How are used cars priced? What factors are considered when deciding the price of a used car?
Have you ever wondered how did they come up with the price for this car? How much is a used car worth? Used cars are priced using many details and comparisons, and even who you are buying the car from. For instance, a private party seller may not have to consider things like paying for a sales person or the overhead of having a building and parking lot like a used car dealership does. A used car dealership has to consider how much he paid to buy the car from the original seller, plus typical business expenses like insurance, rent, utilities, and payroll. So his prices may be a bit more but in exchange for that you get to buy a car from a business with lots of selection, and who wants to sell great used cars because they want to protect and uphold a good reputation. This is good for you the consumer because that usually means when you buy a car from a respectable dealer like Max Auto Sales who has been in business for 25 years then they probably have inspected the car and already fixed any major issues they’ve discovered, cleaned and washed it, and it will be in great condition.
In addition to the price of a used car being affected by who is selling the car as mentioned above, and how the car is being sold, you also have to consider factors about the car itself. For instance, ask these questions:
How old is the car? Most people know the value of a car steadily decreases as mileage and age increase. Two cars from the same model year with varying mileage, or one being a year older, can have very different values. It would be typical to see two of the same cars, a year apart, sometimes have a $1000 or more difference in valuation.
Has the car ever been in an accident? An obvious factor most people normally think about is “has the car ever been in an accident, how bad, and the quality of the repair”. Of course some accidents are worse than others. Just because an accident has been reported on the car doesn’t mean you should immediately pass it by. In fact it could be a benefit! For instance, perhaps the car was in a minor accident where another car tapped the rear bumper. Even if there is no damage some people will call the police and file a report it may get reported on the CarFax. This would have a result of lowering the cars value, and the price you’ll pay, but the car doesn’t really have any damage. That would make the car a better value!
Does location matter in buying a used car? Yes, even location matters. Cars in bigger cities where there is a higher volume of cars being sold will sometimes be cheaper. Cars in the North may depreciate faster due to a higher incidence of rust from road salt used in the winter.
What condition is the car in? We can’t forget about condition! The condition of a used car is one of the biggest factors. A used car in great condition will naturally be worth more than a car in poor condition where the seats are torn, the tires are worn, the carpet is filthy and the paint is faded or peeling. Was the car kept in a garage or parked under a tree?
Do you want a used car in good mechanical condition? Absolutely that’s important! Imagine how uneasy you would feel buying a car that fully checks out mechanically but still has a rattle. If you have concerns and have a mechanic you trust, most used car dealers are happy to let you take the car to your own mechanic to get their opinion before you buy the car. Sometimes the CARFAX details will show you how many service records exist on a car so that you can see it’s been well maintained and had regular oil changes. However keep in mind that not all service places report to car fax so it’s possible that a car was very well maintained but has no service records to report it.
Do recalls matter? Well, yes and no. Usually that asking price for a used car takes into account whether or not there are any open recalls on this car. If there are, then the price is a bit lower. However, recalls are repairs that are done for free by the manufacturer. So for you as the buyer, a recall would be a good thing because the car you are looking at may have a lower price because of it, but the repair will be free! It’s like a win-win! Carfax details will show if there are any open recalls for most used cars.
Is the car rare? Is it hard to find? Will a car with 5 others just like it within 10 miles sell for less? Absolutely! If there is only one cherry red convertible 2010 corvette with 20,000 miles in perfect condition, with 3 other people looking at it on the same day, then that car is going to sell for more; no question about it!
Seems like a lot to consider right? Well, it is. At the end of the day, make sure it’s a car you are happy with, that you really want, and then look up a few other similar cars in your area to see if the one you are looking is at least priced similarly. It may be a little more which is fine if the tires are in great shape, the car has regular service history, and is super clean. And it may be a little less…great! Should you try and negotiate the price? Well, it couldn’t hurt. But know that, for dealers especially, they are negotiating less and less because the internet has enabled the consumer to do more research, and the dealers are aware of this. They already know that if the car is priced too high then chances are no one will even come look at it. So pick your car, do a little research, and then proceed with the deal if you’re happy with it.