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The following post is one of a series of articles I am writing detailing our recent cash purchase of a “new” family vehicle. From deciding which make and model to buy, to closing the final deal, follow along on our car buying adventure!
Whether you are buying or selling, determining a fair market value for a used vehicle is far from an exact science. There many variables that influence a vehicle’s value including (but not limited to) mileage, condition, color, current gas prices, geographic location, and state of the economy. Don’t get ripped off during your next automobile transaction! With a little legwork, you can be confident that the price you are paying (or receiving) is indeed a fair price.
The best method I have for determining a used car’s fair market value is to check the classified ads in your local newspaper or online sites like Craigslist.com. Look for vehicles that are within a year or two of the models you are interested in purchasing (or selling) and make a note of the asking prices. Additionally, if you see any vehicles that catch your eye, write down the information so you’ll have it when you are ready to buy.
Call up some of the older ad listings in your region and ask the seller if the vehicle is still available. If he says no, don’t be afraid to ask how much he sold it for. If the vehicle has been listed for a month or more and has not yet sold, you have a good indication the market is soft for this model, or the seller is asking too high of a price.
These comparisons or “comps” will give you your best indication of what the “market” is for your desired vehicle, and is essentially the same thing that a professional home appraiser will do when they value a home being offered for sale.
New car dealerships in your area are also good places to contact. You can expect to pay more when purchasing a used car from a dealer, but sometimes this cost is justified knowing you got a thoroughly inspected and conditioned vehicle. Additionally, many used cars are marketed as “certified pre-owned” and are covered by extended warranties, free schedule maintenance, and financing incentives that rival those offered with new cars. Expect to pay about 10% more for a vehicle from a dealer than you would an individual selling their own vehicles.
Disregard any prices advertised at “buy here, pay here”, “credit now”, or “everyone’s approved” car dealers. In most cases, these car prices are inflated to adjust for the risk the dealership takes when selling cars to individuals with bumpy credit histories. Rarely are the prices advertised at these dealerships reflective of the actual market value of the vehicle.
After researching KBB, NADA, local classifieds, and local dealer inventories, you should have a pretty good idea of what your desired vehicle is selling for in your area. You will need to consider the vehicles’ mileages, conditions, options, and year when considering your benchmark price. Remember, the more familiar you are with the variables affecting the price of your desired car, the more intelligent purchasing decision you will be able to make.
Read the Entire Series:
Part 1: We Need a New Car
Part 2: The Case for Buying a Used Vehicle
Part 3: How We Decided Which Car to Buy
Part 4: Determining a Used Vehicle’s Fair Price
Part 5: Our First Attempt to Buy a “New” Vehicle
Part 6: Negotiations With an Auto Dealership WE BOUGHT A CAR!
