How can you determine the fair market value of a car? Well, over the last two years, used car prices plummeted during pandemic shutdowns, only to climb a record 40% in 2021. Now, there are strong signals that the car price bubble is bursting.
With such volatile changes in car prices, it has never been more difficult to know the true fair market value of a car.
That being said, there are ways to answer this question! In 2022, we have tools at our disposal that simply didn’t exist a decade ago. Here’s how you can leverage online car dealers and vehicle valuations to learn what your own car is really worth, and how to spot a good deal at the dealership.
In the old days, it was impossible to know what the real fair value of a car was. Kelly Blue Book was just that, a book. Books don’t update from week to week like used car prices do, and websites like KBB are really just meant to gather leads for dealers; their valuations aren’t a true indication of “fair market value.” How we share information has changed, but so has how we buy and sell cars. Online car dealers now account for 30% of new car sales in America, and the used car market is catching up.
Pandemic-driven changes in consumer preferences brought about the rise of online car dealers who are eager (sometimes too eager) to sell you a car via online messaging. With sites like Carvana, Vroom, Cargurus, Driveway and others, you can see in real-time what a car dealer would pay to buy a car. This is VERY valuable information for car owners, regardless of whether or not you intend to sell. More on that below.
Follow the 10% Rule
If you’re buying a used car, the 10% rule is a great way to see if you’re paying a fair price. We all know car dealers make money when they sell cars, but how much do dealers make? In 2022, the average total profit per vehicle is up to $5,138. That’s double what it was five years prior.
With dealer profits climbing all the time, how can you make sure they’re not paying too much for a used car? We like to think about the 10% rule. If a dealer has a used car for sale and you’re going to buy it, the price should be no more than 10% over what online car dealers would pay to buy the car. We consider that to be a fair price. If it’s more, try and negotiate.
How could you apply the 10% rule? Both new and used car listings provide the vehicle’s VIN number, mileage, trim options and condition. Using that information, you could go through the tedious process of requesting a quote from Carvana, Vroom and CarGurus. Better yet, get all the quotes in one place with CarEdge’s Valuation. Once you have an estimated value or offer, simply calculate if the value is within 10% of the dealer’s quoted price. If it is, you’re looking at a fair price. If not, it’s time to look elsewhere or put your negotiating hat on.
See Your Vehicle’s Value In Real Time
We created a new kind of online vehicle valuation tool with the goal of giving consumers a realistic, regularly updated valuation without the fluff. Our CarEdge community members tell us time and time again; drivers just want real data without gimmicks or gotchas. How does it work? CarEdge’s Vehicle Valuation takes information you share about your vehicle or a vehicle you’re shopping for, and gives you real offers from online car buyers. Using either the vehicle’s VIN number or license plate, location and your answers to simple questions about the vehicle’s condition, you get multiple offers in less time than it takes to brew a pot of coffee.
Anyone who’s traded in a vehicle knows well that dealers lowball trade-in offers so that they can turn around and sell your car for more. CarEdge’s in-house auto experts leveraged decades of dealership experience to give consumers a better way to understand what their car is worth, and how its value changes over time.
Have questions about your car’s fair market value, or perhaps you’re wondering whether a dealer is giving you a fair price? Our auto experts are ready to help you at the CarEdge Community forum. Check it out today!