Here’s exactly how dealers determine the trade-in value of your car

Car dealers have a specific formula for appraising a car someone wants to trade in. We find out what you can expect.

Ever wondered how car dealers determine the value of your car when you’re trading it in?

We wanted to understand the process, and quickly discovered that determining the best price to offer a seller as a trade-in is much more science than art. 

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The availability of online research has made the process of valuing your car far more complex than simply publishing a few photos and words about your pride and joy, said CJ Jayasinghe, chief executive officer of major Western Australian used car dealership, Westside Auto Wholesale. 

Mr Jayasinghe explained that buyers are more well-versed on cars than ever before and, to be competitive in the market, car dealers access a huge amount of data points to be able to determine the current value of a car. 

For Westside Auto Wholesale, being yard-ready means making a used car look and feel like new.

What’s the trade-in value for my car?

When determining the trade-in value of your car, the dealer wants to know just how much demand there is for the make and model of the car you’re selling.

“We want to know if the characteristics of the vehicle are on par, better or worse than its competitors on the market,” he told Drive. 

“We also look at how many of this particular model are selling, and even which colours move the fastest.”

Car dealers are also able to refine the data from national to state-specific data to give a clear picture of the worth of a vehicle based on location. 

Other considerations include: 

• How many of those cars from the same model-year and with the same specifications are currently advertised online? 
• What is the average odometer reading on those advertised cars? 
• What is the average price of those advertised cars?
• How many days’ supply exists?
• On average, how many days is a listing online before selling? 
• How many opportunities to sell will the car attract? 

The other factors taken into account when pricing a used car are reconditioning spending and statutory warranty.

“When valuing a vehicle, any damage or defects need to be taken into account,” Mr Jayasinghe said.

For example, Mr Jayasinghe said if the alloy wheels are scratched, it could cost roughly $250 per rim to fix. And if the windscreen has a crack, a new one will cost another $1000. 

Statutory warranty also needs to be offered on used vehicles, which needs to be factored into the price. For example, some cars commonly leak oil or might have transmission issues. The dealership is liable for these costs, whereas a private seller is not, he explained.

“All these things are taken into account, where the potential seller may not be aware of the costs to get the car yard-ready and saleable.”

And while you might get less money for your car than selling privately, the benefit of selling to a dealer is that they sort all the formalities.

“The good thing is the dealer handles all the paperwork. When selling privately, the two buyers need to trust each other that the paperwork, ownership and funds transfer are done currently and quickly,” he explained.

“You also need to be comfortable about sharing contact details and organising a safe place to meet someone if you have communicated with them via email or text.”

The post Here’s exactly how dealers determine the trade-in value of your car appeared first on Drive.