My wife and I recently purchased our first new car together, a sexy 2007 Honda Odyssey with 43,000 miles on it. We went through a pretty intensive search process before deciding upon this particular car, and I wrote all about our decision-making process in the hopes that it would help you buy a car for yourself when it came time.
One thing I haven’t talked about yet is what I did with my old car that we were replacing. There are a few different options, each with different pros and cons. So today I’d like to go through the different options I considered and explain the rationale behind my final decision.
Evaluating the car’s condition
My old car was a 1998 Honda Civic with just over 142,000 miles. It also needed a new alternator, and until it had one I literally couldn’t even turn it on. The air conditioning was also broken, and there were several other little things that weren’t working properly, like the lock on the front hood. In short, it wasn’t in very good shape.
According to Kelly Blue Book, my car would be worth about $1,600 in a private sale if it was in “fair” condition. My interpretation was that I would need to replace the alternator to get it to even be “fair” (i.e. driveable). I called a few mechanics to get a quote on that kind of job, and it came in around $500. So my net profit on a sale after repairs, if all else went well, could be somewhere around $1,100.
Option #1: Trade-in
When you buy a car from a dealer, you have the option of trading your old car in to them so that they can then try to sell it as part of their used fleet. The price on the trade-in will offset some of the cost of the car you’re purchasing.
In my car-buying series, I explained all the details about how we negotiated with the dealers though email. As a part of those email exchanges, I would ask the salesman to quote me a price for a trade-in of my old car as well. The best offer I got was $500 and the worst offer I got was a refusal to take it because it wasn’t currently functional.
With a more functional car, I’m sure there would have been some room to negotiate the price here. But given that I couldn’t even drive it to the lot, I didn’t feel incredibly optimistic about my chances of getting a better offer.
Option #2: Private sale
A private sale is simply a direct sale to another person, without going through a dealer. An example would be selling your car on Craigslist.
This was the most appealing route in terms of securing maximum profit. Comparable Honda Civics without the defects mine had were listing for $2,000-3,000 on Craigslist. I didn’t think I could get that much, but it made me hopeful I could get close to the $1,600 value from above.
My worry here was with liability. My car has been slowly breaking down over the years and I was worried that something would go really wrong right after selling it, and in a worst-case scenario that someone could be hurt. It was unlikely, and even more unlikely that I would be found liable in such a situation, but it was a risk.
Option #3: Salvage
My final option was selling the car to a salvage company for parts. My brother had just done this with his car and received $500. Same as what I could have gotten from the dealers. And they would come to my house and tow it away for me, which was nice because I couldn’t turn it on and all. Easy money with pretty much no work required from my end.
The final decision
In the end, I decided to sell it for parts. Deciding not to trade it in was easy, since I could get just as much for salvage with less work. My decision not to really even try for a private sale came down to two things:
- I would have had to put more money into it first to replace the alternator, and that was pretty unappealing. I was DONE sinking money into that thing.
- I didn’t want to deal with the potential liability. Sure the chances were small, but I was realistically looking at making maybe $500 extra from a private sale than salvage. Was that worth the extra worry? To me it wasn’t.
So there you go. I passed up the potential for a little more money in exchange for peace of mind and security. This line of thinking is almost exactly the same as why I’m one of the most heavily-insured people I know. I will happily pay a little extra in the short-term to know that I won’t meet financial ruin in the long-term.
What would you have done in my situation? Would you have tried for the bigger profit?
Photo courtesy of Grey World