How does a Dealership Find the Value of a Used Car?

How does a Dealership Find the Value of a Used Car?

Posted on September 6, 2021

If you’re trading in or selling your car to a dealership, how does the dealership come up with a value? How do they determine what makes and models are worth more than others or how much to offer? As we’re interested in buying any good quality used car we can right now, we thought we would outline what methods we use to come up with the value of a used car.

Valuing used vehicles

First up, valuing used cars isn’t science. It’s a process. Prices fluctuate and different things can impact a car’s value, like:

• Current market prices
• Make and model
• Trim level
• Mileage
• Condition
• Service history

Let’s take a quick look at each.

Current market prices

The value of a commodity is determined by the price the market is willing to pay for it. That means you can price a car as high as you like but you won’t necessarily get close to that price.

The trick is to use the market to tell us what people are paying. That means checking Kelley Blue Book and online sources to see what cars are valued at.

We then check other dealerships, websites that sell cars and anywhere we know of that is reliable enough to help with pricing.

Make and model

Some vehicle brands are valued higher than others. We all know who is who. Some cars are more desirable, others known to be more reliable or offer more features.

That’s why some cars from some manufacturers are valued higher than others.

Some brands also depreciate faster than others, which doesn’t always correlate with the desirability, reliability or features. This also has to factor into our calculations.

Make and model is also influenced by whether we sell that type of car or not. Sell a Nissan to a Ford dealership and you won’t get as much for it as Ford doesn’t have an existing market for Nissan cars.

Trim level

Trim level has an important role to play in the value of a used car. People like lots of features with their cars and higher trims tend to have more features.

While base models do still sell, they won’t fetch the same price as a higher trim with leather, safety technology, cameras and other goodies.

These features make a car more desirable, which means it’s more valuable too.

Mileage

The higher the mileage, the lower the value. While modern cars can drive several hundred thousand miles in their lifetime, most people think anything over 100,000 is a lot, so won’t pay as much for a higher mileage car.

Condition

Vehicle condition has an obvious bearing on how much we can offer for it. The more work we have to do to recondition the car for resale, the lower the price we can afford to pay for it.

All that work costs us time and money and we will need to take that off the price we offer for it.

Service history

Service history is important because it tells us how the car has been treated over its lifetime. It also tells us whether we have to fully service the car and spend extra time inspecting and checking it for reliability before we offer it for sale.

The more complete the service history, the more the car is worth.

Those are some of the main considerations that go into valuing a used vehicle. If you’re planning to sell your car to a dealership, this is how we come up with the price.

For any questions, concerns, or inquiries. Please don’t hesitate to contact us here!

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