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If your Camry is as clean as I think it is, you can sell it on your own with no problem. Find out how much it's worth on Edmunds.com and put an ad in the local paper and sell it, if you price it right, I bet you'll sell it within a week or so. Then you can find your Accord and not worry about your trade in.
I don't see what you would be gaining here and, like you said, you risk buying someone else's problem. Unless you're going to buy a different style of car (coupe for eg) or a newer car seems like a waste of time and money.
You are inevitably going to lose out on this trade. The dealer is not going to pay you equal value. Selling it privately would be your best option. Even if you did get equal value, you're paying thousands of dollars for a 7 year old used car. If I were you, I'd just put up with the Toyota for another year or two, save up some cash, then buy a newer, better Honda.
Also, you say the Camry is too big for you, but the Camry and the Accord of the model years you are talking about are about the same size. EDIT-- (looked up the specs on edmunds.com)-- actually the 06 Accord is slightly larger than your 06 Camry-- the Accord is an inch wider, two inches longer, and an inch longer wheelbase. The gas mileage is roughly the same between the two cars. Are you sure you are thinking Accord, or did you mean Civic instead?
Agreed - we have a 2004 Camry (same body style) and I've had an Accord as a rental. There was no difference in size to me, and that's with putting them side by side at one point. Then again, I don't consider either car large in any way shape or form. If you're trading in the Camry for an Accord because the Accord is "smaller...it's all in your head and your time, effort and money would be better spent researching the right car for you.
De gustibus non disputandum est. I have 07 Camry, Hybrid, and am tall broad shouldered guy. 6'5''. Super comfortable. But it's matter of preference.
I buy and sell on craigslist. Been doing this for years. Have very good success.
If you want a good car, buy Prius. Better off, Prius V. Even I was very comfy in it. And mpg speaks for itself.
I'd be staying away from Accords. Lousy cars. A Civic is a different animal. Or a Scion. Scion TC is great little car.
Oh, and who told you Honda dealer will refuse your Camry? I have seen them mix and match all the time. Whatever sells.
Not to mention that the majority of cars that get traded into dealers end up going to auction anyway.
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