Car Value: How to Determine a Car’s Worth
Car value is especially important when it comes time to sell, trade in or refinance your vehicle. You can get an idea of how much your car is worth using online valuation guides. We’ll explain how to choose which guide to use and walk you through the options so you’re in the best position to get a good deal.
Pick a car value guide
There are many online car valuation tools to choose from, but these three sources are industry standards. Dealers and lenders use them, and you can too — for free.
Kelley Blue Book. Established in 1926, KBB is the oldest car value guide, and perhaps the most well known. Named after the actual blue books it once published, Kelley Blue Book allows users to look up the value of a new or used car they want to buy, or get the estimated value of a vehicle they own.
NADAguides. The National Automobile Dealers Association (NADA) represents franchised dealers and its valuation guide, NADAguides, also allows users to research new and used cars. You may have heard of the Black Book, which NADA also publishes, but that publication is limited to industry professionals. It gives much more information on vehicles and requires a paid subscription.
Edmunds. It’s the youngest of the three guides, but was early to move online where you can use its appraisal tool to get pricing information for your vehicle or its True Market Value tool to find out if a new or used car is considered a good deal.
Which valuation tool is right for you?
There’s some evidence that KBB tends to give higher car values, so this may be the best source for sellers. NADAguides may give lower values, a boon if you’re buying a vehicle. Our recommendation: check all three. It only takes a few minutes to plug in a vehicle’s information. We’ll walk you through the process in the next section.
Find your car’s value
You’ll first enter some basic information about your vehicle in a car valuation guide starting with year, make, model, location and mileage. The guide will take into account prices of what similar cars sold for in the same area — it may even take into consideration other elements like paint color and equipment.
You may need to provide:
- Engine type
- Transmission (automatic or manual)
- Braking and traction
- Entertainment options
- Comfort and convenience systems such as power windows or cruise control
- Safety and convenience systems
- Type of tires
- Exterior options such as sunroof or fog lights
Once you enter a vehicle’s information in a car valuation guide you’ll get a range of possible figures depending on the condition of the car and who is selling or buying. You may hear these values referred to as a guidebook, book or bookout value, a throwback to when these tools were actual books. Here’s a closer look at some of the factors used to determine a car’s value.
Dealership vs. private seller
Cars sold by dealerships are considered by lenders to be more reliable and therefore less of a risk to secure the loan — after all, dealers wouldn’t be in business long with scores of unhappy customers. Plus, they also have to meet federal and state regulations that a private seller wouldn’t. Therefore, a certified pre-owned car sold by a dealership will have a higher listing price than the same model John Doe sells from his driveway.
Trade-in value vs. used car value
If you trade in your car to a dealer, you are likely to get less for it than you would if you were to sell it on your own to another person. The convenience of turning in your old car and driving away in a new one all in the same day can mean giving up some of the profit.
A car’s condition can range from fair to excellent, depending on everything from engine health to cosmetic problems (or lack thereof). According to Kelley Blue Book, most used cars are sold in “good” condition, which means the car has some repairable cosmetic defects and is free of major mechanical problems. If you’re buying a used car and you’re worried about whether the car is dependable, consider getting an inspection from an independent mechanic.
Important:Vehicle values are in flux during the coronavirus pandemic. This might mean you may get less for your used car right now, whether you’re looking to sell it privately or trade it in. A similar phenomenon happened during the 2008 recession when average used car prices fell 10%.
How can you be sure a car is worth the value?
The prices generated by car valuation tools are estimates of what a certain make and model are worth. A specific car you want to buy may be worth more or less.
A vehicle history report (VHR) is the best way to research whether a car has been in an accident or suffered other damage, but you’ll need to know its Vehicle Identification Number (VIN). For a fee, CarFax, or another provider listed by the National Motor Vehicle Title Information System, can use that number to produce a VHR.
An independent mechanical inspection can predict the likelihood of future problems. If it turns out the $10,000 car will need a $2,000 transmission within a month, the car might be only worth $8,000.
What if the car is in poor condition?
If the vehicle you want to buy or sell isn’t in good condition, you could subtract the price of repairs from the asking price. An estimate from an independent mechanic is likely to be less expensive than one from a dealer. A car that has been in a collision could be worth anywhere from 10% to 25% less than a comparable vehicle with a clean history. Sellers may be able to recoup some of their losses by filing a diminished value claim. Buyers may get a bargain — assuming the car has been returned to good working order.
If a car has cosmetic flaws, these could range from dirt and grime that can be removed using a car detailing service or they may be signs of more serious rust or water damage that require an estimate from an auto body shop.
Get the best price using car values
Bring a copy of your car value research with you when you go to buy or sell a vehicle. Print out or have available screenshots on your phone of the following:
- The NADA, KBB or Edmunds values (or more than one)
- Vehicle history report, if you know the car’s VIN
- A mechanic’s report and estimation of repairs, if applicable
- A dealer’s posted online prices for the new or used car you want to buy — compare these to the sticker price at the lot
Buying a car
Compare the advertised selling price with your research. You should not pay more than what the car is worth according to an industry guide. If the seller refuses to at least meet the price, it might be best to walk away. It isn’t just about a more expensive car — you could wind up with a more expensive car loan, too. Remember, lenders use car valuation tools as well and they may be reluctant to loan you more than the car is worth or charge you a higher interest rate as a result.
Some lenders allow a loan-to-value ratio as high as 120%. The idea is that you could finance the entire value of the car plus taxes and fees without a down payment. The risk is that you could become upside-down on your car loan.
Selling a car
Advertise your car at a price point a little above its guidebook value so you have room to negotiate. And if a potential buyer asks how you decided on the price, tell them it’s based on whichever industry-standard pricing source you choose and the information you entered in that valuation tool.
For example, your car may have standard equipment or optional equipment that increases its value. If your vehicle has a middle-range trim, but you added the “technology package” when you bought it, it could have upgraded speakers, a navigation system and a larger touchscreen, making your vehicle worth more. A way to check your trim if you’re not sure is to enter your car’s Vehicle Identification Number in a free VIN decoder like the one provided by the National Highway Traffic Safety Administration (NHTSA).
Trading in a car
Don’t let the dealer convince you to take less than what a guidebook says your car is worth as trade-in. Check out these tips for trading in a vehicle.
Refinancing a car
Potential refinance lenders will compare the amount you owe on your current loan compared with the car’s value. If you owe more than the car is worth, the less likely you are to get favorable refinance offers.
Repairing a car
If it’s going to cost thousands of dollars to repair your car, and your car is only worth $10,000 as a trade-in, it might be better to trade it in rather than fix it. On the other hand, the purchase of a new car is probably more expensive than most car bills. Knowing your car’s value can help you make your decision. A personal loan is one way to get money you need to make repairs.
Market value versus tax value
As we’ve mentioned, car valuation tools generate estimates of a car’s market value. Tax value is what your local government says your car is worth, a number that’s used to determine how much you would pay in sales and/or property tax, if your state or city levies such taxes on motor vehicles. The tax value will typically be in line with KBB, NADA or other valuation tools we’ve mentioned, but if it’s higher, you might be paying more in taxes than necessary. It may be possible to look up your vehicle’s tax value and appeal it. Your local tax assessor’s office or state department of motor vehicles can help.