Sell Your Used Car Before You Lease or Buy

Selling a used car is preferable to trading. You'll receive close to full retail value rather than accepting wholesale value if you trade.

Prepare to sell your used car

Psychology is a powerful and important part of buying and selling cars. Perception can be reality. What a potential buyer thinks and feels about your used car is more important than facts and figures.

If a potential buyer sees your car is filthy inside and out, she is very likely to assume, rightly or wrongly, that you don't take any better care of your car in other ways.

The implication might be that you don't change your oil, don't perform regular maintenance, don't make necessary repairs, and don't take care when driving. So, the simple fact that you didn't take the time to clean up your car could easily kill a possible deal.

Although some savvy buyers might look past the dirt on your car and see it for what it really is, you really don't want to assume that this will always be the case.

On the other side of the coin, a beautifully immaculate car can cover up poor maintenance and serious problems. Buyers who are blinded by the glow and shine can make serious mistakes if they don't look further.

So, to maximize the possibility of a quick sale, clean up your car — good. Clean it inside and out, top to bottom, under the hood and in the trunk, under seats and inside cubby holes. Touch up paint scratches. Repair windshield dings. Pull out small dents. Balance the tires. If you can't do all the work yourself, pay to have it done. Have it detailed. Your effort will result in a faster, more profitable sale.

Pricing properly

One of the biggest predicaments facing used car sellers is what price to ask. A price that is too high will discourage potential buyers. A price that is too low means money unnecessarily thrown away.

Unfortunately, there are no standard prices for used cars. There are a number of guidebooks (some only available to dealers and lenders) and online pricing sources, such as Edmunds, Kelley Blue Book, and NADA Guide, that are just that — guides. Prices can vary from one area of the country to another and can be affected by short-term new-car discounting and rebates.

Your price should reflect the mileage and condition of your car, demand for that make/model, reliability history (yes, car buyers read Consumers Report magazine), and your area of the country (convertibles sell for higher prices in Florida than in North Dakota).

Psychology comes into play again when mileage is a factor. Cars with 100K miles or more, regardless of condition, are often perceived as "used-up" and almost worthless. Very low mileage cars (less than 10K miles per year) are often assumed to be jewels, and worth more money than they may actually deserve. Sellers often overvalue both of these kinds of cars.

Many sellers run CARFAX Vehicle History Reports to show potential buyers that the car has no secrets to hide. Even if you don't show the report to potential buyers, you need to know what it contains because most smart buyers know to get a CARFAX report for themselves. If you're not the original owner, don't be surprised if a buyer finds that your car was in a serious accident prior to your ownership. Here is a sample CARFAX report for a Toyota Camry that has had three different owners.

Understand that most potential buyers know your price is an "asking" price and expect to get a better deal. Adjust your asking price accordingly. A 5% difference in asking and selling price is typical.

Where to sell your used car

There are essentially two ways you can sell your car, depending on how quickly you want to sell and how much money you want.

First, you can sell wholesale. This means you sell to a dealer for a low wholesale price and the dealer resells at a higher retail price to make a profit. Carmax is an example of a major dealer that buys used cars from individuals.

If you have a relatively new, clean, low/average mileage vehicle, you should talk to new car dealers who have a used car lot. They may be interested, especially if the car is of the same make that they sell new.

Otherwise, talk to independent used car dealers, especially CarMax, if you have them in your area. Wholesale auctions in your area are also a possibility, but be aware that there are fees involved.

Next, you can sell directly to buyers ("private sale"), which should bring you a higher price than by selling wholesale. One of the best and fastest places to sell a used car is on eBay Motors. Thousands of people shop on eBay every day looking for used cars at good prices.

Make potential buyers aware of your car by advertising using one of the following methods:

Start by offering your asking price and explain why you feel the price is fair, based on your own research. Point out the positive features and characteristics of your car. Some good "positives" could be the following:

• low mileage
• add-on equipment
• original owner
• no accidents
• low insurance costs
• low maintenance costs
• remaining warranty
• good gas mileage
• good reliability history
• records of scheduled maintenance
• good CARFAX Vehicle History Report
• tires with good tread
• no dings, dents, or scratches

After having been offered your asking price, a buyer may point out his own research and counter with data and negatives that justify, to his mind, a lower price. Be prepared to either accept his counter-offer, or respond with a compromise price and politely explain why his price can't be accepted.

Honesty is good

One of the first questions a used car buyer will ask is, "Why are you selling?" Be ready with a good honest answer. A response of, "My family is growing and I need a larger car" is clearly better than, "It keeps breaking down and I'm tired of walking home." But be truthful.

Buyers will expect honesty and truthfulness. They will expect you to disclose problems that you know about. Explain that you have adjusted your price to account for any problems and that the price is fair.

Even though there may be no legal recourse if your buyer discovers problems after the sale, they can become very irritated and can make your life miserable if they feel you have cheated them by knowingly not disclosing problems to them, whether it's true or not.

Closing the deal

After you and the buyer have agreed upon a price for your used car, all that remains is the exchange of goods, title, and money — and a paper record of the transaction, generally called a Bill of Sale.

A Bill of Sale is always smart — even if it's not required by law in your state. It protects both buyer and seller. It contains a description of the vehicle, VIN, date of sale, purchase price, dates, signatures, and other important information.

To the buyer, a Bill of Sale is legal proof of purchase. It serves as a kind of temporary title/registration that can be important if pulled over by police for any reason, for purchasing insurance, and to secure a purchase loan.

To the seller, a Bill of Sale is protection from disputes that might arise later from the buyer.

Rather than attempt to write up your own Bill of Sale, we recommend that you use CarContracts.net. You can create and print a proper legal Bill of Sale form in a couple of minutes. In some states the car title form is also used as a bill of sale.

Problems and scams

From a used car seller's perspective, the most obvious potential problem is not getting your money. To some degree, you'll have to use your judgment as to what is risk and what isn't. If you know the person who is buying your car, the risk may be lower than selling to a complete stranger who lives in another state.

Never accept a promise of future payment unless you have absolute confidence in the person. Even if it's family, this kind of deal can often go sour.

Never sell your car with a do-it-yourself loan or lease agreement. You may just find your agreement has little or no legal basis after the buyer fails to complete all payments.

There have been cases in which buyer promises to pay seller over a period of time, but buyer wrecks car, buyer has no insurance, buyer stops payments, and seller is without car or money.

The lowest risk transaction is one in which the buyer pays you hard, cold cash. If the buyer brings you a check, go with him back to his bank to get it cashed.

If the buyer needs a loan, it's best to go with the buyer to his bank or loan company and conduct the entire transaction there. The buyer should have already arranged his loan beforehand. Get a cashier's check or get cash directly from the bank. Avoid personal checks unless the buyer is willing to wait until the check clears.

Be aware that money orders and cashier's checks can be counterfeited. Be especially cautious if the seller wants to conduct business by mail or from a foreign country on behalf of a "client." See Car Buyer Scam about a common used car buying scam that involves fake cashier's checks.

State laws and sales taxes

Most states have laws and regulations that apply to how used car transactions and title transfers take place. It is strongly suggested that you contact your state Department of Motor Vehicles (DMV) to learn about the latest laws in your state. Many state DMVs have web sites with the information you need.

Some states require that sales tax be paid on used car purchases. Other states do not. If you don't know, you should contact your state DMV or check their web site.

If your state doesn't collect sales tax on person-to-person sales, this can save your buyer considerable money over buying from a dealer. Make this a selling point in your advertising.

After the sale

It could happen that the buyer of your used car will have "buyer's remorse" a short time after the sale and ask to return the car. They may claim that they found problems that you didn't disclose to them, or that they simply don't like the car after having driven it for a few days.

Unless this situation is covered by consumer laws in your state, you have no obligation to accept the buyer's request to return the car. Normally your bill of sale, which the buyer would have signed, specifies that the sale was sold "as is" and that there were no guarantees, warranties, or return provisions.

Otherwise, you should use your own sense of good judgment and fairness to determine what action you'll take on the buyer's request. If you decide to turn down his request, you should be polite and explain your position fully.

Should you donate your car?

In some cases, you may find that donating your used car to charity provides tax advantages that outweigh the benefits of an outright sale. See the following article for more details: Donate Your Car - How Car Donation Works.

For more, see LeaseGuide.com