There are three values commonly associated with used-vehicle pricing:trade-in value, private party value, and retail value.
Trade-in value is a theoretical value, which indicates the bestpossible price a dealer will offer if the car is in top-notchcondition. The lowest of the three common appraisals, "trade-in" valueis accurate only for clean cars with high re-sell potential. Typically,a dealer will offer less than trade-in value to cover the costs to thedealer to sell the vehicle at auction or on the used car lot withoutlosing money during the transaction. These costs to the dealer caninclude paperwork, transportation to auction, repair, reconditioning,vehicle certification, and other costs that the dealer must recoup whenthe car is wholesaled at auction or sold on the used car lot. Whilethere are exceptions, most trade-in values are 20 percent less thanprivate party values.
Private party value is the asking price commonly associated with salesbetween private citizens. These prices are lower than retail valuebecause a private party does not recondition, service, repair orguarantee their vehicle before the sale. Private parties are also notburdened with facility overhead such as rent, insurance, utilities oremployees. In most cases, the only warranty in effect will be anyremaining balance of the original factory coverage, and only if it'stransferable. Generally, there is no buyer recourse as private salesare final. Private party values are often mid-pack when compared totrade-in or retail values.
Retail value is the price established by professional licensedautomobile retailers. While the cost may be as much as 20 percenthigher than private party values, the vehicles sold by the dealershiphave often been professionally reconditioned, detailed and cleaned, andrepaired to bring them up to required standards (e.g., new tires andbrakes). In many cases they will be offered with a limited mechanicalwarranty or as a factory certified vehicle with an extended warranty.
More New Car Buying Tips:
- New Car Buyer'sGuide
- Preparingyour finances before buying a car
- ShouldI trade my old car in or sell it privately?
- Whois the best person to negotiate with at the dealership?
- Howmuch profit should a dealer make?
- How do I buy anew car?
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