The
source of the greatest stress or concern in the typical automotive
transaction may very well be the value of one's trade in. One may see
similar vehicles as his/hers advertised in the newspaper, on line, or
at a dealership at one price but will be offered a lesser price for
their car by the dealer. "I saw one just like mine advertised for
$10,000.00. Why are you offering me $7,000.00?"
To answer that candidly, a dealership will invest in, or pay, wholesale for a vehicle and attempt to sell the vehicle at retail. Obtaining
the difference in the two values is the goal of the dealer. Therein
lies their profits. Factor in the repair and the reconditioning costs, and the fact that a car is a depreciating item, and the margin is not as big as it initially appears. The diminishing return on the risk of investment can be a gutsy move. So
where do we go to research these values? This is a difficult question
to answer as there are probably a half of dozen resources and they all
give different values to a specific car. And they are only reporting historical data. They are not predicting what a vehicle will bring at the next auction! However we have found that
as of this writing probably the most consistently reasonable for "wholesale" or
"trade-in" value is Kelley Blue Book (kbb.com).
And there exist many times where Kelley is significantly off. They are simply erroneous less than most other publications that we have observed. So if you research the value of your vehicle on their website, you can
usually get a decent picture of what the wholesale value of your
trade-in might be. DOES A PUBLISHED BOOK VALUE MEAN THAT'S WHAT MY CAR IS WORTH? This
well may be the most misunderstood issue in researching a vehicle.
When one makes the effort to research a vehicle they intend to be
rewarded with the "knowledge" of what a vehicle is worth.
Unfortunately that is not the case. You have discovered about what the vehicle may
be worth. The car business is very similar to the stock market. Like
most commodities, the used car market is driven by supply and demand as
revealed at thousands of auctions nationwide. If anyone "knows" what
the car will bring at tomorrow's auction, they will become quite
wealthy. So
book values make the attempt to average market prices in a particular
region. But as in any published data there are variables that do
affect the true value. The variables are condition of the vehicle,
number sold at that auction, age of the data, region, time of year, gas
prices, and believe it or not, the weather! Hurricane Katrina affected
values for at least six months. Any or all of these factors may create
ascending or descending market conditions. Staying in touch with the
pulse of the market is the main challenge of any used car manager who
is appraising your trade in. We go to the auctions, subscribe to many publications, buy, sell and trade virtually every day. And at best we are making an educated guess as to what a vehicle is worth at the next auction. So if anyone tells you they "know" what a vehicle is worth, just smile and check for their Patek Philippe and their Rolls Royce because you just met the smartest person in the world, and they should have more money than they can spend.
