You've decided to buy a new car. The natural question is what to do with your current car. You've got a couple options, so you need to understand the relative value of selling a used car versus trading it in when you buy.
The good news is that understanding the trade-in math can help put a nice chunk of change in your pocket. The bad news is that the math is not quite as straightforward as you might think.
Let's say you have a car that you can sell for privately for $5,000. And let's say you're in the market for a $25,000 new car. Should you sell your car yourself, or should you trade it in when you buy the new one?
You might put more cash in your pocket by selling it yourself, but your net gain on the sale might be lower than if you traded it in. That might sound strange, but it's really not. The missing piece of the puzzle is the impact of sales tax.
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