How to Sell a Car to a Dealer

Car keys at sunset -  Author puhfoto

Used car prices have surged to incredible levels due to overall vehicle shortages. During this peak of the used car market, selling your used car seems very sensible. Why not strike while the market is leaning your way?

Among the many ways to sell a car you own is to sell it to a car dealer. There are advantages to selling your car to a dealer, but getting the best price is not among them. All of the reasons to sell your car to a dealer are related to convenience.

In our overview of how to sell your car to a dealer, we will explore two ways that sale might take place. First, you sell the car to the dealer without also buying a vehicle. We have some cautions on that method. Second, you sell the car to the dealer as a trade-in on a vehicle you buy at the same time from that dealer. Each method is a bit different but ends up with a dealer buying your car from you.

Let us also mention that if you get an instant cash offer from a website like KBB or Edmunds, you will likely end up selling your car to a dealer, so what we share here will be helpful if you are also looking at those offers and wondering how they work.

Pros and Cons of Selling Your Car to a Dealer

  • Easiest path to selling your car quickly
  • Least paperwork hassles if you have loan
  • No stranger danger
  • Financially safe (Very low likehood of a payment issue)
  • No worries about test drives with buyers
  • Unlikely to be the best price possible
  • State and local tax implications if you sell and then later buy

Paperwork You Need to Sell your Car

Nobody likes to handle the paperwork associated with selling a car. It is intimidating because we sell cars so infrequently. One of the pluses of selling your car to a dealer is that they are the experts on vehicle sales paperwork.

If you own your car outright, you should have a title for it. A title is a formal government document that certifies ownership of a vehicle. In some states, it also acts as a bill of sale. The Department of Motor Vehicles (DMV) where you reside will have sent it to you after you purchased and registered the car, or after you paid off your loan. The title is a very important document. Locate it, or let your dealer know you can’t find it. They may direct you to the DMV for a copy, or they may handle it themselves.

If you still have a loan on the vehicle, grab your most recent monthly bill or the loan origination paperwork. Your dealer is going to need to know who your lender is, what your account number is, and of course, how much you currently owe. Dealers will know how to contact the lender and how to get the loan paid off. Your check from the dealer will be the balance of what you sell the car for minus your outstanding loan balance. If you owe more than the car is worth, you can still “sell” your car to a dealer, but you’ll end up writing them a check. If you trade in a car and then buy a new one, your dealer will happily roll your loan balance forward on a new car purchase.

If you have kept your service records, gather them up and be ready to turn them over after you do a deal with the dealer. They may want them, or they may not. Either way, go through the pile and remove your personal info before you turn them over. Your date of birth, social security number, home address and phone numbers are the sort of things to cull from the pile.

You should also remove your registration and insurance documents from the vehicle before you turn the car over to the dealer. Take your plates and dispose of them according to your DMV’s guidelines after you cancel your registration. You will be canceling your subscriptions for satellite radio, telematics systems and also your insurance, so be sure you set aside those documents before you turn over the car.

Preparing to Sell Your Car If you are selling your car to a dealer it makes sense to have it be clean and presentable before they evaluate it for sale. Remove your belongings, check for any Big Mac wrappers under the seat, and clean it up. If it is in relatively good condition, you may want to stop at this point. Dealers are going to professionally detail your car before they put it on the lot anyway. If you spend any money having it waxed that money is unlikely to come back to you. To a large degree, dealers buy cars “by the pound.” There is even a school of thought that thinks shining your car up too much can work against you at a dealership. It makes you look too desperate to sell. Too eager to get the deal done.

One exception may be if your car smells like a pack of Marlboro Lights. Any buyer, dealer or otherwise, is going to be put off by a car that has been smoked in. Have it professionally detailed inside to get as much of the smell out as possible. Your local car wash likely has an interior detailing special for under $100. They have the tools to shampoo the upholstery and carpets and can get the smell down to a minimum.

If your car’s tires are in good shape and undamaged, you should not rush to change them before a sale. Look over the sidewalls for damage and check the wear bars to see if they are still in their safe range. If so, do not buy new tires for the car. You won’t get that money back when you sell. Conversely, if the tires are unsafe, or bald as baloney skins, changing them to the same brand and model that the car came with may be a wise choice. The dealer will discount the car if they know they have to put tires on it. In case it comes up in your negotiations, dealers do not fit new tires to every used car they offer for sale.

Unlike a private party sale, if your car is in need of scheduled maintenance, don’t do the work before you have a discussion about selling the car. Dealers will do the minimum work possible to sell your car after they buy it from you. Paying them to service it just before you sell it to them is a really bad idea.

Negotiating a Price for Your Car

Every interaction in life is a negotiation, but negotiating car prices is what dealers do all day, every day. They know how to get the deal they want because they practice this constantly. You probably do not. Can we write you a few bullet points here and give you our heartfelt encouragement? Sure. But we can’t make you a professional negotiator.

The chances you are going to take the dealer to the cleaners and come away with top-dollar for your car are slim. If getting the absolute best price, or even a fairly good deal for your car is a top priority, don’t sell to a dealer. Sell your vehicle private party. Set a high price and be patient. Someone will come along and give you a more than fair price. A dealer never will.

Here are a few negotiation tips we can suggest:

  • Know the car’s true value. Use KBB, Edmunds, or any valuation tool you like, and note that they always list a few options. “Trade in to a dealer” is always the lowest price these valuation tools will list for you. You can use online shopping sites like CarGurus to find cars like yours on sales near you to get an idea on price. Be aware that those are dealers selling cars, not buying them.
  • Set a minimum and don’t change your mind. You must be prepared to walk away from a deal, and wait for a better one to be presented.
  • Know when you’ve won. At some point, you will get an offer from the dealer that you can live with. If you take it, you are done. Fighting for the last penny is difficult and exhausting. Be ready to accept a yes answer.
  • Beware the handshake. In our culture an outstretched hand is hard to ignore. Don’t respond to a low offer and an outstretched hand accompanied by, “Do we have a deal?” Just say, “No thank you.” And wave back.

Trading in Your Car

Trading in a car is the easiest way to sell it. Any car dealer can make this happen for you. Not only are they experts at the paperwork, they are experts at getting you to sell the car to them at the lowest possible price, and then charging you the highest possible price for the car you buy. You “lose at both ends of the deal” is the sad reality for most new car trade-in transactions. However, time is money. Trading in your used car when you buy one from a dealer takes no added time. You get to skip the hassles of advertising your car, dealing with buyers, going on spooky test drives as a passenger, and any stress related to the financial part of the deal.

In many states, there is also a tax incentive to trade a car, courtesy of the officials you elected. After you voted them into office, they granted the car dealers in your state a sweetheart of a deal. They allow them (only them) to deduct the value of your trade from the sales tax calculation. In some places (like Car Talk’s home state of Massachusetts), if you sell your car, then buy a new one, you don’t get to apply the value of the old car you sold. You pay the full sales tax. Make sure you research how sales taxes work in your state before you opt to sell private party.

How to Sell a Leased Car

When you sign a car lease you commit to keeping it for the listed months designated in the contract, usually 36 or 39 months. You pay as you go, and then at the end of the lease term, you can either turn in the car, or in most cases you have the option to buy it. But what if your Acme Glutton makes you want to punch the gas pump every time you fill it up and see the dollar signs roll over to a third digit? Or your two-seat sports coupe isn’t cutting it now that you just had twins? You may have the option to “sell your leased car.”

We use the parentheses here because it is very unlikely that you are really going to sell that car. What a dealer can sometimes do for you is sell you a new car and make the lease “go away.” The easiest way for them to do that is to simply pay off the lease and add the cost of doing so to your new car purchase. In a sense you have “sold your leased vehicle.” In another sense, you simply paid off the lease early and lost that money.

However, it is 2022, and there are so few cars in the market right now, so crazy things are happening. The valuation of used cars, even Acme Gluttons, has risen dramatically. That may work in your favor. Perhaps the value has risen well beyond the previously agreed to purchase price at lease end, and with a bit of paperwork the added equity can be used to cover your remaining payments? Either way, you are giving up some value when buying the new car.

Ask your dealer if they can help. We have heard the most positive stories about folks ending leases early when the lease was from the automaker and the new car you buy is also from that same brand.

Closing the Deal and Getting Payment

Once you have agreed to a deal with your car dealer you can move forward with being paid. There are a few scenarios, and we will cover each one. For each of the below sections we are going to assume that by “Dealer” we mean an official new car dealer franchise. Joe Schmoe's Chrysler, or something along those lines. If you opt to do business with a sketchy back-lot used car dealer, do so at your own risk, and be sure you get cash or a cashier's check at a minimum.

If you simply sell your used car to a dealer, you should feel comfortable accepting a check from the company you can then cash. Franchise car dealerships are not known for trying to pass bad checks. If you are concerned about the availability of funds, ask before you do the deal, not after.

If you trade in your car, your dealer will apply its value to the purchase of the new car. It will be shown on a worksheet that breaks down how all of the money will be handled. If you pay cash for the balance you will hand over your payment. If you finance, your trade will act as equity towards the new car purchase like a downpayment. You may even be able to take cash out of the deal. Which means more payments down the line.

Once you have done all of the paperwork at the dealer, ask them how your registration and plates are transferred or canceled. They may have a DMV capability at the dealership. This is common in many states. If you need to cancel a registration because you sold your car but didn’t buy a new one, handle it immediately after the sale. To your checklist, add canceling your insurance and any subscriptions you may have had on the vehicle like satellite radio or a telematics system (OnStar, etc.).

Instant Cash Offer - ICO

If you use a vehicle valuation website like KBB or Edmunds, you will likely receive an instant cash offer (ICO). These are like solicitations to buy your vehicle. Since you just described it to the company in detail, they can offer you a close approximation of what the buy price will be. If you wish to pursue that instant cash offer, you will be directed to a local car dealer who will inspect the vehicle, and then let you know how much they will pay for it. From this point forward, the process is the same as selling your car to a dealer.

Hey, Before You Sell Your Car in 2022…

Car Talk is on your side as the consumer, not the dealer’s. We want you to be fully aware that selling a used car in 2022 may be a big mistake. Unless you plan to Uber your way home from that car sale and never drive again, be certain that you can actually find and buy a new car. Or a newer used car.

Unprecedented shortages for vehicles mean that many popular models are being marked up by $10K or more by dealers. Some cars, like the Ford Maverick, and Ford F-150 Lightning are simply sold out. Ford went so far as to stop pre-orders for some models. And Ford isn’t alone. Many models are months from being available in America. Our advice is to be absolutely sure you can get a new car before you let your old one go. If your car is able to be spruced up a bit and driven another year, we strongly suggest that you consider that option.

If you still want to sell, start with your family. You may be able to satisfy a family member’s vehicle needs and save them from having to overpay for a new car this year. There are also sales tax benefits to selling a car within a family in some states.

Another option we always like to suggest is donating a car and earning an income tax break. Car Talk can help you with that, and the money will go to your local NPR station. The same good people who brought you Click and Clack.

Read more on How to Sell Your Car here.

FAQ

If I want to sell my car to a dealer, does it have to be a dealer for my car’s brand?

No, you can sell your car to any dealer who wishes to buy it. There is likely no significant difference in the price you will get. Shop around to multiple area dealers.

Can I sell the car I am leasing?

Sort of. You can speak to a dealer about ending the lease early and how that would wash out financially. If you are near the end of the lease and are also buying a new car it is likely to be doable.

My car dealer offered to buy my car when I was in for service. Is this a scam?

Not at all. Car dealers are desperate for inventory to sell. All dealers are actively soliciting their customers to sell them their cars these days. Shop around and look for the best price offered. Your dealer is unlikely to offer you as much as you can get in a private party sale.

My dealer sent me an offer in the mail to buy my car. Is this for real?

Yes, car dealers are looking anywhere they can to find inventory they can sell. Dealers make money on every car transaction. If you are thinking of selling, check out a few dealers and consider selling the car private party to get the most money for your car.

I owe more on my car than the car is worth. Can I still sell it?

Yes you can, but you will be writing a check when the transaction is complete. It is worth double checking the value of your used car. In 2022, many used cars are selling for more than they cost new due to inventory shortages.

Editor's note and disclaimer: Car Talk is supported by our fans, readers and listeners. When you click on some of the links on our website, we may receive referral compensation. However, you should know that the recommendations we make are based on our independent editorial review and analyses.