Q: What is Resale Value?

December 17, 2013 12:53 PM

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There are a number of reasons a car owner may wish to resell a vehicle, from the desire simply to be rid of a particular car to wanting to upgrade to a newer model. When the time comes to sell the automobile, the resale value of the car is Kelley Blue Book's projection of the market value of that used vehicle. That value is determined largely by the car model type, the age of the vehicle, and its condition.

Generally, the more expensive the car was when purchased, the higher its resale value will be, dollar-wise. Normal market forces apply as well. For instance, if the model is rare or in high demand, it will have a higher than normal resale value when compared with other models of its class.

The variable that has the largest effect on the resale value of an automobile outside of the model type is age. Regardless of the level of upkeep applied to a vehicle, normal wear and tear will have a detrimental effect on the car's overall condition. Determining just how much the use of the car has worn down each auto part would be an intensive process, so a generic deduction is made each year from the value of the vehicle to account for the aging process. This deduction is known as depreciation and begins the moment the automobile rolls off the new-car lot. Every year, more depreciation is applied, lowering the value of the vehicle to cover the effects of normal use.

The overall condition outside of normal wear and tear also has an effect on a vehicle's resale value. Proper maintenance and careful use tends to keep a car in the best condition possible. This keeps the value high. A lack of maintenance can cause increasing amounts of damage to the automobile, lowering its value in the process. Collisions, regardless of the success of repairs, can also lower the value, and so can any naturally occurring damage such as floods.

Sometimes, the installation of aftermarket car parts can help to raise the car's value. Aftermarket car parts are those manufactured by a third party. These parts can be used to replace existing auto parts, from wheels to precision engine parts, or they can be used as add-ons, such as a sound system.

Ideally, the resale value of an automobile is the price that a seller is likely to receive under optimum conditions. Any damage to the vehicle will lower its value, while aftermarket parts or demand may raise it. The ultimate determinant of a vehicle's resale value, however, is the contract made between seller and buyer, as is the case with all product values.

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