When purchasing a new or used car, there are several things you can do with your older car. You can use it as a trade in, you can sell it privately, you can give it to a friend or relative, or you can donate car to charity. There are pros and cons with each choice.
Negotiating the purchase price for a car with the dealer is difficult enough without having to haggle over the trade in amount. Most car buying guides indicate that you can probably make a better deal without a trade in. If your older car needs significant repair or does not run, the dealer may not offer you much of a trade in for it simply because he does not really want it.
Selling your older car privately comes with its own set of problems. First, you have to advertise it and wait for people to response and make arrangements to look at it. Then, you have to wait for them show up. If you car does not run or is in poor condition, you might have to makes some repairs in order to sell it. Once you have an interested person, you then have to negotiate the selling price. After you settle on that, you have to establish the terms of payment, i.e. will you take a check, accept payments, etc. Accepting another method of payment other than cash, a money order or a certified check is never in your best interest. There are some other concerns associated with the private sale of a car. Everyone has heard horror stories of the buyer suing to get their money back by claiming the car had some major problem that the seller failed to disclose. Fortunately, in most states private sales are viewed as being as-is and these types of lawsuits are generally unsuccessful. The other concern is that the buyer will drive the car without transferring the title or registering the car in their name. This can happen particularly in states where the license plates stay on the car.
On the surface, giving your older car to a friend or relative seems like a very generous gesture. However, this can really backfire and cause irreparable damage to your friendship particularly if the car develops a major problem you were not aware of shortly after the gift. Besides the possibility of losing a friendship, you will get no financial benefit by gifting a car.
Car donation may be the least stressful of all the choices. The financial benefit to you is the tax deduction you will receive when you donate your car. You do have to itemize on your federal tax return to claim it. The car donation process is very simple. Usually, you only have to make a phone call or go online to donate your car. Your car should be picked up for free. Some car donation charities will let you donate car that is in poor condition or does not run. If that is your case, you may need to do a little research to find a charity that will take it. To avoid any pitfalls, you should only donate car to a reputable car donation charity. That way you will not have to worry about any documentation issues.