A trade-in offer is always lower than what a private buyer would pay. But in most states the trade also cuts the sales tax on the car you're buying, and a private sale costs money and hours. Put the offers side by side on equal terms and see the private price you'd actually need to come out ahead.
Dealers typically offer 10% to 20% less than a car would fetch from a private buyer. That gap is the number people compare. It leaves out the fact that in most states, a trade-in toward your next car comes off the taxable price.
Buy a $35,000 car in Texas with a $12,000 trade and you pay tax on $23,000 instead of $35,000. At 6.25% state plus 2% local, that saves $990. The dealer's $12,000 offer is really worth $12,990 to you — a figure no private buyer can match unless they pay more than that, after your costs and time.
The tax credit is the whole case for trading in, and in some places it doesn't exist or barely does:
Online buyers and big used-car retailers will often beat a dealer's trade-in offer by a few hundred dollars, with none of the private-sale work. But unless you're buying your next car from the same company, the sale isn't a trade toward a purchase and earns no tax credit. A $12,500 instant offer can lose to a $12,000 trade-in once the trade's tax saving is counted.
The practical use for an instant offer is as leverage. Bring it to the dealer and ask them to match it on the trade — if they do, you get the higher number and the tax credit.
A private sale means photos, a listing, messages from people who aren't serious, test drives, a few no-shows and a trip to the bank or DMV. Eight to fifteen hours is typical. Whether that's worth $200 or $1,000 is your call, but it isn't zero, and it's the input that most often flips the answer on cheaper cars where the dollar gap is small.