Used Car Valuation
Used car valuation refers to the process of determining the worth or value of a pre-owned vehicle. Several factors are considered when assessing the value of a used car, such as its make, model, year of manufacture, mileage, condition, and any additional features or modifications. Valuation is typically done by professionals, such as automotive appraisers or dealerships, who use various methods and tools to determine the fair market value of the vehicle. This information is crucial for both buyers and sellers as it helps them negotiate a fair price and make informed decisions when buying or selling a used car.
It is important for a car owner to be aware of the worth of his/her vehicle. This will be useful when one is looking to sell the vehicle or when buying a suitable Car insurance cover for it. Having an accurate valuation of the car ensures that you get the best price for the vehicle.
Factors Considered for Determining Value of a Used Car:
The below listed are few of the common factors considered when valuing a used car:
- Condition of the Car: The value of a car is determined by its overall condition. This includes its exterior and interior, its mechanical condition, its history of service, and any changes or improvements that may have been made.
- Mileage: In most cases, lower mileage tends to positively impact a used car's value. Cars with lower mileage often have less wear and tear and may be perceived as having more life left in them.
- Demand of the car model in market: The value of a used car depends on the demand for a particular make and model. High demand used cars tend to hold their value better than low demand used cars.
- History of accidents: The No Claim Bonus accumulation and accident history of the car should be evaluated.
- Registration Certificate (RC) details: One should check whether the car has changed hands multiple times. Bank hypothecation should also be evaluated. The imprint of car chassis numbers should be checked as well.
- Service history - The service history of the vehicle should be checked. One should also check whether the car was serviced at authorised workshops.
- Working condition of the car - The suspension of the car should be inspected. One should also check if there are any noises from inside, speed lag, or any other driveability issues.
- Car functions - Other things that need to be checked include the power window, AC, central lock, lights, steering, door locks, and indicators.
- Production model - If the vehicle model is discontinued, then it is quite likely that the spare parts will be more expensive. Cars from specific manufacturers also have costlier spare parts.
How Does Used Car Valuation Impact Car Insurance?
The value of your car which you declare to your insurer, is known as the Insured Declared Value (IDV) and is determined by several factors. These include the age of your vehicle and the depreciation value of your vehicle. When your claim is settled with your insurer, the compensation is calculated based on the IDV.
If the seller has offered you a lower price for your car, you may end up declaring your car IDV to your insurer at the same price. Underpricing a car can lead to loss of money when selling it and lower insurance payout for total loss events. Accurate pricing requires practice.
Overpricing a car can lead to difficulty in selling, higher insurance premiums, and lower claim payouts. Find a balance between age and characteristics for a realistic price.
It should be noted that every car depreciates with age. In the realm of motor insurance, there are guidelines that specify the rate of depreciation of cars with age. This chart is used uniformly across the industry to set the Insured Declared Value (IDV) for the vehicle.
Age of the car | Percentage depreciation for IDV calculation |
Less than 6 months | 5% |
More than 6 months but not above 1 year | 15% |
More than 1 year but not above 2 years | 20% |
More than 2 years but not above 3 years | 30% |
More than 3 years but not above 4 years | 40% |
More than 4 years but not above 5 years | 50% |
Therefore mentioned values correspond to the rate of depreciation of the entire vehicle with age. The depreciation rate for car parts are evaluated in a different way.
The above table corresponds to the depreciation of a vehicle for the purpose of identifying its IDV. When you are looking to sell your vehicle, it is important that you identify the actual value of the car by approaching a website that has an in-built car valuation facility. This calculator tool will provide you a more accurate value.
How Does the Used Car Valuation Calculator Work?
Used car valuation calculator available on leading websites, providing an instant valuation based on age, condition, and mileage, with ease of use and accuracy.
The user will have to enter the registration number of the vehicle, the year of manufacture, the make and model of the car, and the city it was registered in. In order to improve the accuracy of the valuation, the user can enter the mileage and general condition of the vehicle. The output of the tool will reveal the following details:
You may also consider browsing through used car portals to understand the seasonal fluctuations in car prices. Limited edition car models are a very tempting proposition, but they have a low second-hand value. The latest models of cars can also command very high costs in comparison to their resale values.
- The amount that you will receive/pay when selling/buying the vehicle to/from an individual.
- The value that you should aim for when trading your vehicle at a dealership.
- Some of the used car valuation tools available online enable you to get the dealer price that you will be paying in case you were buying the vehicle without any part-exchanges.
FAQs on Used Car Valuation
- How can I improve the value of my vehicle?
Clean the car well to get a good valuation price. Consider painting touch up, cleaning carpets, adding perfume, and dent removal. Check tyre conditions, servicing, and replace worn-out parts to increase the price.
- Is the value of a new car equal to 100% of its invoice price?
As far as car insurance is concerned, the value of a car that is less than 6 months old is 95% of its ex-showroom price. When looking to sell such a car, the estimated valuation should be around this value.
- What is the worth of my car to a dealer?
The value of your car to a dealer will depend on the specific dealership you approach. It will be useful to go to a dealership that specialises in your type of car, i.e., brand-specific cars, old cars, low mileage cars, etc. By approaching a specialised car dealer, there is a greater chance for the vehicle to be sold off from the showroom at a quicker pace. You should also inform the dealer that you are looking for a fair valuation of the car.
- How does the used car valuation calculator help sellers and buyers?
The used car valuation calculator helps sellers price their vehicles fairly, creating transparency in the sale process and benefiting buyers and lenders. It also helps insurers determine motor insurance premiums.
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