In many states, you pay sales tax only on the "Price Difference" as opposed to the full selling price when you buy without trading. For example, if you buy a new car for $25,000 and trade-in your old car for $8,000 you will only pay $1,200 in taxes vs $1,500 if you did not trade-in your car.

Selling your car requires significant effort on your part. In order to sell your used car you'll have to do things like running a classified ad, field phone and have strangers come to your house so that you can go on test drives with them. Then of course, you'll have to negotiate!

If you sell your car, you will need to ensure it is maintained and all parts are working. This is extra worry and expense on your part. It can include fixing brakes, tires and other big items. If you trade-in with a dealership, they cover all of the reconditioning expense.

Selling your car can be very dangerous and you need to be extremely cautious. When selling on your own, it is extremely important that you set up appointments when a friend or family member can be there with you. This cannot be over emphasized!

If you trade-in your car, you prevent any issues with a dissatisfied customer later on. What happens if the engine burns up or the transmission goes out? If you sell your car, the new owner knows where you live and you may contact or harass you. If you trade-in your vehicle, the dealership assumes all of the responsibility and you can walk away carefree!