‘Right price’ for a second-hand car

How do you know if you are getting a fair price when selling a second-hand car? Should you be aiming for book value, market value or trade-in price from a dealer? And what do those terms mean anyway?

With more and more people downgrading their vehicles due to tough economic circumstances – and the avenues for selling a car increasing to include new disruptive offerings – Fernando Azevedo Pinheiro, joint MD of CarZar online car buyer offers sellers some tips.

1) Learn the car’s ‘book value’

Book value is often thought to be the benchmark when negotiating the sale of a car. Our advice: use it as a starting point for setting a price.  When selling a car, be aware that most buyers (private sellers and dealers) are currently paying quite a bit less than book value.

“Book” refers to a pricing guide which uses various sources of historic data.  The challenge with this is that the valuation looks back in time (rather than considering present market forces of supply and demand, for example).  Beyond this, the data sources for this pricing guide are limited.

While some consumers look to online classifieds and insurance calculators to determine the trade value of their vehicle, these don’t tend to be the most accurate because they state the asking price but what the car eventually sells for is almost always way lower. (They are generally quite disconnected from the actual market value and overstate the value of a car, especially for less common vehicles.) The best source for reliable vehicle prices is car buying sites. CarZar has developed an innovative car pricing algorithm that offers instant online quoting and that requires just four pieces of information.

2) Pricing prangs

There are a range of factors that can impact the price of the vehicle, but one of the most important considerations is whether or not a car has been in an accident. In particular, the severity of an accident needs to be confirmed and the extent of the structural damage assessed.

If the damage from an accident is cosmetic (like a low-speed bump requiring panel beating or a door replaced), the impact on value is limited. However, if the chassis has been damaged, then the price could be reduced by as much as 50%. Also pay close attention to possible mechanical faults. If a  dashboard shows an engine light, it is possibly  a very expensive problem.

3) Cost, size and complexity conscious

Given the tight economic conditions currently (and into the foreseeable future), there is a shift in the market towards vehicles that are cheaper to run. This includes preferring diesel over petrol engines, opting for smaller engines and buying vehicles with lower repair and maintenance costs (generally cars that are smaller and less complex).

This effect is most obvious in vehicles that people don’t want rather than those that they do. For example, a consumer looking to sell a 3.4l-litre petrol engine car will struggle and will likely take a big knock relative to what they paid for it.

4) Haggling and hassles

If selling privately, remember the ‘intangible costs’. It may appear quite easy to place a classified ad, but it can take weeks to vet possible buyers and find the right offer. While most reputable car dealerships provide services like prominently displaying a car for re-sale, handling inquiries, test drives, financing and fixing things that might be wrong with a car, they will inevitably offer a lower price than if selling privately.

Apart from time and price, one’s personal safety can potentially be jeopardised in selling to strangers.

Pieter De Gouveia (now a happy CarZar customer) had a scare a few years ago that persuaded him to avoid face-to- face car sales. Despite taking several precautions — from meeting at a public place that required the prospective buyer to walk through a metal detector — several other men jumped into the car he was selling. “In retrospect, I think it was an abandoned highjacking because they decided my car wasn’t what they were looking for, but it was a very scary situation,” said Pieter. Although he only felt threatened in being told to “drive” by group of strangers, the incident could have been life-threatening.

Pinheiro says that, for consumers, there is a difficult balancing act in minimising haggling and hassles, while also trying to maximise value and assure potential buyers that a car is in good working order.  “As more of us find ourselves time starved and financially challenged, online car buying services seem to be an attractive option.  Convenient, transparent and offering fair market-related prices, these modern services provide an opportunity to better appreciate the old idiom “a bird in the hand is worth two in the bush.”

Fernando Azevedo Pinheiro is joint MD of CarZar.

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