If you’re thinking about getting rid of your current automobile, you may be tempted to sell it at a higher rate than you paid for it. While this makes some sense financially, there are a number of factors you’ll have to consider before raising the price and writing that ad. In fact, there are four really good reasons why you won’t want to make a profit on your vehicle when selling it in the future.
You Have to Pay Additional Tax
Remember that any profits that you gain when selling your automobile may be considered as capital gains by your local government (depending on where you live). For instance, residents of the USA will have to pay capital gains tax on the profits they make while UK citizens will be exempt. Thus, you’ll have to work out how much more money you’ll make and whether this will affect your annual tax returns. If your profits spill you over into the next bracket, you may end up losing money because of the additional tax that you have to pay.
Thus, it’s important to get your accountant to conduct some quick calculations. If your profits cause you an additional loss in the future, you may consider lowering the price you’re asking so you can then avoid this financial emergency later on. Take a small loss now and take care of your monetary stability when tax time comes around.
Trading It in Is a Smarter Decision
Typically you’ll be selling your car to purchase a new one in the future. There are two avenues you can take at this time:
• Selling your old car and buying a new one using the cash you get
• Trading in your old vehicle for a new automobile at your local dealer
In some cases, the latter may actually be more financially viable regardless of whether you can get a profit from selling your vehicle outright. Seeing as you’ll use all of the money for the new car, why not skip a step and just swap vehicles at a reputable dealer?
Of course, you’ll have to think carefully about the figures here, ensuring that you get the best deal. With a little negotiation at your local auto yard however, you may eventually get the buying price of your new car down to a low enough point if you simply end up trading in your present vehicle.
The Demand Is Not so High
Let’s say that your taxes are safe and you can’t get a good deal on the trade in. Are there any reasons why you wouldn’t want to sell your car at a higher price now? It turns out that there are! While demand for used cars has risen in the UK, always remember that an increased price will cut out all but the top-end buyers. This is especially true if you own a vehicle which isn’t a rare or expensive model.
If you are trying to sell a standard auto, don’t ask for too much or you might not find a buyer in time. Your car is always depreciating so it’s best not to sit on an expensive asking price in the vain hope that someone will take it. You want someone to drive away in your car so don’t make the price too high and drive them away instead! Look at buyer demand and work with this figure.
The Value May Not Be That Much
This point and the last are certainly related. If you’ve had your vehicle for a while, it’s important to realise that its value will constantly be dropping over time (unless you own a rare, sports car). Thus, you might not even be able to sell your vehicle at a higher rate especially if you own one of the vehicle brands which depreciate the most. The price that you ask must be more or less in line with the actual value of the vehicle your own.
Take a look at the depreciation rates of your particular model and work out whether or not you can feasibly sell your car for a higher rate. Again, asking too much is a sure-fire way to turn away customers rather than encouraging them to visit you and make a purchase. If the value of your vehicle has dropped too much, it will be impossible to ask an inflated selling price while still finding a buyer.
As you can see, the most obvious choice isn’t always the best. You may end up getting a better deal if you sell your vehicle at the same price or even at a loss. Just remember that the price given will have real effects on everything from annual tax returns to buyer demand so you’ll have to carefully balance out the selling rate with how convenient your life will be.
Chris Hood writes for a vehicle buyer in the UK. The Car Buying Group, as their name clearly states, helps clients to sell their cars off at reasonable prices and through a relatively fast process.