Determining a vehicle's worth is quite easy to do but it is not exactly an exact science.
A used car's price is determined by a whole range of factors including: make, model, mileage, service history, condition, accident reports and the demand for the particular vehicle in the current market.
Buyers have several tools to help determine the value of a used car they plan to buy.
Start off by searching for vehicles similar to the one you are interested in buying on car classified websites, to find a fair market value of the particular make & model.
Browsing classified ads is not always very accurate, as you have no way of knowing how the advertised cars actually compare to each other.
Some might be bargains whereas other could be complete lemons.
A better way to determine the current value of a second hand car is to make use of the various online 'car valuation' services.
Some websites offer the first report free, so be sure to shop around! It should be noted that these websites in turn make use of an Auto Dealers' Guide, to determine the correct value of used cars.
This guide is widely used by car dealers as well as insurance brokers, but is still only a guide and provides you with a good average price of a specific vehicle model.
This guide also takes into consideration the mileage and the condition of the car.
A 'valuation report' will essentially provide you with the 'trade' as well as 'retail' price of the vehicle which you can use to determine a fair 'market price' for a vehicle.
These are price 'terms' typically used in the auto industry when it comes to used vehicles, and following is a brief explanation as to what they mean: Trade price (Also referred to as: Book value) The 'trade price' or 'book value' of a used car represents the average price that a second hand auto dealer will pay you for such a vehicle.
Depending on the condition of the car, the car might also be worth a bit less than 'trade' should the car be in need of servicing, new shocks or tyres etc.
The 'trade price' off a vehicle is essentially the lowest value of a used car, and when buying privately you can expect to pay a little more.
Retail price The 'retail price' is the value that the car 'retails' for if you were to buy it from a car dealer on a showroom floor.
The 'retail price' off a vehicle is essentially the highest valuation of a used car, and when buying privately you can expect to pay a little less.
Market price Even though, this term is mostly used by the insurance industry and is generally the 'average' between trade and retail price at which they will 'pay out' a claim, it is also a term that can be effectively used when buying a vehicle privately.
Market value can be calculated with the following formula: Market value = (Trade value + Retail value) / 2 This calculated value can be very different to your perception of a car's market value, but it can be a good starting point for finding the fair market value of a used car you might be interested in buying.
The 'trade price' establishes the low point of your car's value when trading it to a dealership, whereas the 'retail price' indicates the absolute highest value your car might be worth.
Due to the additional risks and effort involved, no savvy car buyer will pay the 'retail price' to a private individual, but in turn the reason for a seller to sell a car privately is to get a better price than the 'trade' value, and hence the 'market price' is a good middle ground.