. You'll then need to meet with prospective buyers and field bids. This can all add up to huge hassle if you're not in the frame of mind to tackle these responsibilities.
None of this is necessary if you're trading in your car. Your work begins and ends with driving your car down to the dealership and spending a few minutes negotiating with the dealer. If you're looking for a relatively low-effort approach to making money on your older car, trading it in to a dealer makes sense.
Speed. If you're trading in your car, you can count on the transaction being completed quickly. This is not the case with a private-party sale. While you can certainly get things moving in your favor by ensuring your ad presents your vehicle in the most appealing light, at the end of the day, you have no control over the timeliness and quality of the bids submitted. Your car could be on the market for weeks or months before you receive a satisfactory bid.
Trading in your car: Cons
Lower payout. To understand why a trade-in often nets you less cash than a private-party sale, you need to understand what happens after a dealer purchases your vehicle.
The vehicle likely will be spruced up a bit and then sold. For the dealer to make a profit on the sale, the selling price needs to be higher than the price paid to you during the trade. However, if the vehicle is to stand a fair chance of finding a buyer, its selling price needs to be in the ballpark of its market value. Therefore, for the dealer to profit on the sale, the price paid to you during the trade-in needs to be lower than the vehicle's market value.
You can protect yourself from being taken advantage of by doing some research regarding the market value of your used car. One useful resource is Kelley Blue Book. This site provides access to a tool that factors in location, mileage, vehicle condition, and factory options to determine pricing both for trade-ins and private-party sales. Use this pricing to get yourself the best possible deal on your used car when negotiating your trade-in with the dealer.
Sellers should heed the following warning, though. If a dealer agrees to offer you an unusually high amount of money for your trade-in, it's a strong indicator the dealer plans to make money on the transaction by inflating the price of your new-car purchase, selling you overpriced accessories or services, or by arranging a higher-interest loan. In situations like this, pay close attention to all aspects of your new-car purchase to avoid being exploited.