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How to Value a Used Car

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Introduction: The Three Pricing Levels
How to Value a Used Car
Michael C. Harley for About.com

Valuing a used car is both objective (year, make, and model) and subjective (appearance and condition). Normally, this would not be an issue if all cars were identical. Unfortunately, used cars are all very unique.

While two cars may be identical in age, outward appearance, and options, their values may be very far apart on the secondary market. This requires nearly all used cars to be valued individually to establish pricing.

There are three different established price levels when discussing used vehicles:

Trade-in – The value a dealership will give you when you trade-in, or give, the used car to the dealer in exchange for cash or a down payment on another vehicle. A trade-in value is typically 20% lower than private party values.

Private Party – The value a private individual can expect when selling to another private individual. Many consider private party values a baseline.

Retail – The value a dealership or used car lot will assign to the vehicle. Used cars sold at “retail value” will often have been reconditioned, carry a warranty, or both. Their prices may be up to 20% higher than private party values.

We are going to describe how to establish a “Private Party” value for your used car. If you consider the number we arrive at a middle ground (a good compromise between several numbers), it is easy to subtract price to establish “Trade-In” value, or add to the price to see a “Retail Value” for the used car.

Now, let us move to the first step in valuing a used car...

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