We recommend three car valuation guides that are popular with both consumers and auto industry experts: NADAguides.com, kbb.com (Kelley Blue Book), and Edmunds.com.
When it comes to a used car, each of these guides will give you two numbers – the wholesale value (also known as the trade-in value) and the retail value.
Wholesale or Trade-In Value: This is what you can expect to get for a vehicle that has normal wear and tear. It’s usually a fair price for vehicles in average condition for their mileage and age. Because this is an average, half of the vehicles on the road will be worth more, and half will be worth less.
Retail Value: This is what you’ll pay for a vehicle that is completely free from defects – it has been 100% refurbished, and it’s as nice a car as you can hope to find for that year and for that mileage. Dealers and private individuals will try to charge full retail value, but keep in mind that less than 3 percent of the cars in the United States are in such excellent condition and worth retail value. In other words, retail value is usually the most you should ever pay for a used car.
When figuring out a fair price for a particular vehicle, it’s important to remember you must adjust for miles and condition. Here are some of the things you’ll need to account for:
- The average annual mileage in the U.S. is 12-15k miles. If the car you’re looking at or trading in has more than twice the average, you should expect to deduct more than the recommended mileage deduction. It’s commonplace to double or even triple the mileage penalty for extreme mileage situations (this is particularly true with NADAGuides).
- If the vehicle needs tires, deduct $400-$600 from the value of the car– if you’re not sure how much you can always call the local tire store and find out.
- If the vehicle needs a windshield, deduct at least $300 from the value.
- If the vehicle needs minor scratches repaired or small dents knocked out, that again will cost a few hundred dollars.
- If you can stand five feet away from the vehicle and see dents or scratches on the car, you should have a body shop look at it to get a sense of how much it’s really going to cost. Believe it or not, a seemingly minor cosmetic flaw can run into the hundreds or thousands of dollars.
- If you’re looking at any substantial body damage, get a second opinion. Body estimates can vary widely.
- Whatever the damage is, it’s best to have an estimate in hand. That will make determining the actual value of a car much easier.
It’s important to remember that you should be just as aggressive valuing your own car as you would a car you’re trying to buy – fair is fair.
The process of valuing a car using kbb.com or Edmunds.com is only a guide. The actual price of the car will be determined by factors such as the local market, the time of year, and how available that type of vehicle is. When you come up with a value, don’t feel like that is the only acceptable one. Too many times people get caught up in a specific number – instead, tell yourself that if you can get within $500-$1000 of the value you’ve determined, you’ve done pretty well. Besides, if you’ve done your homework and you’ve followed all our car buying negotiation tips, you’re going to get a good deal.
As always, take your time when buying a used car. Do your research, get multiple financing quotes, and feel free to contact us with your questions.