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How to Value a Used Car

Determining the true value of a used car for sale

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Trade price (Also referred to as: Book value)

The ‘trade price’ or ‘book value’ of a used car represents the average price that a second hand auto dealer will pay you for such a vehicle. Depending on the condition of the car, the car might also be worth a bit less than ‘trade’ should the car be in need of servicing, new shocks or tyres etc. The ‘trade price’ off a vehicle is essentially the lowest value of a used car, and when buying privately you can expect to pay a little more.

Retail price

The ‘retail price’ is the value that the car ‘retails’ for if you were to buy it from a car dealer on a showroom floor. The ‘retail price’ off a vehicle is essentially the highest valuation of a used car, and when buying privately you can expect to pay a little less.

Market price

Even though, this term is mostly used by the insurance industry and is generally the ‘average’ between trade and retail price at which they will ‘pay out’ a claim, it is also a term that can be effectively used when buying a vehicle privately.

Market value can be calculated with the following formula: Market value = (Trade value + Retail value) / 2

This calculated value can be very different to your perception of a car’s market value, but it can be a good starting point for finding the fair market value of a used car you might be interested in buying. The ‘trade price’ establishes the low point of your car’s value when trading it to a dealership, whereas the ‘retail price’ indicates the absolute highest value your car might be worth.
Due to the additional risks and effort involved, no savvy car buyer will pay the ‘retail price’ to a private individual, but in turn the reason for a seller to sell a car privately is to get a better price than the ‘trade’ value, and hence the ‘market price’ is a good middle ground.
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