What’s my Trade-in Really Worth?

When it comes time to trade-in your car, whether you’re trading it for another car or simply selling it for cash to a dealership, you want to know how much it’s worth.  The auto industry refers to this as the Trade-In Value (TIV) and this is what you might expect a dealership to pay.

You can find the TIV in popular valuation guides such as, Kelly Book®, Edmunds® and NADA®.  So how do the guides set their valuations?  Well, they’re usually linked to values generated by the major dealer auction-house, Manheim®, which publishes its own ‘wholesale’ used-car values for dealers.  Manheim’s values come from the selling prices from the hundreds of thousands of dealer cars it auctions annually.

Given this, you would think that the valuation guides would agree on what a given car is worth and that dealers would be willing to offer you that if you trade or sell your car, right?

Comparing TIVs

To test this, we ran a little experiment.  We looked up the TIV for a popular car, a 2011 Toyota Camry with 50,000 miles on those guides (see Table).  When using all three, we noted that all use slightly different approaches in figuring out a vehicle’s value, especially in specifying optional equipment and defining vehicle condition.  Both of these impact a vehicle’s final value.

We used two variations of the same car, one in ‘Average’ condition with no optional equipment and the other in “Above-Average (Clean)” with most major options available for a Camry LE.  Since, both better condition and more options each raise a car’s value, we wanted to see how the guides would take this in to account.

TIV Comparison

From the Table, you can see that the guides disagree on the TIV (what the car is worth to a dealer) for the Average car by as much as $1,930.  For the Clean car, the disagreement narrows to $909.

What Manheim Thinks Our Car is Worth

We then compared it to what Manheim thinks the same car in “Average” and “Above Average” condition is worth to a dealer, since these are the number dealers use in their valuations (see table).  For Average condition, KBB was closest to Manheim.  For Clean condition, each of the guide books thought the car was worth more than did Manheim, with Edmunds being the highest by a wide margin.

Since an asset is only really worth what the market is willing to pay, we figured it would be a good idea to see what dealers had actually paid recently at Manheim for an Average condition 50k mile 2011 Toyota Camry LEs.  We found two sales in August 2014 for $11,300 and $11,500.  When adjusted for auction fees and other costs, these values would be $300 or so higher, meaning that dealers had paid more than what Manheim thought an Average car was worth.

For the purposes of trading in our Average Test-Car, this showed that relying upon a single guide-book for a TIV could mean leaving thousands on the table!

Let’s See What Its Worth In the Real World

Finally, some real-world testing was in order and we decided to shop our “Average” car at a few well known online car buying-sites of the “Instant Offer” variety.

Our offers were $980 to $1,495 less than the Manheim Value ($10,950) for our Average car.  In fact, as a real seller, we’d be well out of pocket (thousands of Dollars) if our test car were ‘Clean’ and not ‘Average.’  Why? Because the offers for a Clean car were no different, yet a Clean car was valued more highly by the guidebooks and by Manheim.  The fact is that the car-buying sites did not fully factor condition or optional equipment so their offers didn’t change materially.

At the end of the day, what’s our Average car really worth?  As far as we can tell, to the right dealer buyer, at least $11,500, which is close to the NADA number and $1,500 more than an Instant Offer from a car-buying service.

So How Do I Get the Most for My Car?

But there’s only one way to really find out.  By knowing your TIVs and getting a number of offers from brick-and-mortar dealerships, along with the car-buying services.

And that’s where SpeediMango comes in.  We get you real dealer offers, it doesn’t cost you a dime and saves you a ton of hassle.

Posted by: Farra Majid on Thursday, August 21st, 2014 at 10:51 pm in CARS, NEWS, PRODUCT UPDATES