Used Car Prices: What's My Car Worth? Myths And Facts

What’s my vehicle worth? What a question! I wish that after 20 years in the automotive industry there was a simple answer. One would think that with all the information available it would make prices and values easier to obtain. In fact, in many ways, the numbers are more unclear than ever.

The following e-mail conversation regarding retail car prices and trade-in values highlights the confusion and misconceptions about automobile price and value.

This conversation occurred between me/Ted, the dealer, and Rich, the customer...

[Begin Email]

[Ted]

Hi Rich...

Donna loves the 2006 Volvo. It’s a perfect fit!

Again retail value is: $23,800

Here's what Medway Imports can do:

2006 Volvo S40 Price.............$18,995

2001 Chevy Impala Trade-In Value…........$4,000

Thanks Rich!

Note: the Volvo is still under its factory 4-Year 50,000-mile warranty, free road side assistance…etc.

[Rich]

Hi Ted,

Thanks for the information. The Volvo certainly is a great price, but isn’t my Impala worth $6,000-$7,000?

Kelly Blue Book lists the private party value at approximately $7,995. I know that does not mean it will sell for that amount. However, most of the ads that I have been seeing reflect a range of $7,000 to $9,000.

I would guess that based on the retail prices, the actual sale price would be discounted by $1,000-$1,500. That would mean a reasonable expectation would place the value at $6,000-$7,000.

[Ted]

You’re right Rich…$6,000-$7,000 is certainly a reasonable "retail value" for the Impala, but research shows it’s actually only selling for around $4,000.

Interestingly, based on your math of knocking $1,000-$1,500 off private party bluebook would put the 2006 Volvo at a "reasonable" price of $22,800, as it retails for $23,800 to $24,500 depending on which source you use.

The facts are, however, neither the Impala nor the Volvo will sell for these retail values—not in today’s market anyway.

[Rich]

I can lease an Infiniti which would probably cost me less on a monthly basis. My partner just leased a 2007 loaded Infiniti for 39 months, (78,000 miles) for $558.00 month. Cap reduction was only $595.00.

I'm guessing that I could lease the same car for 3 years with 36,000 miles for no more than $400/month.

They’re also willing to give me $7,000 for my 2001 Impala.

I'd appreciate your thoughts!

[Ted]

Hi Rich…

Your guesses “might” be close; however, this is a classic example of the confusion surrounding trade-in values and the actual vehicle worth.

That $7,000 they will pay you is called a "feel good" number. Dealers use it all the time, and then whack you on the retail sale end of your new car.

In other words, as a dealer, I will gladly give you $7,000 for your Impala provided you’re willing to pay $22,800 or more for the 2006 Volvo….as you can see, based on these numbers, you'd spend more.

It’s stunning how often people fall into this trap every single day based off of blue-book-type retail numbers.

For an interesting discussion on car values, check out the article on bluebook pricing @ http://www.repairtrust.com/articles_kelley.html. It's eye-opening!

The facts are, however, we as a retail dealer are not likely to get $22,800 for the Volvo even though the book says it's reasonable. Book values, or the values placed on vehicles by websites are guides based heavily on opinions and averages. Go to seven different websites and you'll get seven different values.

If you’d like, I can get you any used car you want at a great value like the Volvo…but I'd still only be able to pay $4,000 for the Impala.

Since we don't use manipulative "feel good" numbers to inflate the trade-in value by increasing the sale price of the Volvo, it appears as if we're offering too little for the Impala.

In actuality, the numbers are dead on. $4000 is a real number!

Note...none of this is a sales pitch, but the straight deal on the "value" of the Impala in the real world. This is not to say that you couldn't sell it for $7,000, provided you want to do the footwork—advertising, replace the bald tires, service and recondition it, fix the rear seat...etc.

In short, what makes up the value of a car is incredibly complex and variable.

What I wouldn't want you to think is that you're being low-balled on the trade-in price. What is happening, and it’s the only way we’ll do business, is that you are being given a "real value" and a "fair value" for your Impala.

The short answer to all this is that you're getting a square deal on both ends—even though it may not “feel” like it with the Impala.

[Rich]

Hi Ted, if I had to finance approximately $14,000 for the Volvo, my monthly payment would be around $430/month (3 years @ 7%). I think that I may be more inclined to lease a 2007 loaded Infiniti, which would probably cost me less on a monthly basis.

[Ted]

Hi Rich…

Leasing has many positives; however, at the end of 3 years the value of the Infiniti to you would be $0. The residual value of the 2006 Volvo S40 is $9625.

One of the major downsides of leasing is that at the end of the lease…you have NO equity.

I will not in anyway be offended if you choose to lease, or buy somewhere else. What I know, and what I can do for you is get you a great "value" for your dollar.

$18,995 for a vehicle that is priced $4805 under the low value of $23,800 is a great value.

$4,000 for an Impala that needs $1,000 or more in reconditioning is a real price.

In short, you can't buy wholesale and expect to trade in for retail.

Interestingly, the current wholesale price of the Volvo is $19,000 to $20,000. In other words, I couldn’t even buy this car right now for $18,995.

Those are my thoughts.

I hope this helps in your decision making process.

[End Email]

As you can tell from this conversation, the perception and the reality of used car prices is very different. This article illustrates that pricing used cars must be done in context. An arbitrary number set by a website or book distorts the real-life values for the car buyer and the seller. These "values" make everyone distrustful, uneasy, and confused. The auto industry doesn't need any more of this!

-Ted Olson

Medway Imports...

Making sense of Used Car Prices

Car Rental - Time & Money Saving Tips

Lowest Rates Vs. A Good Bargain


The thing is, Car Rental market is very competitive one and rates differences for comparable quality and service are relatively small, sometimes as small as $10 to $20. These minuet price differences are going to vanish in the wind when you consider the long lines and lost time at the cheapest renter counter, drop charges for remote destinations, late return fines, and gasoline inflated rates as well as other service charges you didn’t think about when you shopped for the “best deal”.

Don’t get us wrong, we don’t like to pay higher prices more than you do.
We do recommend to shop around and check the various rates available,
especially when it’s so easy to do it via the Internet at comparison sites.

All we say here you need to consider other things beside the price and when
you compare please make sure you compare apples to apples and not apples to pears.


Things to consider when ordering a rented a car

Who is using the car, are you by yourself on a business trip or you are traveling with the whole family? How much luggage are you going to have, does the car you are thinking about is big enough to have you all plus all your hand luggage and big suitcases? If not, consider to change to a mini van or a car with extra large trunk.

Do you need an Infant seat or a child booster? make sure it is mentioned clearly with your order, usually there is a shortage of these seats and they are provided for extra charge. Check the state laws for where you are traveling.
A new law in Denver for instance, requires Booster Seats for all 4 and 5 year olds who are not 55 inches tall.

Do you actually need the car in the town or city at the first few days? If not, consider to take a taxi, a bus, a train or the hotel shuttle into the city and when it’s time for you to go out of town and travel around, then, rent the car from the city location and by that save up to 15% on Air-Port charges as well as on city parking fees.

Are you going to a very warm and humid destination? If yes, it’s recommended to order a car with air conditioning, usually the price difference is negligible, the problem is that it’s not available in all destinations like in some European countries.


Most major rental car companies allow for unlimited mileage in the same state, but it's a good idea to check their policy before confirming. Many smaller local independent companies charge mileage after 100-200 free miles per day.

As mentioned before price is not the only factor to consider when choosing a car rental company. If you choose a very small, no-name company, don’t expect them to provide you with service across all nation or continent, what would you do if the car is needed to be replaced or serviced for some reason?


Frequent or Preferred Renter Programs and affiliations

Frequent renter programs, Like airlines and hotels, major car rental companies track their customers’ rental histories and offer preferential service to loyal customers. Most of the major companies offer frequent renter programs that are similar to airline frequent-flyer programs and hotel frequent-guest programs.

Preferred renter clubs, Most major car rental companies also offer preferred renter programs or clubs (one example is the Hertz #1 Club). When you belong to one of these clubs, you get preferential treatment, including automatic upgrades when those cars are available. You can join these programs at any time, even if you are a first-time renter with that company.

While basic-level club memberships are often free, higher-level memberships (as in the Hertz #1 Gold Club, which allows you to bypass the rental counter) generally come with a price tag. What most people don’t realize is that it’s often possible to avoid the membership fee by simply writing or calling your car rental company and asking them to waive it. They will do it because the car rental industry is very competitive, and they want your business

If you're still faced with a steep rate, try getting discounts based on your affiliations with organizations like AARP, AAA or others. These discounts are usually not great, but they are better than nothing.

In addition, always check for corporate rates if applicable to your situation.


Car Rental Insurance

Some of the Insurance terms seem to be confusing, let’s try to clear them out first.

CDW - Collision Damage Waiver.

LDW - Loss Damage Waiver.

PDW - Physical Damage Waiver.

PAI - Personal Accident Insurance.

PEC - Personal Effects Coverage.

ALI - Additional Liability Insurance.

Many of the Credit Cards have most of these coverage, therefore it’s not
mandatory to purchase excessive coverage. It’s better to check this issue
with your travel agent, insurance agent and your credit card company a head of time. Some Car rental companies require that you show proof of insurance.

Also be aware that your personal insurance probably doesn’t apply to your rental car when traveling overseas. All this is somewhat complicated and at times confusing because there are no industry standards for terminology and policies vary by locations.


Important things to check and do before leaving the Air-Port

After a long flight and the waiting in lines for your luggage and afterwards for
your keys at the car rental counter, it is understandable you just want to take the rented car and drive away to your hotel, but wait! Here is a list of things you must check first.

Start by making a careful check around the car, look for any small dents or scratches, in case you find some, don’t be lazy, go back to the office and ask a representative of the rental company to write down all of these dents, ask for a copy of that report. Other wise you might be responsible for damages you didn’t perform.

Open the trunk, make sure you have a spare tire, a jack and set of tools, there is noting more irritating than to find out in the middle of nowhere that you don’t have a jack when you need to replace a flat tire.

Many car companies will provide you with an extra key if you ask for one. This can come in handy for some of us who are absent minded.

It is recommended to spend some time to get acquainted with the cars’ features and switches, make sure you know where the lights switches are, how to operate the windshield wipers, the air conditioner and even set your favorite radio stations as well as set your side mirrors. It might be quiet frustrating to fight with the new switches while driving, when all of a sudden it starts raining.

Make sure you have a map and it’s better to spend few more minutes and plan your driving route.

Last but certainly not least, If you have a lot of luggage, don’t park the car in the parking lot and go for lunch, in many countries, this is an easy target for
the thieves, It’s better to buy some sandwiches and beverages in the air-port, or stop somewhere along the way for refreshing but never leave the car unattended.


In case you are involved in a Car Accident

These are the most important pieces of information to collect from the involved parties: full name, mailing address, telephone number, insurance details, and drivers’ license number.

Also try to get the names and contact information of anyone who witnessed the accident. Make a note of the vehicle’s make, color, brand and license plate number.

Try to pinpoint the exact time and location of the accident. If the police get involved, ensure that you receive a copy of their report. Don't forget to inform your insurance agent immediately and notify the car rental company.
They will let you know about their accident procedure.

If you purchased insurance through the car rental company, they will have to make the claim. If there is damage to the rental car, there will be much paper work to complete

Make sure any involved parties are ok. Any injuries should be taken care of ASAP.

Call the police and/or ambulance (if necessary), and then call the car rental agency. Be as cooperative as possible. The car rental agency will have its own policies regarding accidents.

Exchange information with the affected parties. Try to record everything on the scene. Your notes should include details of the accident, identification of the autos and people involved, and the names and badge numbers of all emergency personnel.

Take pictures if possible. If you are on vacation, you will probably have a camera handy already.

File an accident report with the police, and report the claim to your own credit card company or insurance company.


When returning the Car

Make all necessary arrangements to return the car on time, that includes looking the location in the map especially if you return the car in a foreign city.

Late return charges are high and arbitrary, secondly, if you are late, you probably won’t have the time to fill the car with gasoline yourself and the rental company will charge you exorbitant inflated gasoline rates.

In case you return the car in a city location on Sunday, it might be that the station will be deserted, it will let you in via automated gate, make sure to take the card and leave it over the dashboard, this is your recorded time of arrival.

In addition, lock the car, take the keys plus your rental contract and insert them into the designated box.