If you already have a car, you must decide what you are going to do with it. Do you want to keep it for a second car, or give it to someone you know? If so, go ahead and do that, and you needn't bother reading the rest of this information. But, if you do not want to keep you present car, then what are all the alternatives is its disposition?

Trade it to the dealer.
Perhaps the simplest choice is to trade it in on your new car. The dealer will be willing to look after the details. Chances are that he will want your car to resell. You do not need to do any repair work on your present car in order to trade it.

One advantage of trading your car to the dealer is that, in most localities, any applicable sales tax will be due only on the difference between the cost of your new car and the allowance for your old car. Without a trade-in, sales tax will be charged on the whole cost of your new car.

There is also a way to reduce the sales tax when you are selling your car privately. It is legal and most dealers are happy to co-operate. They will do a paper transaction, in which you sell your car to the dealer, who immediately turns around and sells the car to your buyer. Both transactions are at the price you and the buyer have already agreed upon.

Most dealers will do this at no charge and even look after all the paper work this double transfer generates. It is not a complicated procedure and the dealer may not even see the car.

Trading your car to the dealer means, however, that the allowance he will give you for your car will, in effect, be its wholesale price. He needs to buy your car at a price that is low enough that he can fix it up and sell it at its market price and make a reasonable profit. His allowance to you is really coming out of the price he is charging you for your new car.

When negotiating your deal with the salesman, it would best to get two prices. Find out the price without trading in your old car and also see what the price would be if you do trade in your present car.

Sell it yourself.
You can get a higher price for your present car if you sell it privately, because you bypass the middle man--the dealer--but the higher price will cost you something. You will have to get the car fixed up to a saleable condition. Depending on what needs to be done, that could run from only a few dollars to as much as several thousand. If you want to do this, you would likely be much better off in the long run by not trading your car into the dealer.

There is the option of selling your car in "as is" condition--that is, doing no fixing up. That would be most likely if your car is in either extremely good condition, or very bad condition. Your decision on this option might be determined in part on how much the dealer allows you.
If you fix up your car to sell it privately, to whom can you sell it? Perhaps a friend or relative wants it. Used cars are often sold to acquaintances because they know the owner and probably know the car, too. That gives them much more confidence than going to a used car lot and getting a car whose history they know absolutely nothing about.

Like borrowing money for your new car from a friend, however, relationship deterioration is a possible risk. This risk is particularly high in the sale of used car because something totally unexpected might go wrong with it right after the sale.

Of course, this is no less likely to happen if you sell your present car to a stranger. Are you prepared to face this possibility? What would you do if it were to happen? You may be the kind of person who does not want to put yourself into that kind of potential situation. If so, trade your car and let the dealer take the responsibility for the repairs, risks and so on. That is part of the business he is in.

On the other hand, if you can take the possible risks in stride, go ahead. Fix up your car and sell it privately. Place an inexpensive ad for your car in the local newspaper, pennysaver paper or car-trader magazine. Make up a notice and put it on the bulletin board at you place of work. Put a "For Sale" sign in the window, with your phone number or address. Post it on an appropriate newsgroup or web site that has classifieds. You can either keep driving your car or park it in a good location where a passersby will see it. Either way, potential buyers will spot it. If they are interested enough, they will contact you, and talk business.

Summary.
You have a couple of ways to go in the disposition of your old car. You can trade it to the dealer from whom you buy your new car. Or, you can sell it privately. Either way, you have a number of options within those two main paths. Consider your options carefully before you decide.