To find out the true market value of your car, the first step is to get what’s called a car valuation. Below, we give a rundown of what a car valuation is, what factors can impact a car’s value and where to get a valuation.
What is a car valuation?
A car valuation or appraisal is an estimate of the current price of a car. It allows you to find out if you have the right price when insuring, buying, selling, or trading in a car, as well as helping you determine whether it’s affordable. There are a number of online guides that can help predict your car’s value – more on that later.
What scenarios would require valuing your car?
Regardless of whether you’re selling or buying, understanding the market value of a car is important. Below, we list a few scenarios that would usually require a car valuation:
Taking out or renewing an insurance policy
When taking out comprehensive car insurance, you’ll generally have the option to insure your vehicle for market value or for an agreed value. As the name suggests, market value refers to the amount your car would be sold for in the open market at the time of the claim. Your insurer will determine your vehicle’s market value based on its make and model, age, mileage, etc.
Agreed value cover, on the other hand, is an amount that has been determined following a discussion between you and your insurer. For this type of cover, it is a good idea to understand the value of your car. The advantage of this policy is that it provides certainty of what compensation you’ll receive if the worst were to eventuate (i.e. if your car is written off). However, agreed value policies tend to have more expensive premiums than market value policies.
Selling a car
The average age of a vehicle in Australia is 10.4 years, so regardless of whether it’s in a decade’s time or earlier, it’s fair to say you’ll probably look to sell your car at some point.
If you’re considering selling your vehicle, a car valuation could let you know how much it is worth, to help you set an accurate price when it comes to listing it. This can help you negotiate pricing with potential buyers and, potentially, sell your car faster.
Buying a car
Whether you’re buying your first car or upgrading, a car valuation could help you buy a car for the right price. It can also equip you with a better understanding of the market value of the car you are looking at, which could put you in a stronger negotiating position.
Trading in a car
A car valuation can give you a better understanding of whether to sell your car privately or trade it in for a new one at a dealership. It could help you compare your car’s market value with what a dealer is offering, to help you decide which option will be more financially viable for you.
What factors impact your car’s value?
From the model of a car to its mileage, there are many factors that determine how much your vehicle is worth. Here are some of the key factors that can affect your car’s value:
Your car is almost certainly a depreciating asset. Unfortunately, the moment you put the keys into your brand-new car and drive away from the dealership, your car immediately drops in value. In fact, a car can lose up to 58% of its initial value after three years, according to Australian automotive website CarChase.
Mileage — the total number of kilometres that a car has driven — is a big factor when it comes to your car’s value. Simply put, the lower the mileage, the higher the value. This is because the mileage gives an indicator of how often the car has been used and helps the prospective buyer determine the likely wear and tear of the car.
Make and model
The make of a car is the company that manufactured it, while the model refers to the car product. For example, in the case of a Toyota Camry, the make is Toyota and the model is Camry.
The make and model of a car plays a significant role in the valuation process. According to Car Advice, brands such as Mazda and Toyota are the most popular options among used car buyers. This is because they have built up a reputation of reliability over the years and tend to retain their value in the used car market.
The condition of your car is another important factor. A car with paint and panels in excellent condition will likely be worth more than the same model with scratches or chips.
What’s also just as important as a car’s condition is its service history. The service history is an important document that records any work completed on the car and demonstrates all the recommended maintenance work has been completed by mechanics. Having a complete service history that shows regular maintenance can improve the value of your car.
A 2016 report from Axalta, a global car coating provider, showed that the most popular car colours are white, black and grey. This means that cars with conservative colours could be easier to sell than flashier options (think yellow, pink, or lime green) as they are generally in higher demand, whereas bright colours can drive prices down due to being less popular.
Some features, including leather seats, built-in navigation, multi-media systems, reversing cameras and a sunroof, can increase the value of a car.
What tools can you use to value your car?
There are a few ways you can find out what the approximate value of your car is. A common and relatively easy way to do this is through a free online appraisal tool, either via a classified (where sellers can post an advertisement) or car website. Carsales.com.au for example, connects people trying to buy and sell cars and other vehicles online and has a free valuation tool.
After entering in a few details about your car, including its make and model, mileage and age, these online tools can often give you an estimate within seconds. Below we’ve listed a few other sites that offer free car valuation tools:
However, the main disadvantage with these online valuation tools is they often provide an automated estimate. If you want a more detailed appraisal, taking your car into an independent valuer or dealership could be your best bet. It could also be handy to see if you can arrange this for any vehicle you are considering buying, as the valuer or dealer can conduct an independent pre-purchase inspection to ensure there are no major faults with it.
What can I do to improve the value of my car?
As you can see, keeping your car in top-notch condition can increase its worth, which could come in handy when you decide to sell it or trade it in. So, here are a few tips to potentially improve the value of your car:
- Clean it: Make sure you clean your car thoroughly before putting it up for sale. This includes its interiors and consider spending a little extra to polish the exteriors. You may also choose to fix any scratches or dents yourself or through a professional. You’re more likely to get a better result if you hire the services of a professional, but if you’re looking to save a few pennies, Carsguide has a few tips on how to remove scratches from your car.
- Keep a complete service history: An incomplete service history can impact the price of your car, so make sure you have the necessary documentation to prove your car has been regularly serviced.
- Replace faulty parts: Parts that don’t work properly (such as faulty internal buttons or lights) can decrease the value of your car. It’s a good idea to consider getting your car fixed before getting a valuation quote, or asking how much your fault would cost to repair, so you are prepared in case a prospective buyer wants to negotiate.
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About Kurt Bornhutter
Kurt Bornhutter is Head of Growth at Jacaranda Finance. He has a Master of Business Administration and a Graduate Certificate in Management from the Australian Institute of Business. His background is in computer science and technology, with over two years’ experience working in finance. You can find him on LinkedIn.
Cover image source: Patcharanan (Shutterstock)