Car Resale Value

• Once you buy a vehicle, it is no longer new and now must compete as a used car. Even in showroom condition, it is only worth the market value for that used model. This depreciation is typically thousands of dollars, plus the taxes and fees paid at purchase.
• As a quick rule of thumb, a car will lose between 15 percent and 20 percent of its value each year.
• After three years of a car’s life, depending on the vehicle, it may have depreciated 50 percent.

If you will keep your vehicle for less than five years, resale value should be an important consideration. Getting the maximum price when you sell or trade starts with the purchase of that vehicle.

• Research the selling price of used vehicles in your market. Study various makes, models and even trim levels to understand which vehicles command the highest resale value.
• Select a brand, model and trim level with good residual value. Manufacturers that have invested heavily in used-vehicle certification programs have helped improve the resale value of those vehicles.
• Choose options carefully. Air conditioning, automatic transmission, leather seats, a moonroof and rear-entertainment systems can positively impact resale value. There is more demand for automatic transmissions over manual, and automatic transmissions can typically recoup between $1,000 and $2,000 of their cost. Luxury features like adaptive cruise control and lane-departure warnings may be appealing to new buyers, but used-car shoppers are much more price sensitive.
• Cover your bases. Used-car shoppers expect comparable models to have equivalent options – such as leather or heated seats. Instead of increasing the value of a vehicle with these features, it decreases the value of cars in that category that don’t have that equipment. Any vehicle without electric windows, adjustable steering and Bluetooth or USB ports will have a more difficult time competing in the used-car market.
• Pick a conservative color. Black, white and gray are the safest choices; for some models, black and white are a symbol of luxury. Interior colors should be conservative as well; unique embroidered leather or special trim will not add to the resale value.
• Buy a vehicle that will appeal to the widest range of buyers. Focus on features everyone will want and don’t worry about adding custom options.

More than brand or features, the overall condition of your vehicle matters most to used-car shoppers. Keep your vehicle in top condition to preserve its value.

• Drive safely and avoid a collision. Any collision history – even if the damage is repaired – decreases your resale value.
• Fix dents, scratches and dings immediately before they become more serious. Paintless dent repair is a cost-effective option in many situations.
• Follow the proper maintenance schedule and keep all of the receipts. Complete any necessary recalls; they are free, and not having them performed could compromise the safety and operation of the vehicle.
• Unusual paint schemes or extreme options are a turn-off to used-car shoppers and can bring down your resale value. Spending $500 on an upgraded stereo could make you happy, but four or five years from now it won’t bring you any extra money when you sell or trade. Never add a modification that will void the warranty.
• Never smoke in the vehicle, and avoid eating in it to prevent unpleasant smells and stains. Have the vehicle detailed regularly to preserve the interior and finish.
• Most important, keep the mileage low. High mileage will hurt trade-in values and low mileage cars will sell for a premium. According to the U.S. Department of Transportation, annual mileage of roughly 13,500 a year is considered average. If you drive more than that it will detract from your car’s value; if you drive less than the average, your car is likely to depreciate at a slower rate.

Many people overestimate the condition of their car, discounting dings, scrapes and wear. How does NADAGuides define vehicle condition?

• Excellent condition means there are no mechanical defects and the vehicle passes all necessary inspections. Paint, body and wheels have a minimum of minor surface scratching with a high gloss finish and shine. The vehicle’s interior has minimal soiling and wear, and all equipment is in working order.
• Good condition means that the interior has minimal soiling and wear, and all of the equipment is in complete working order. The vehicle will need minimal reconditioning to be made ready for resale.
• A vehicle in average condition is mechanically sound but may require some repairs or servicing to pass necessary inspections. The paint, body and wheel surfaces may have moderate imperfections, but the finish and shine can be improved with restorative repair. A vehicle in average condition will need a fair degree of reconditioning to be made ready for resale.
• In the “rough” category, vehicles have significant mechanical defects and need substantial work in order to restore reasonable running condition. Paint, body and wheel surfaces have considerable damage, potentially including dull or faded paint, dents, frame damage or rust. The interior has above average wear, and some equipment may not be working properly. Often there are heavy stains on the headliner, carpet and upholstery. These vehicles will need substantial reconditioning and repair to be made ready for resale, and some issues may be difficult to restore.

When it’s time to sell, focus on the condition of your vehicle.

• Leverage online sites to help you assess the value of your vehicle.
• Price your car higher if it’s still under warranty or has an extended warranty that is transferable. Recently completing major maintenance – such as a 60,000-mile service – adds value. You’ll also benefit if you’ve recently purchased a new set of tires or installed new brakes.
• Recondition “hazy” headlights. An inexpensive conditioning kit from a local auto parts store can improve visibility and enhance the appearance of your car.
• Remove the stickers and decals, and clean out the console and glove box.
• Run a history report. A minor fender bender may look like major damage on some reports. Having the documentation about repairs can help eliminate any confusion.
• Have your car professionally detailed to remove stains and odors.

Which disposal method will get the best price for your vehicle? There are four options for disposing of your vehicle, and you’ll want to evaluate these options depending upon the vehicle’s mileage, condition, age, brand, model and trim level.

In general, the better the vehicle, the greater the likelihood of a private-party sale. Vehicles in worse condition may be more appropriate as a trade-in or dealer sale. Vehicles at the end of their life may be best suited as a donation.

• A trade-in is the most common solution for disposing of a used vehicle. The trade-in typically generates value towards the cost of a new vehicle, in some states there is the added benefit of reducing taxes, as you pay tax only on the difference between the cost of the new vehicle and the trade-in value. A trade-in is very convenient, and reduces the amount of time invested in disposing of the vehicle. Trade-in value, however, is typically less than the price in a private-party sale.
• You can sell your vehicle to a dealer directly without purchasing another vehicle. This helps you separate and simplify the negotiations on the price of a new car from the discussion of your trade-in value. The value assessed to your vehicle will be similar to the trade-in value.
• Selling the vehicle yourself is widely believed to be the most lucrative method of disposing of a vehicle, but that assumption has many caveats. You might need a significant amount of time to sell the vehicle, or be forced to sell it at a reduced price. There also are costs to advertise the vehicle, time involved in the sales process, and the potential need to have the vehicle inspected by a mechanic in order to attract buyers. Used-car buyers also are more comfortable buying “certified” vehicles that come with a warranty – an option that could cost you additional time and money.
  • There are many organizations that will take your vehicle and either use the vehicle or the proceeds from its sale for charity. You benefit from a tax deduction, and you are able to dispose of the vehicle quickly. Determining the value of your donation, however, is complex. It’s also important to ensure that the charity you are working with is an official 501(c) (3) and that they provide you with the required tax paperwork.

Once you’ve determined your sales method, check the calendar to plan your transaction. Vehicle sales are the highest in March and April, making it the best time to sell your vehicle. Selling in September or October, however, would be more difficult because of a glut of used-car inventory caused when fleet companies dispose of older vehicles in preparation for newer models.