How does a dealer value my car?
If you’re judging your car’s value based on what dealers are selling similar cars for, then you need to be taking a number of things into account, all of which reduce the amount a dealer will pay for your car.
Firstly, a dealer will look a the exact make, model and specification of your car. There can be a massive difference in value between two similar-looking Volkswagen Golfs, for example. One could be a base model with small engine, manual gearbox, no desirable options and in an unpopular colour (blues and reds may look great but are usually less popular than other colours), while the other could be a top-spec car with a diesel engine, automatic gearbox and painted silver or black.
Aftermarket modifications will also usually hurt your vehicle’s value – it doesn’t matter how phat you think your oversize wheels and dark tinted windows are, there’s a high probability that future buyers won’t be so impressed, so dealers will mark you down accordingly.
Secondly, a dealer will look at the car’s age. Six months here or there may not seem significant to you, but there may have been a major model upgrade in that time which could make a car that’s only slightly older far less valuable at trade-in time.
Also, a car that’s just out of new car warranty will be worth less than a car that still has some warranty left, even if it’s only a few months. Buyers certainly prefer some kind of warranty, so dealers will value it accordingly.
Thirdly, a dealer will judge a car’s condition. This consists of all of the obvious and visible points, as well as a more detailed analysis of the things which are not immediately obvious but influence the car’s value significantly. Leaks, rust, tyre wear (including the spare), service history, MOT reports, and so on. A dealer is trying to decide how much money they are going to need to spend before the car is ready for sale. Every penny they have to spend preparing the car is a penny less that they will be giving you.
Fourthly, the dealer will look at your car’s mileage. Essentially, a car with low mileage for age will be valued slightly higher, but a car that has higher-than-average mileage will usually be marked down heavily.
Again, this is purely based on customer preferences, so dealers buy and sell accordingly. It doesn’t matter if the mileage is “all motorway mileage”, a customer will always prefer to buy a car with lower mileage than one with higher mileage. And you can’t prove where those miles took place anyway, so the old “motorway mileage” excuse is worthless.
Those four points are the big ones in determining your part-exchange value, but a dealer will also look at how many owners a car has had. One owner from new is desirable but not usually worth any more than a couple of owners, but a number of owners in a short period will be considered suspicious and valued downwards accordingly – regardless of whether or not there’s a valid reason.
There is also the simple equation of supply and demand, and individual bias. One dealer may have had good returns on selling Vauxhall Corsas, so may be prepared to pay a bit more for your nice Corsa. Another dealership might have struggled to shift the last three Corsas they had in stock, so may be less generous in what they offer for yours.
To arrive at the price they offer you for your car, a dealer will look at their likely selling price for your car, and then subtract their profit margin (they are a business, after all), subtract their costs of running the business, and then subtract anything they will need to spend on your car.
They will use industry data from CAP and/or Glass’s as a guide, and use all of that information to come up with a price of what they are prepared to pay for your car. However, going back to the start of this article, that doesn’t mean that they will offer you that much to start with…
The more time you spend getting to understand the real value of your car, the better position you will be in when it comes to buying your next car. You won’t be so shocked when dealers offer you what seems to be a pittance for your car, and you’ll be better placed to negotiate up to a fair figure.
And because you started your new car calculations with a more realistic figure in mind, you will be in a better position to look for cars that you will be able to afford.
Far too many people already have their heart set on a specific car, and their calculations get blown out of the water because they massively overestimated their part-exchange value. Unwilling to give up on their dream car, they end up paying far more than they can afford and end up in all sorts of trouble trying to keep up with their payments.
Don’t miss our next episode!
In our next #AskTCE article, we will look at what you can do to get the very best price for your car when you sell it, whether it is a part-exchange or private sale. Because although people get outraged by the part-exchange offer they got from the dealership, the truth is they usually could have done a lot more to help themselves.
You could be hundreds or even thousands of pounds better off if you take The Car Expert’s advice, so stay tuned!
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