Why Your Car Isn't Worth As Much As You Think!

Currently most people have an overinflated idea of the value of their existing car and what they are going to get if they trade it in. In my opinion, this is largely due to the easy access to classifieds sites where similar cars listed for sale are mistakenly used to benchmark the market value.

Let me explain...

It's called Carsales not Carsold. The prices you see advertised are anything but the actual sales price. Who pays the asking price for a used car whether from a private or dealer seller. When you view a segment of cars listed for sale all you know is what they don't sell for, not what they do.

And, because of the relative low-cost method of advertising (eg free on Gumtree & Facebook or run-it-til-you-sell-it in Carsales etc) there's not much pressure for the sellers to be aggressive with their pricing (very different from the old days when you paid $120 for an ad in the Trading Post and if it didn't sell, you'd be doing the same again next week. That certainly sorted the serious sellers from the opportunists).

So why wouldn't you list it high and see how you go. Take your time. Knock the price down incrementally if you must but otherwise hang out for that buyer that's going to pay top dollar sooner or later.

This means when you're contemplating selling your car if you look at comparative cars advertised for sale, it's hard not to be swayed into thinking 'Well if others are advertised for $20,000, then if I advertise mine for $19,000 it's going to show great value.  However, this misses the fact that that the current listing may have been there for many months without a nibble and will never sell for $20,000.

There's also a temptation to look at the middle of the range for a price guide. After all it feels natural that the median or mean average of a data set should deliver the 'best' benchmark.  But when it comes to cars (and other classifieds), buyers don't look at the middle range - they will sort by lowest price and filter the results to ignore all the others.  

Lastly owners usually have an overinflated opinion of the condition of their car. They are familiar with it which builds confidence and it's easy to overlook the negatives for the positives eg:

  • Sure, it's got a lot of kms but it's never missed a beat (the buyer doesn't care).
  • It's got $6,000 of new car accessories (the buyer may not place ANY value on them).
  • It's basically like new (why are you selling it then?)

All the above analysis is comparing the car's value with a private or dealer sale price.  However if you trade a vehicle in, you're going not one but usually two levels under that.  When you trade your 2015 Mazda for your new Hyundai, that Hyundai dealer will likely ring around wholesalers to get their buy price. They will make sure there's a bit of wriggle room and attempt to 'buy the car'.  Then they sell it to the wholesaler.  Then the wholesaler sells it to a used car dealer or puts it through the auctions.  Only then does it get advertised to the public and is ready to be compared to the market.

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