Chat with us, powered by LiveChat

What Happens When You Sell Your Car to a Dealership

What Happens When You Sell Your Car to a Dealership
January 20, 2024
17 min

When the time comes to part ways with your trusted set of wheels, deciding what to do with your car can feel overwhelming. One option available is selling your car directly to a dealership.

But what happens when you sell your car to a dealership? And is it truly the best choice compared to alternatives? Let’s find out:

Here’s Exactly What Happens When You Sell Your Used Car to a Dealership:

Here are the critical steps involved in the process of selling your used car to a dealership.

Dealership Will Ask For Documentation

The dealership will require some critical paperwork from you:

  • Obtain your car’s service records from the vehicle shop/dealer to show maintenance history.
  • Gather the title, registration, and release of liability form to transfer ownership.
  • Make copies of your ID/driver’s license to verify your identity.

What Happens When You Sell Your Used Car to a Dealership

You’ll Have to Get Appraisal First

It’s best to schedule an appraisal mid-week as dealerships tend to be busiest on weekends:

  • Confirm with the used car manager what documents to bring for the appraisal.
  • Prepare any information that could increase the offer price, like aftermarket parts or low mileage.

The Appraisal Process

During the appraisal, the dealer’s representative will do the following:

  • Inspection: Note odometer reading, and inspect interior and exterior for defects or damage.
  • Test Drive: Evaluate how the engine, transmission, brakes, and other components operate.
  • Digital Scan: Use tools to scan for past accidents, repairs, or other issues not visible.
  • Research: Investigate your car’s make/model specs and standard/optional features

You’ll Get The Initial Cash Offer Price

The appraiser will then provide a final cash offer value based on factors like:

  • Your car’s condition, mileage, popular options, and local market demand.
  • Research online to learn typical pricing for comparable models recently sold in your area.
  • Rare or high-demand models may sell for more than average prices.
  • The offer must cover your loan payoff if you still owe on an auto loan to sell the car.
  • Ask the dealership to explain how they determined the price for transparency.

Finalizing the Paperwork and Payment

To complete the transaction:

  1. Sign the purchase agreement, title transfer, and odometer statement documents.
  2. Get proof of payment, like a check, within 2 business days for selling your car to the dealership.
  3. Collect the final signed paperwork and your car keys from the dealership.

Pros & Cons of Selling Your Car to A Dealership:

ProsCons
Reduced Paperwork BurdenLower Sale Price
Guaranteed SaleLess Negotiation
Trade-In ValueTime Constraints
Payment Methods
Free car Appraisal
Protection from Post-Sale Liability

Pros of Selling Your Car to a Dealership:

Reduced Paperwork Burden

Dealerships have trained staff that handle all the required paperwork like title transfers, billing of sale, and releasing liability accurately and legally. This can include 5-7 forms. When selling privately, it’s easy for individuals to make mistakes in filling out and submitting these important documents, which can lead to issues down the line.

Mistakes like canceling insurance before sale completion, improperly signing over titles, and filling forms incorrectly can create headaches for private sellers. Dealers have the experience and expertise to navigate state car sale laws and ensure all paperwork complies fully with DMV/RMV/BMV requirements. This provides legal protection for sellers. Common paperwork responsibilities include mechanics’ liens, warranting the car’s condition, undisclosed defects transfer to the dealer after the sale, and relieving private sellers of liabilities.

Guaranteed Sale

Selling your car to a dealership means you’re guaranteed payment even if the car appraises low, while private sales can fall through from buyers backing out at the last minute.

There’s also less back-and-forth negotiating, which is a major frustration many face when attempting to sell to private buyers.

Trade-In Value

Taking a car as a trade can get you fair market value compared to potentially getting less if attempting a private cash sale directly.

Payment Methods

Dealers provide certified funds upfront, like cashier’s checks, unlike private sellers who may delay payment for up to a month.

Free car Appraisal

Appraisals by dealers certified by guides like NADA or Black Book accurately assess a car’s market value at no cost, unlike independent appraisals, which usually charge $50-100.

Protection from Post-Sale Liability

If a private sale car breaks down after being sold, the previous owner could potentially still be pursued legally for repairs or issues. However, when selling to a dealership, the liability transfers fully to the business after completing the transaction.

Dealerships assume responsibility for any lawsuits related to known or unknown defects after purchasing the car from the seller. This provides peace of mind that sellers are fully releasing all obligations and won’t face potential future legal troubles regarding the car.

Cons of Selling Your Car to a Dealership:

Sale Price Can Be Lower

On average, dealers resell cars for 12-15% more than the price offered to sellers. This is due to the added costs of reconditioning, advertising, and dealer overhead being worked into the new sales price.

Less Negotiation

Private sellers, on average, accept offers 8-10% below their list price, but dealers typically only negotiate 3-5% above their initial offer.

Time Constraints

Most dealers demand a quick decision, usually within 24-48 hours, to relist the car in inventory versus flexible scheduling when selling privately.

As this overview shows, selling your car to a dealership provides convenience but potentially costs less money than a private sale.

The right choice depends on weighing these various pros and cons based on your unique priorities and situation.

Can I sell my car back to the dealership I bought it from?

Yes, most vehicle dealerships have buyback programs that allow you to sell the car back, usually within the first 1-2 years after purchase. This can be an easy option if you want to get rid of the car.

But….You likely won’t get as much money back as you owe

However, the dealership needs to earn a profit when reselling the car. So buyback prices typically equal around wholesale value - which is often 10-20% less than retail price. You may not make up the difference versus your loan payoff amount.

Learn the dealership’s buyback policy details.

Ask the dealership about time frames, mileage limits, and how they determine price based on condition or other factors. Get policy details in writing.

Consider alternatives if you want a higher sale price

Selling privately or to another dealer may realize a higher sale price to better cover your loan payoff. But this requires more effort on your part to find a buyer.

Check for penalties if selling back for less than the loan payoff

Make sure to inquire about any fees for paying off the auto loan early in a scenario where a dealer buyback amount is less than what you owe.

Only accept a dealer buyback if the ease is worth getting less money versus potentially earning more through other sale options that demand additional work.

Dealership Car Trade-In Vs. Getting Cash - Which One is Better?

A comparison of the pros and cons of trading in your car versus selling it for cash.

1. Convenience

Trade-In

Trading in your car is more convenient as it’s a one-stop process where you drive off in a new car without having to arrange separate sales and transfer ownership documents. The dealership takes care of all the paperwork and logistics of the trade.

Cash Sale

Selling your car for cash requires more effort on your part. You need to independently negotiate the sale price with a buyer, handle things like signing over the title, paying off any loans on the car, and handling paperwork to transfer ownership. This is a multi-step process that is separate from acquiring your next car, unlike a trade-in where it’s a single visit to the dealership.

2. Price

Trade-In

Dealers typically offer a lower price for your trade-in compared to what you could get selling it privately. This is because dealerships have expenses like reconditioning the car and paying salespeople commissions that factor into their used car pricing. They also aim to make a profit when they resell your traded-in car.

Cash Sale

Selling your car privately usually allows you to get a higher sale price than a trade-in since you avoid the dealer’s markup and can negotiate directly with buyers. Resources like Kelley Blue Book and NADA guides can provide an estimated range of your specific car’s worth in a private sale.

Trade-In ValuePrivate Sale Value
$4,000$5,500

For example, as the table shows, your 10-year-old sedan may only be valued at $4,000 in a trade-in but could potentially sell for $5,500 if you find the right private buyer. Selling privately maximizes your car’s sale price.

3. Taxes

Trade-In

When trading in a car at a dealership, the taxes you pay are based on the full price of the new car you’re purchasing, not just the difference in value. So even though your trade allowed reducing the new car’s sticker price, you still pay taxes as if you bought it at the full price. This increases your overall tax burden.

Cash Sale

Selling your car for cash means you only pay taxes on any profit made - the difference between the sale price and your car’s tax basis (what you paid for it). This is usually lower than the full taxes owed if the same sale was made as a trade-in towards another car purchase. Therefore, a private sale yields lower taxes compared to a trade.

4. Negotiating Power

Trade-In

When trading in, the dealer knows your trade-in value upfront and factors that into their negotiations on the new car’s price. So, it impacts your ability to haggle the best possible deal. Dealers have an incentive to offer you as little as possible for your trade to increase their profit margins.

Cash Sale

Selling your car separately for cash allows for independent and separate negotiations. You aren’t obligated to use sale proceeds exclusively at one dealership. This strengthens your bargaining position and lets you get the best new car price without the trade value affecting negotiations.

5. Timing

Trade-In

Trading in simplifies logistics, but it requires completing both the used car sale and new car purchase at the same time during a single visit to the dealership. You need to find an available car you want at that instant.

Cash Sale

Selling your car privately is more flexible. You aren’t tied to any specific timeline other than selling your car. You can do it independently of buying another car or wait to purchase a new one until you find your desired car and the best price. This avoids rushed decisions and provides more scheduling flexibility.

Additional Considerations

  • Warranty: Trading in may be preferable if your old car is still under manufacturer warranty and a new owner risks voiding coverage on repairs. Selling privately forfeits any remaining factory protection.
  • Offers: Some automakers offer additional discounts or perks if you sell your car back to them through their certified pre-owned (CPO) channels versus a regular dealership trade. This can sweeten the deal financially.
  • Condition: A trade allows dealers more leeway to deduct for minor issues, whereas private buyers may nitpick more during inspections. Major problems could kill a private sale.
  • Hassle: Showing your car to many potential buyers takes time and effort, especially if it ultimately doesn’t sell. A trade simplifies by offloading responsibility to the dealer for resale.
  • Brand Loyalty: Trading promotes further business and loyalty to that brand, while cash sales are neutral. Some manufacturers reward this longer-term relationship.

As the table below summarizes, trading in or selling your used car for cash makes more financial and logistical sense, depending on your unique circumstances and priorities. Most experts advise getting quotes from multiple local dealerships to compare trade-in offers against private sale estimates from KBB or NADA before deciding.

Trade-InSelling for Cash
More convenient processPotentially higher sale price
Lower sale price due to dealer feesMore control over sales and taxes
Limits negotiating Power on a new carMore leverage to get the best new car deal
Must sell and buy at the same timeIndependent and flexible timing

3 Alternatives to Selling Used Cars Via Dealership

1 - Sell Privately

One approach is marketing your pre-owned car through online classified ads on websites like Facebook Marketplace, Craigslist, etc.

This opens the door to a wider audience than just auto dealers negotiates the selling cost straight with potential buyers and keeps the full amount from the sale rather than giving a percentage to a dealership.

However, it requires more effort on your part to show the car, field calls and messages about it, arrange viewings, and handle the transaction paperwork.

2 - Use Car Trading/Consigning Services

Some prominent online companies will purchase your used car directly. They photograph your vehicle, list it on their websites, show it to interested parties, complete all documentation, and provide you with payment.

Often, these services offer competitive rates close to what you may achieve through a private sale. The downside is that you likely won’t get the absolute maximum price, but it involves less hassle than dealing with buyers.

CompanyServices Provided
CarvanaOnline car purchase and delivery nationwide
VroomOnline purchase and delivery similar to Carvana
CarMaxPhysical dealership locations that buy cars across the US

3 - Auctions

A third path is selling your pre-owned automobile through a car auction. Websites like eBay Motors allow you to auction cars online, reaching a vast pool of potential buyers.

Traditional in-person auctions at places that specifically deal in used motor cars are another selection.

You’ll need to consider any auction fees involved. Since bidding can be volatile, your final sale price is less predictable than a set amount from a dealer or private party purchaser.

Best Practices & Tips for Selling a Car to a Dealership

Here are some recommendations to get the best price when selling your car to a dealership.

1. Research Comparable Used Car Prices

It is important to research the market value of your car before discussing terms with a dealership:

  • Search vehicle listing sites like CarGurus Autotrader for your make/model/trim/mileage
  • Check recent sales prices for similar cars near your location
  • Note average listing prices, how long cars remain unsold
  • This data helps you negotiate a higher price from the dealership

2. Counter the Initial Offer

Being prepared will help you negotiate the best deal:

  1. Do your research, contact other local dealerships for competing offers
  2. Email/call back to negotiate a higher price, citing market data
  3. Dealerships have wiggle room of ~5-10% from the initial offer to close a deal

3. Provide Clean Title and Service Records

Having documentation that shows your car is in good condition, such as:

  • Clean title with no liens against the car
  • Complete service records indicating your car was regularly maintained
  • This can increase what a dealership is willing to pay for your car

4. Be Flexible on Payment Method

Consider accepting part cash and part trade-in to sweeten the deal. Dealerships prefer this method, allowing them to resell the traded-in car for additional profit.

5. Know When to Walk Away

If a dealership’s best offer is well below market value, thank them for their time, but consider other options. Selling privately or to another dealer may get a better price. But selling to a dealership offers the convenience of what happens when you sell your car to a dealership.

Here is a draft of the Frequently Asked Questions section of the blog post:

Frequently Asked Questions:

Does selling a financed car hurt your credit?

When you sell a car that you still have an outstanding loan for, the loan must be paid off. This is typically done using the funds from the sale to the dealership. As long as the loan is paid in full, it generally does not negatively affect your credit. In fact, it can actually help your credit by reducing your overall debt-to-income ratio.

However, if the loan is not paid off in full, it is possible for it to be reported to the credit bureaus as a late or unpaid debt. This can negatively impact your credit score. So, when selling a financed car to a dealership, it’s important to ensure the loan is completely paid off using the funds from the sale.

When you trade in a car, can you get cashback?

When trading in a car to a dealership as part of purchasing a new car, it is possible to receive cash back if the appraised value of the trade-in exceeds the remaining amount owed on the loan. Dealerships will appraise the worth of the trade-in and apply that value towards reducing the price of the new car. If the appraisal covers the full loan payoff amount, any excess can potentially be given to the customer as cash.

However, dealerships are businesses that aim to turn a profit on used car sales. So unless the trade-in has significant equity, it is unlikely that much cash will be returned. However, negotiating the trade-in value and any potential cashback is possible when working with the dealership on the new car purchase.

Who pays top dollar for used cars?

Several options exist for who pays the highest prices for used cars. National wholesale vehicle auctions generally offer the highest prices, as dealers can buy there to resell on their lots. Franchised car dealerships also aim to pay competitively to maintain inventory for resale. Some independent used car dealers focus on buying directly from consumers and may compete more aggressively on price.

Researching recent sale prices for similar makes and models can help sellers gauge the market value and target the outlet most likely to offer top dollar. Big-name dealerships also have access to resources for thorough car inspections and valuation reports.

Can you sell your car to a dealership if you still owe it?

Selling a car to a dealership is possible even if you still have a loan balance. The dealership must verify the payoff amount with your lender and include that in the purchase price. At the time of sale, the proceeds would go directly towards paying off the loan in full.

This process ensures the car title can be properly transferred free and clear of any liens once the loan is paid off. Both the seller and the dealership must coordinate with the lender. As long as the loan balance is satisfied using the sale funds, the lender has no issue with the private sale transaction.

Will the dealership buy my car without a trade?

Yes, most major franchised dealerships are willing to purchase used cars directly from consumers, even without a corresponding new car purchase or trade-in. As wholesale auto auctions are a primary source of dealership pre-owned inventory, they also aim to buy competitively from private sellers.

The sale process and paperwork are very similar, whether just selling or selling as a trade-in. However, without any bundle savings applied to a new car sale, the price will likely not be as high compared to selling on the private market or smaller used car lots focused primarily on outside buys.

How do you sell a car to a dealership when it is still being financed?

When a car owned is still being financed, the loan must be paid off in full before the title can be transferred to the new owner—in this case, the dealership. Here are the standard steps:

  • Contact your lender to get the current payoff amount
  • Inform the dealership the car is financed and provide lender details
  • Negotiate a purchase price that will cover the payoff amount plus any remaining equity
  • Upon sale, the dealership will pay off the loan directly using proceeds and obtain the title

With coordination between all involved parties, it is a straightforward process. Just be sure to confirm any paperwork needed from your lender to complete the loan payoff process.

What paperwork do I need to sell my car to a dealer?

The minimum paperwork the dealership will require includes the following:

Document\\Purpose\
Driver’s license or state IDTo verify the seller’s identity and address
car titleTo transfer ownership upon completion of the sale
Lien release documents (if applicable)To demonstrate any loans have been satisfied
Bill of saleTo acknowledge sale terms and document transfer
Odometer disclosure statementReport current mileage at point of sale

It also helps to have maintenance records, the owner’s manual, and any other documents related to the car’s condition and service history. While not legally necessary, these provide helpful reference material for the dealership’s inspection and evaluation.

Can you sell a car to a dealership for cash?

Yes, using cash payment is standard practice for used car dealerships to purchase cars directly from private sellers. Once ownership is properly transferred using a bill of sale and title work, the dealership will pay out the agreed sale price in cash or cash equivalent, such as a bank check.

Cash sales allow the transaction to be finalized quickly on the spot, avoiding any loan approval or financing steps. They offer convenience for private individuals selling a used personal car. Cash payment is an easy transaction for both parties as long as the dealer’s offered price is agreeable.

Our website uses cookies, pixels and other tracking tools to enhance your experience and for analytics and advertising. For more information, visit our Privacy Policy. By using our website, you agree to our Terms of Use.
Okay, I understand