Trading in your old model when you're moving up to a new one can seem like a great deal at first, but you'll often throw money away if you take this route. No matter what you’re trading in, the same fundamental principle applies: when you sell to a store or dealer, you're forced to sell at a significantly lower wholesale price so the store can profit by reselling the item at retail price. When you sell to a private party, that higher retail value goes straight to you. Here are a few common instances where you might be tempted to trade in your old item but can get a better deal by reselling it yourself.
-Trading in your old car at a dealership. Even if you go to one of the supposedly fair no-haggle dealerships, this is a great way to lose money. You’ll trade convenience for a lot of cash, sometimes thousands of dollars. By selling your old car to a private party, you can typically get double what a dealer will pay you for the car. One caveat: If your old car is a lemon, you may feel better unloading it at a dealership.
-Getting a new cell phone. Have you seen those cell phone recycling bins at the store? I'm not sure what they do with those phones, but you'll be better off selling your phone on eBay. I recently sold a three-year-old cell phone that was scratched up and had a dying battery for a surprising $25. If you originally got your phone for free, you can actually make a profit this way.
-Trading in your used CDs, DVDs, or video games at brick and mortar stores. At best, you'll get 50% of the item's value, and you'll often get less. What's worse, the store probably won't buy everything you're trying to get rid of. Sell your items on Amazon or for the greatest profit. In my experience, if you're willing to sell your item for less than anyone else is, it will almost always sell.
-Books. Don't even bother taking your books to a half price bookstore. Most pay a small pittance for an entire grocery bag's worth of books, which will only depress you. Again, Amazon is your best bet.
-Collectibles, such as action figures and comic books. You used to have to haul your stash to conventions or go to hobby stores that would sell your stuff on consignment—neither of which was very easy—but now you can sell it to the highest bidder without ever leaving home, and make more money doing it.
That being said, there are a couple of situations where it can make more sense to trade in your old items rather than resell them.
-Clothing. Most clothing (aside from certain designer label items) is difficult to resell on eBay and isn’t even worth the effort to sell at a garage sale. If you take it to a secondhand store, you might have a decent chance of getting money for it as long as it's still in good condition and not out of style. One store I frequent will give you 50% of your item’s retail value (the retail value being the price they are going to resell the item for, not the price you originally purchased it for) if you trade it in, or 30% if you want cash. The cash value is usually so little that I think it's a better deal to essentially trade one or two old items of clothing for a new (to you) item.
-Very old cars. Depending on what state you live in, you may be able to sell your very old car to a government program designed to get highly polluting vehicles off the road. Sometimes to qualify for these programs your income cannot exceed a certain threshold, and you're unlikely to get more than $1,000 for your car. You also have to be willing to accept that your beloved car is going to end up on the junk heap. However, if you haven't been able to sell it to a private party or don't expect to get more than $1,000 anyway, this can be a good route to take. A dealer may not be willing to purchase your 1976 Volvo at any price.
For stuff that you can't sell online or trade in at a store, garage sales can be attractive. You won’t get much money for your stuff, but it's a pretty simple process if you do it right, and you might get a few bucks for items you'd otherwise just have to toss. Garage sales have really come back into fashion because people like to go to them to hunt for things to sell on eBay. So if you aren't inclined to go through the eBay process yourself, you might be able to easily sell your stuff to someone who is.
In the past, trading in your used stuff was a great deal because you could get more money for an item that way than you would selling it yourself. For the average person, venues for selling items to other private parties were very limited. But now that we have eBay, Craigslist, Amazon, and other online options, a little extra effort can get you a lot of extra money. When you consider that the time spent listing and shipping items can be similar to the time you would have spent taking items to a store to trade them in, you haven't even lost any time.