If you’re thinking about getting a car title loan, trading in your car, purchasing full coverage insurance, or selling your car, it is important to know what your car is really worth. Vehicle values have changed quite a bit in the past couple of years, meaning you may be surprised to find out how much your car is really worth.
Having a vehicle with a large amount of equity can also be a financial safety net for emergencies. To understand what your vehicle is really worth, first you need to understand how vehicles are valued.
How Vehicles are Valued
When a vehicle is valued, there is not one simple number assigned. There are generally four different categories for vehicle values, in order from highest to lowest:
- Retail – What a dealer will sell the vehicle for.
- Private Party – What the vehicle is worth in a private party sale.
- Wholesale – What a wholesaler will pay for the vehicle.
- Trade-In – What a dealer will pay for the vehicle.
The value of the car can vary significantly depending on the category. Additionally mileage, condition, options, and history all factor in to the value of your vehicle. Just like all products, a car is worth what someone will pay for it at that moment.
A simple answer to this question is the vehicle is worth what a willing buyer will pay for it right now. The category of buyer is what will affect how much they will pay for the vehicle. Let’s look at the four categories:
Trade-in Value:
The trade-in value of the vehicle is what a car buyer (dealer) will pay for the vehicle. The simple answer to “what is my car worth” is what someone will pay for it today.
If you need to sell it immediately there are companies that will purchase vehicles directly from the public. Autotrader also has a car buying service where they will provide you with a quote and a dealer interested in purchasing your vehicle. Carvana also buys vehicles directly from the public. There are plenty of others.
Do not be surprised if the amount these companies offer you for your vehicle is significantly less than the retail or private party value of the car.
These companies need to make a profit to exist, and do so by purchasing vehicles for less than they sell them for. They have expenses to cover, and if they end up selling your car at a wholesale auction they will offer you less than wholesale price.
Wholesale Value:
The wholesale value of the vehicle is what a wholesaler will pay for the vehicle. A wholesaler purchases vehicles from dealers and sells them to dealers (often through wholesale auctions).
They do not deal with public, and wholesale auction data is not readily available to the public. The wholesale value is usually slightly higher than the trade-in value but can vary depending on make, model, mileage, and condition.
A low mileage vehicle can be worth significantly more than the same vehicle with high mileage. The same applies with condition. A pristine vehicle is worth significantly more than the same vehicle that has cosmetic and mechanical defects.
If you are trading your vehicle in to a dealer and buying a new vehicle; you can negotiate the price of the trade-in and get the dealer to pay you the wholesale value (or higher). They want to make the sale; so making a profit on your trade-in in less important to most dealers.
Private Party Value:
The private party value is what you can expect to get for the vehicle if you sell it yourself. If you prepare your car for sale by fixing any mechanical issues and reconditioning it, place a classified ad, and show the car to potential buyers you may be able to sell your car for more than the trade-in value.
If you are lucky, you can sell the vehicle quickly for what you think it is worth, however, there are no guarantees. It may take some time to sell, and you may end up having to lower the price.
Kelly Blue Book provides estimates on private party sales for most vehicles; again condition and mileage will be a big factor.
Retail Value:
The retail value of the vehicle is what a dealer will try to sell the vehicle for and is the highest value of the four categories. Unfortunately, the retail value of a vehicle is not what the vehicle is really worth. We’ve all heard the saying about the car depreciating as soon as you drive it off of the lot.
It can be frustrating to see a vehicle very similar to yours at a dealer for $15,000 and then see the trade-in value is only $11,000. The dealer has expenses including rent, wages, utilities, and other costs.
Additionally, the dealer will repair, recondition, advertise, show, and store the vehicle while they try to sell it. This process can take months. Like any other business selling a product, they need to sell cars for more than they purchased them to continue to exist.
The Real Value:
So what is the real value of a car? The real value of your vehicle is somewhere between the trade-in value and the private party value; depending on if and how you plan to sell the vehicle.
Finding a buyer in the private party category will net you the most for the vehicle, but it is not without risk. To sell the vehicle immediately you can expect to get the trade-in value. In some cases, there is a big difference between the two.
If you are just looking for the value of the car and not interested in selling it; take the difference between the private party value and the trade-in value. This will give you a decent estimate of what the vehicle is actually worth. If and when you decide to sell it, you can adjust as necessary.
Car Title Loan Value
A car title loan is a secured loan and the value of the vehicle usually determines the maximum loan amount. For purposes of this exercise we recommend using the trade-in value.
Next Steps for a Title Loan
Part of preparing for a title loan is knowing the value of your car. Now that you know the value of your car, if you are interested in a car title loan, some other preparation is recommended.
Car title loan costs, rates, and terms can vary widely depending on both the state you live in and the lender you choose. To get an estimate you can use the title loan calculator. Preparing properly can help save a significant amount of money and help ensure you find the best possible title loan.
A few things you will want to decide include whether or not to get an in-person or online title loan. For more information on both types, and other related topics, visit our site.
The retail value of a vehicle is what a dealer sells the vehicle for. The trade-in value is what a dealer will pay for a car. The cars they buy for trade-ins are not sale ready. They require reconditioning, inspection, and often repairs. Additionally, the dealership has expenses to pay like rent, employee wages, and utilities.
Generally title lenders use the loan value to assign a value to a vehicle. The loan value is what a bank will lend on a vehicle should you finance it. This value is usually very close to the wholesale value of the vehicle, which is usually a bit more than trade-in value. To be on the safe side, when estimating how much you can borrow with a title loan, use the trade-in value.
The amount you can borrow with a title loan is directly related to the value of the vehicle. Once you get an accurate valuation, you can generally assume that you can borrow up to 50% of the vehicle’s value. The actual amount varies depending on the state you live in.