If you're looking to apply for a bad credit auto loan, you may be wondering if you should trade in or sell your vehicle. Which route should you go? It's really up to you, as there are pros and cons to both.

Pros and Cons of Trading in Your Car

Trading in your car is something every dealership is familiar with. Many credit-challenged car buyers choose to trade in a vehicle to help meet the minimum down payment requirement set by lenders, or if they want to make a larger down payment by combining cash with their trade-in equity.

Let’s take a closer look at the pros and cons of trading in your car:

Should I Trade in or Sell My Car?Pros:

  • Easier process – When you go to a dealer to trade in your vehicle, your role is very minimal. You don’t have to handle all the paperwork since the dealership does that for you. This makes the process easier and faster.
  • Tax credit – Most states charge sales tax on the difference between your car's trade-in value and the new vehicle’s selling price. If you trade in your car, having this tax advantage could help you save money on your new vehicle.


  • Get less money for your trade-in – Because each dealer is different and sets its own value for trade-ins, you may get less than what you expect. You could negotiate the price, but don’t be surprised if a dealership (or multiple dealerships) offer less than what you think your trade-in is worth.

Pros and Cons of Selling Your Car

If you have an older model with high mileage, you may want to consider selling the car privately instead of trading it in. The reason why? The dealer bases trade-in values on book value, and yours might only be worth a few hundred dollars. If you want to avoid this, selling your vehicle privately could be the way to go.

Let’s look at the pros and cons associated with selling privately:


  • Could get more money – The biggest advantage to selling a car privately is that you could get more out of the sale. You set the price point, and can sell it for whatever figure you want.


  • Longer process – Because you’re selling your own vehicle, the process could take a lot longer. You have to deal with all the paperwork associated with advertising and selling the car, and may need to deal with multiple potential buyers.
  • No tax credit – When you sell a vehicle privately, you forfeit any potential trade-in tax credit. This isn’t a big deal if you just want to sell your car. However, if you know for sure you want to buy a new vehicle, you may want to reconsider selling it this way.

What about negative equity? If you have negative equity in the car, selling it privately at a higher price could help make up the difference between what you owe and what the vehicle’s worth. If you simply trade in your car and it has negative equity, you may be asked to pay the difference right then.

The Bottom Line

Whether you choose to sell or trade in your vehicle is up to you. Keep in mind what the pros and cons are, and if you plan on buying a new car after you trade it in or sell it. If you need assistance selling your vehicle, we can help.

If you just need a dealership, we can help with that as well. At Auto Credit Express, we work with dealers all over the country that are signed up with lenders that know how to handle complicated credit situations.

We've been connecting consumers to special finance dealerships near them for over 20 years. Getting started is simple – just fill out our auto loan request form, and we’ll get right to work matching you with a local dealer!