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What Determines the Value of a Used Car

The price you see on the window sticker of a used car is based upon a number of universal factors. Now granted, different sellers are going to value those factors in different ways — and the nature of car sales in general typically means the price you see isn’t the price you’re expected to pay. However, knowing what determines the value of a used car can help you get the best possible deal.

Depreciation

As a general rule of thumb, new cars automatically lose up to 25 percent of their value in their first year on the road. This happens for a number of reasons. Newer models always come in behind them, which drive their values down. Dealers only buy cars at wholesale, at their salvage valueso you won’t get your money back from them. And, people won’t pay full retail for a car with an uncertain history when they can get a new one for the same price.

Therefore, used cars have to be priced lower to be competitive.

The Car’s Manufacturer

Some brands have better reputations than others when it comes to reliability and fuel economy. Other marques are noted for delivering outstanding performance and driving excitement, while being light in the aforementioned areas. Still others are noted for providing wonderfully luxurious experiences with high purchase prices and high maintenance costs. All of these factors go into the formation of a builder’s reputation and affect the perceived value of the cars it produces.

Overall Condition & Mileage

There’s a reason the phrase “good, clean used car” has cachet. It’s what everybody wants. Thus, the farther away from that description your car is, the less it will bring on the open market.

Flawless paint, a pristine exterior, and smooth-running powertrain will enable you to price your car at or near the top of its category. People also get excited with they see low mileage as they equate fewer miles with better condition. The generally acceptable rule of thumb is 12,000 miles per year. Thus, a five year-old car with 60,000 miles on it is considered “normal.” The farther it strays in any of the above areas, the less money you can expect it to bring.

Color

Try selling a purple car with a yellow interior and you’ll understand this one right away. While, somebody out there might fall in love with that combination, they are few and far between. You’re a lot better off staying within the mainstream palette if you’re trying to keep the value of your car as high as possible. White, black, grey and silver hold sway as this is being written. Of course trends do change. There was a time when green, gold and brown were the favorites.

Speaking of which —

Trends

SUVs are currently enjoying a huge wave of popularity. This keeps their resale values high, as demand is greater for them than sedans, coupes and sports cars.

Options

You can also command a higher price for your car if it is feature-rich as opposed to what’s known as a “stripper.” The more options you choose when you buy a car, the more you can charge when you sell it.

Rarity

A highly desirable car of which only a few were made will bring a higher price than the opposite. This is simply the law of supply and demand at work. The more people there are clamoring for an item for which supply is scarce, the higher the price can be.

As counter-intuitive as it might seem, knowing what determines the value of a used car is good information to have when you’re buying a new one. Every smart businessperson knows profit is made when buying, not selling. Always buy with an eye toward eventually selling — unless you’re purchasing something special with the intention of keeping it forever.

And even then, hey, you never know.

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