What is my Car Really Worth?

If your thinking about trading in your car, purchasing full coverage insurance, or selling your car, it is important to know what it is really worth.  Having a vehicle with a large amount of equity can also be a financial safety net for emergencies.  To understand what your vehicle is really worth you first need to understand how vehicles are valued.  There are generally four different categories for vehicle values, in order from highest to lowest:

  1. Retail – What a dealer will sell the vehicle for.
  2. Private Party – What the vehicle is worth in a private party sale.
  3. Wholesale – What a wholesaler will pay for the vehicle.
  4. Trade-In – What a dealer will pay for the vehicle.

The value of the car can vary significantly depending on the category.  Mileage, condition, options, and accessories all factor in to the value of your vehicle.  Just like all products, a car is worth what someone will pay for it at that moment.  A simple answer to this question is the vehicle is worth what a willing buyer will pay for it right now.  The category of the buyer is what will affect how much they will pay for the vehicle. Let’s look at the four categories:

Trade-in Value:

The trade-in value of the vehicle is what a car buyer (dealer) will pay for the vehicle.  The simple answer to “what is my Car worth” is what someone will pay for it today.  If you need to sell it immediately there are companies like We Buy Any Car and Carmax that will purchase vehicles directly from the public.  Autotrader also has a car buying service where they will provide you with a quote and a dealer interested in purchasing your vehicle.

Do not be surprised if the amount these companies offer you for your vehicle is significantly less than the retail or private party value of the car.  These companies need to make a profit to exist, and do so by purchasing vehicles for less than they sell them for.  They have expenses to cover, and if they end up selling your car at a wholesale auction they will offer you less than wholesale price.

Wholesale Value:

The wholesale value of the vehicle is what a wholesaler will pay for the vehicle.  A wholesaler purchases vehicles from dealers and sells them to dealers (often through wholesale auctions).  They do not deal with public, and wholesale auction data is not readily available to the public.  The wholesale value is usually slightly higher than the trade-in value but can vary depending on make, model, mileage, and condition.   A low mileage vehicle can be worth significantly more than the same vehicle with high mileage.  The same applies with condition.  A pristine vehicle is worth significantly more than the same vehicle that has cosmetic and mechanical defects.  If you are trading your vehicle in to a dealer and buying a new vehicle; you can negotiate the price of the trade-in and get the dealer to pay you the wholesale value (or higher).  They want to make the sale; so making a profit on your trade-in in less important.  See our post “How to get the most for your trade-in“.

Private Party Value:

The private party value is what you can expect to get for the vehicle if you sell it yourself. If you prepare your car for sale by fixing any mechanical issues and reconditioning it, place a classified ad, and show the car to potential buyers you may be able to sell your car for more than the trade-in value.  If you are lucky, you can sell the vehicle quickly for what you think it is worth, however, there are no guarantees.  It may take some time to sell, and you may end up having to lower the price.  Kelly Blue Book provides estimates on private party sales for most vehicles; again condition and mileage will be a big factor.

Retail Value:

The retail value of the vehicle is what a dealer will try to sell the vehicle for and is the highest value of the four categories.  Unfortunately, the retail value of a vehicle is not what the vehicle is really worth.  We’ve all heard the saying about the car depreciating as soon as you drive it off of the lot.  It can be frustrating to see a vehicle very similar to yours at a dealer for $15,000 and then see the trade-in value is only $11,000.  The dealer has expenses including rent, wages, utilities, and other costs.  Additionally, the dealer will repair, recondition, advertise, show, and store the vehicle while they try to sell it.  This process can take months.  Like any other business selling a product, they need to sell cars for more than they purchased them to continue to exist.

The Real Value:

So what is the real value of a car?  The real value of your vehicle is somewhere between the trade-in value and the private party value; depending on if and how you plan to sell the vehicle.  Finding a buyer in the private party category will net you the most for the vehicle, but it is not without risk.  To sell the vehicle immediately you can expect to get the trade-in value.  In some cases, there is a big difference between the two.

If you are just looking for the value of the car and not interested in selling it; take the difference between the private party value and the trade-in value.  This will give you a decent estimate of what the vehicle is actually worth.  If and when you decide to sell it, you can adjust as necessary.