Three values that determine used vehicle prices

There are generally three values that go into determining the price of a used vehicle: trade-in value, private party value and retail value.

Three values that determine used vehicle prices

There are generally three values that go into determining the price of a used vehicle: trade-in value, private party value and retail value.

A vehicle’s trade-in value

Trade-in value – A theoretical value that corresponds to the best price a dealer would offer if the vehicle were in perfect condition. The lowest of the three common appraisals, the trade-in value is only accurate for clean vehicles with high re-sale potential. The dealer generally offers less than the trade-in value to offset its costs to sell the vehicle at auction or on the used vehicle lot without losing money in the process. These costs to the dealer can include administrative costs, transporting the vehicle to auction, certified vehicle inspections, repairs, vehicle reconditioning and any other expenses that the dealer incurs. While there are exceptions, the trade-in value is generally 20% lower than the private party value.

Private party sale value

Private party value – Asking price commonly associated with a vehicle sale between private parties. This price is lower than the retail value of the vehicle, since the seller does not recondition, service or repair the vehicle before the sale, or offer any warranty. Private parties are also not burdened with general overhead costs such as rent, auto insurance, public utilities or employees. In most cases, the only warranty in effect is any remaining coverage on the original factory warranty, and only if it’s transferable. Generally, there is no buyer recourse as private sales are final. Private party values are usually midway between the trade-in value and the retail value.

Retail value

Retail value – Price established by authorized vehicle dealerships. While the cost may be as much as 20% higher than private party values, vehicles sold by dealerships have often been professionally cleaned, reconditioned and repaired to bring them up to required standards (e.g. new brakes and tires). They are often offered with a limited mechanical warranty or as factory-certified vehicles protected by an extended warranty.