TYPES OF AUTOMOBILE VALUES EXPLAINED

This article describes the differences in used car values. The following chart details how much a vehicle is worth in any given market. The most common misconception is that there is a difference between Fair Market Value and Trade-In Value. Selling a car in an arm’s length private party transaction will result in the same monetary return as a trade-in to a dealer. However, selling the car outright to the dealer will return less because the dealer has no incentive to offer the same amount that they would if you were buying a car.

Consider a new car that was sold for $40,000.00. That is considered the new car value.

Once it is driven off the lot it loses approximately 10% of its value. Should the car end up back on the dealer’s lot as a low-mileage used car, expect that the retail asking price will be approximately $35,000.00. That is the recognized used car retail value. In an insurance claim, this acronym is also considered actual cash value.

If the car owner decided to sell the car privately, they would realize a higher return than if selling outright (not trading the car) to a dealer. This is generally known as fair market value. These transactions are quite common.

If the dealer acquired the car in a transaction whereby they sold a new car to the car owner, they might typically pay about $5,000.00 less in trade than they would ask for it when reselling. That dealer mark-up is what is attributed to what is known as trade-in value. These are the prevalent types of transactions between car owners and dealers.

If the dealer purchased the car in a transaction where the car owner wasn’t buying a car, the dealer’s incentive to offer a higher price is gone. This is known as fair market value in an outright sale to a dealer. These types of transactions are very rare.

Many cars that are acquired by dealers in trade go straight to auto auctions. Cars that had repair histories that showed structural damage or air bag deployment can’t be certified and banks won’t finance them. A dealer will only accept these types of vehicles if a new car sale is involved. In an outright purchase, the vast majority of new car dealers won’t touch the car for any price. This is known as the auction value.

The last category describes a car that was wrecked and deemed a total loss. The salvage value is typically 15% to 25% of the cars pre-accident retail value.

New Car Value $40,000.00

Used Car Retail Value or ACV (Actual Cash Value) $35,000.00

Used Car Fair Market Value – Private Party Sale $30,000.00

Used Car Trade-in Value $30,000.00

Used Car FMV – Outright Sale to Dealer $20,000.00

Used Car Auction Value $10,000.00 to $20,000.00

Salvage Value $3,500.00 to $5,000.00

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