What's a used car worth?
Whether you're purchasing a used car or trading yours in this is one of the most common questions that comes to mind, and with all the available evaluation tools, who could blame you? Today we'll look at the different tools available and the differences between them. We'll also look at different “value” terms that are used in each. We'll start with the terms used when purchasing a vehicle and what they mean.
Value Types When Buying a Car
Private Party Value:
This is the value you can expect to pay when purchasing a vehicle from an individual. This person may be a coworker, neighbor, or just someone that listed a vehicle for sale. This value is generally less than purchasing a vehicle from a dealer, but there are things to consider when making a private party purchase. An individual is not likely to have a vehicle inspected before selling it, not likely to change fluids, is not going to assist in securing financing, and does not provide the ease of title transfer a dealer will. So, while you may save some money on the sales price of the vehicle, you may incur added expense and increase the amount of time and effort completing the purchase. An individual can do less in preparing a vehicle for sale and selling it, because they don't have to worry about receiving bad reviews or surveys a dealer has to.
Dealer Retail Value:
This is the amount you can expect to pay when purchasing a vehicle from a dealer. Although it may have a higher price tag than a private party, you can usually buy with more confidence knowing the vehicle has gone through inspection, some reconditioning, usually has a free Carfax available to you, and has an ease of securing finance.
Certified Preowned (CPO) Value:
This is the amount you can expect to pay for a Certified Preowned vehicle. A CPO vehicle is looked at as a premium preowned car. They are subject to a more stringent inspection process and are usually still under Manufacturer Warranty. Many CPO vehicles will qualify for lower interest rates than your usual used car, and also, in many cases, come with a manufacturer-backed extended warranty.
When purchasing a used vehicle, it is always a good idea to check listings for similar vehicles to compare pricing. Be sure you are looking at the same vehicle year, make, model, and trim level to get the most accurate read on what fair pricing would be.
When looking at trade in value for your vehicle, you have the below evaluation tools that can assist in estimating that value.
Value Types When Trading a Car
Kelley Blue Book
Kelley Blue Book, or KBB, has more than a million visits monthly, and the majority of those visitors are looking for trade-in values on their vehicle. KBB has been a trusted source of this information for over 90 years, and receives data from Dealers, Manufacturers, and Private Party sells that go into KBB's algorithm or determining used car values. They also consider market trends, time of year, and location when determining the value you see after entering your vehicle's information.
Edmunds
Edmunds.com is another trusted evaluation tool, just like Kelley Blue Book. Edmunds receives industry information just like KBB but offers an additional category for rating your vehicle's condition that KBB does not. This allows you to be more accurate in listing vehicle condition and in turn, makes the value you receive more accurate. Many industry experts agree that Edmunds is the most accurate when giving vehicle values.
JD Powers (NADA)
One of the oldest vehicle value guides out there. JD Powers, formerly known as NADA, was originally created for franchise auto dealers, but individuals were given access to JD Powers free retail evaluation guide. JD Powers values are usually higher than KBB or Edmunds because JD Powers automatically assumes “clean” condition on vehicles when valuing them. You should keep this in mind and know the value you see here will probably need to be adjusted for the condition of your vehicle.
While these are all good tools for estimating a vehicle's value, there are a few issues to keep in mind when using them.
- Lag Time: It takes time for pricing data and other information to come in and be analyzed by these tools. Therefore, the value information you receive may not be up-to-date based on trending market and economic conditions.
- Consumer Bias: Often times people over value or overestimate the condition of their vehicle. Cars that we have had for some time have sentimental value to us, and there are things we overlook condition wise because we have seen them every day for however long. It becomes hard to objectively judge your car, so the best thing to try and do is look at it as if you were buying it and what you would ask about it to the person you were buying it from.
- Dealers Don't Use These Tools: While dealers are knowledgeable of what KBB, Edmunds, and JD Powers are showing consumers about car values, they don't necessarily use them. Dealers use a tool that aggregates all this information along with auction and wholesale values on similar vehicles within a local or even national radius. Your local dealer will know more up-to-date information about the current value of a vehicle than any tool available that you can use.
In conclusion, all the available online evaluation tools are great for getting an idea of what a used car's value is. Don't just look at the highest or lowest number you can find, be sure to check all the tools and take an average of what you see and that will probably be the best estimate you can get, and if you are looking at a trade in value be sure to be as honest as you can regarding condition to avoid disappointment when trading your vehicle in. At the end of the day, anything's value is what someone is willing to pay for it, and no tool will ever be able to tell you that.
