Buying a used car usually means selling one. Often the biggest car-buying problem is what to do with the vehicle you currently own. Trading it in is easiest, but selling it privately usually brings a better price. There can be tax and personal advantages in giving it away to a charity or family member. Selling a car yourself does take time, so if the goal is to get the most money, be willing to make the sacrifice.

Trading In Your Car

Dealers who handle used cars generally want trade-ins, so they make the procedure as easy as possible. The dealer assesses the condition of the car, its age, and other factors, then determines its trade-in value. The amount the dealer gives for the trade-in is deducted from the amount paid for the new car.

The value of a trade-in is generally lower than the amount one could sell the car for in a private-party sale, but trading-in eliminates some potential problems. Trading-in can save time, effort and potential post-sale headaches. When selling a car on your own, you are basically putting yourself at the mercy of the buyer. They know where you live!

Trading-in is about convenience -- there are no advertisements to place, no test drives to arrange, and no legal battles to fight if the recently-sold car breaks down. Once a car is in the dealer's hands, it's the dealer's responsibility to prepare it and handle the resale. Trading-in may also offer a tax advantage if you are buying a vehicle at the same time. In most states, sales tax is only paid on the difference in cost between the trade-in value and the price of the new car. This can help narrow the difference between trade-in value and the expected private-party price.

And, of course, when buying from a private individual, there is seldom a chance for a trade. Still, some of the best deals I've done involved swaps with private owners. It never hurts to ask. Especially if someone is selling a car to reduce their monthly payments, they may be interested in your less expensive trade.

Selling It Yourself

This can be the most difficult part of the process. While unscrupulous buyers and unsavory shoppers are not the norm, consider meeting people at a location away from your home. A professional, confident approach will forestall most concerns.

Selling a car on your own is usually the best way to obtain top dollar, and it may be the only option. But be aware of the work involved. Prepping a car for sale will take time and, depending on its condition, may also cost some money. Honestly assess the car's condition and decide how much to spend on minor repairs. Be sure to fix things well enough to avoid running into possible problems after the sale.

Unless you really enjoy cleaning cars thoroughly, have a professional detailer go over the car, bringing it into top condition. This usually costs between $80 and $200. Before doing so, it may pay to send the car to a car wash offering under body and under hood washes, often for less than $25. This alone may make the car look good when inspected. Give the car a thorough "once over" using the same checklist and procedure used when evaluating a new car. Refer to the article "Used Car Buying Checklist" for a detailed list of the items needing attention when prepping a car for sale.

Collect all the documentation and receipts that relate to the car and put them in a file. Folders that have been labeled individually for title and state fees, insurance, and repairs look good and will impress a buyer. Make sure NEVER to give the buyer the insurance file when the car is sold. That is private information. Additionally, make a copy of registration, title and other major documents to give to the new owner. Should something ever go wrong and the buyer tries to return the car, the records will be readily available.

Refer to the same sources used to research a purchase to determine the value of the car being sold. By looking at both the trade-in and suggested retail values listed for the car, you can determine an asking price somewhere between them. Also check classifieds and newsstand publications. Look for similar cars listed and compare the asking prices. Using multiple sources helps assure a fair and realistic asking price.

Most guides list variations of prices, something like retail, wholesale, and trade-in, in descending order. Retail is usually close to what a dealer might expect to ask for a car; wholesale is the price usually paid at an auction; and trade-in is the value one can expect from a dealer. These estimates are varied by car condition, mileage and options. The guides will explain how to revise the estimates to suit the car under consideration. Use the guides to get a rough idea and then check dealer ads and classified listings for the current going rates. Try setting a price about 5%-10% below similar listings, since a quick sale may be worth a lot of time and advertising cost.

Check your library, financial institution, or car dealer friend for copies of buyer's guides with pricing. They will vary in estimates, but all are close enough to be good indicators. Even if the prices are not the most recent, they can give you a good starting point. Also check newsstands for commercial versions. Some web sites that provide pricing include:

• NADA Pricing Guides at http://www.nadaguides.com.
• Kelley Blue Book at http://www.kbb.com.
• Car Prices at http://www.carprice.com.

For more information about determining the right price of a car read the article "">��The Process Of Buying A Used Car In A New Era."

Be prepared to advertise in multiple sources. Remember to calculate the advertising costs. Unless the car is highly desirable, it may take several weekends to sell -- a costly process that could tie up other car-buying plans. Run the ads Friday through Sunday, and expect the most activity in the morning. Gauge the response to the ad. Few calls may indicate that the car is not popular or the price is too high. Be patient, and adjust the price if the vehicle is not moving. Selling a particular model may be affected by the season of the year: sports cars, station wagons, minivans and convertibles sell best in spring and summer; sport utility vehicles sell best in the fall.

Depending on the car, it can take a long time to sell or go very quickly. Our editor once sold a Camaro just below Kelley Blue Book retail. It was in great shape, clean and had relatively low mileage. She had so many offers, it sold within five days for cash. A contributing factor to the quick sale was that the community nearby viewed the Camaro as a status symbol. It pays to know where to advertise to reach the target market and to be familiar with the nature of the customers.

Make poster board signs and place them in the windows when the car is parked. A sign in the left rear window, however, does not impact the driver's view and can remain up while driving. Print up flyers with a photo and place them on corporate and shopping center bulletin boards. List on the Internet, searching for every available web site that takes car listings. Most communities have a shopper's newspaper, which only charges a fee if the vehicle is sold. These are best for low cost cars, less than $3,000, and often will ask for their fee no matter where the buyer finds the referral. These are usually sold at convenience stores. When calling to place the ad, ask which day they are published to get the freshest editions with the most current listings. Also, check around to see if there are any papers or tabloids in your area that allow car listings for sale free of charge. These are good for an additional listing and don't cost a dime.

Since advertising is best done locally, do an Internet search using such keywords as auto, classifieds, ads and the name of your city or state. Some of the best sites we've found to list cars for sales are:

• The Auto Stop at http://www.theautostop.com.
• ViCars at http://vicars.molave.net.
• The Find at http://www.thefind.com/us.

Some localities have auctions or used-car lots that will help individuals sell cars for a percentage or fixed fee. The seller gets a display space and they often place ads in local newspapers to attract buyers. These can be found by watching newspaper classified ad sections to find the people setting up these auctions and temporary car lots. Also, don't overlook collector club meets or auto flea markets.

Prepare for possible scheduling hassles that occur when multiple buyers want to see the car at the same time and for negotiating in general. Make sure to have a firm idea of how low a price will be acceptable. How will you handle competing offers and other dilemmas? My rule of thumb is to generally accept the first reasonable offer from a buyer with cash. If someone calls after another has made a commitment but not produced full payment, take their names and numbers.

If someone wants to make a down payment to hold the car, ask for an amount greater than the cost of advertising for another weekend to cover time and expenses. If someone wants to take the car to a mechanic, ask for a significant deposit, something about 25% the value of the car or at least $1,000 if the car is more expensive. For example: If the car is worth $1,000 ask for a $250 deposit. If it is worth $5,000, get $1,000. The least I'm comfortable with is $100, but let the buyer make the offer, and raise the ante if it isn't in your comfort zone.

Ask where they are taking the car and get the information from their driver's license -- consider photocopying the license - and make sure the license is current. Call or look up their home phone number to verify it is correct. The recovery rate for stolen cars is not great.

Your insurance probably covers the car until sold, but it is a good idea to ask the buyer for information on his liability carrier. Consider taking the car to their mechanic if that makes you more comfortable, but make sure the shop knows that the potential buyer is paying, not you.

When holding a car for someone not able or willing to complete the transaction, refund their deposit, less an amount based on the cost and trouble of advertising for an additional weekend. Make sure that this is understood up front, and sign a sales agreement with this stipulation spelled out in clear English at the time the deposit is placed.

When you finally find a buyer and have the money in hand, the last step is to transfer the title and registration, and cancel your insurance on the vehicle. It is best to go to the Department of Motor Vehicles with the buyer to make sure the transfer actually takes place. It may help to photocopy the signed transfer papers and keep them on file to respond to any traffic tickets or claims should the buyer get involved in an accident.

Our editor had a terrible experience years ago when she sold a car to a young man who crashed it within a couple of weeks of buying it. The person he hit tried to sue her. Fortunately she had a signed bill of sale and had gone to the Department of Motor Vehicles with him to change the title and watch him register the car. Regardless she spent months on the phone with the person who had been hit convincing them she wasn't responsible because she didn't own the car at the time of the accident.

Give It Away

While donating to charity is an attractive alternative on principle alone, some sellers find the greatest advantage to be the ease of disposing of a vehicle that otherwise would require more effort to sell than it is worth. And, of course, there are the advantages of a potential tax write-off.

Donating a car should be rewarded with an income tax deduction. Be sure to evaluate your personal tax situation. Check with an accountant to ascertain the benefits. There are two main components to making a deductible donation: a qualified organization to receive the donation and the fair market value of the car.

Qualified charities include most churches, synagogues, temples, mosques, and other religious organizations, as well as federal, state, and local government programs, nonprofit schools, educational groups, museums and hospitals. The receiving group should provide a letter describing the gift or a detailed receipt. If the car is of significant value, ask them to fill out an IRS Form 8282 acknowledging the gift. Most states ask for copies of the appropriate federal forms for deductions. Make sure the documents list year, model, and VIN number.

The IRS Charitable Contributions, Publication 526 states, "Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all relevant facts." Determine fair market value the same way you would when figuring an asking price -- using web sites such as CarSmart.com and Cars.com, buyer's guide publications and local classifieds. Include copies of the guides and advertisements with your tax forms. Recipients are not able to provide an assessment of the value of the gift; that is the donor's responsibility. If the gift is expensive enough to require an appraisal, that cost may be included as a deduction also.

One last way to give away the car is to a family member, which does not gain you much, except in goodwill. Still, there are possible benefits since the transfer costs to the recipient are much less in most states. One direct benefit is to give a vehicle to a family member listed as a dependent when filing with the IRS. The IRS requires that in order to claim someone as a dependent you must contribute a certain percentage to their income and upkeep. The value of the car can contribute to that contribution.

In Conclusion

As with anything else that is worthwhile, this selling effort will take time, organization, and perhaps even some hassle, but the financial benefits are worth it. It is even possible to meet some interesting people and make good friends in the process. Good luck!