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Used Car Values Explained


If you want to upgrade your vehicle or are considering a car loan refinance to lower your monthly payment, it’s essential to understand used auto values. Knowing your vehicle’s value can help you get the best price and potentially increase the value.

Understanding how car values work and the difference between retail price vs. trade price can help you select your next vehicle. Finding a car that can hold its value may even improve your odds of getting approved for car loan refinancing. This is why it’s so crucial to understand used car values and how you can make your vehicle’s value as high as possible.

What Factors Affect Used Car Values?

A few different factors can influence a used car’s value, including the vehicle’s condition, age, mileage, title status, popularity, accident history, flood history, geography, make, model and trim. First, consider what condition your vehicle is in cosmetically and mechanically. Your vehicle’s condition can significantly influence your trade-in at a car dealership. Next, consider your car’s age and do your research to determine whether there are any notable mechanical problems from that model year.

The higher your car’s mileage is compared to the year, the lower the value will generally be. Another factor that can impact a used car’s value is the title status. A clean title is easier to sell, and a vehicle without one will be both harder to sell and refinance. If your car is popular, you may be in luck — it may hold its resale value better.

The accident and flood history of a vehicle is also important — for example, if your vehicle has been through a flood, it could be worth less. Even your geography could affect your car’s value. In certain states, your car may be more valuable than in others. Finally, your vehicle’s make, model and trim can influence the value, as the value of the upgraded version will be higher than the standard model. Each of these factors can affect your car’s trade-in, retail or residual value.

Types of Used Car Values

If you want to sell a car to a dealer, it’s essential to understand the differences between the types of values for used cars.

Types of Used Car Values

Though there are some other types of used car values, the most common types are retail, trade-in and residual value:

  • Retail value: The price that the dealer sets for a used car is known as its retail value. Since the dealership’s goal is to make a profit off of the sale of the car, the retail value tends to be higher than the trade-in value. The dealership will base this value on your vehicle’s features, such as the condition, popularity and mileage.
  • Trade-in value: The amount a dealership believes your car is worth is known as the trade-in value. When you trade in your car to a dealership, you may be able to use the car’s value to reduce the cost of leasing or buying a new vehicle. As with retail value, the dealership will base this value on your vehicle’s features like the condition, popularity and mileage.
  • Residual value: The residual value of your used car is a percentage of its initial price and how much your car is worth at the end of a balloon loan term or lease. For example, if your vehicle will have a 50% residual value at the end of a two-year lease and costs $20,000, it will be worth $10,000 by the end of your lease. Lenders and dealerships determine your monthly payments by using the residual value.

Vehicles with high residual values tend to have lower monthly payments due to less depreciation occurring over the duration of the lease term. In comparison, vehicles with low residual values tend to have higher payments since they will depreciate faster.

Typically, the trade-in value of a used car is less than its retail value. This is because the dealership needs to mark up the price of the vehicle to make a profit when they sell it. Before reselling, the dealership may also make some repairs to the vehicle, and the value accounts for those costs.

It can be challenging to find a private buyer for your used vehicle, so if you’re looking for a faster sale and convenience, a trade-in may be worth the loss of the extra money. You may be able to negotiate the value with the dealer or take your vehicle to several dealers to get the best offer.

How Do You Find Your Used Car’s Value?

Finding your car’s value is essential if you want to sell or refinance your auto loan. First, you can review valuation tools like NADAguides and Kelley Blue Book. Ensure your car’s vehicle identification number (VIN), mileage and condition to ensure the price you find is as accurate as possible. However, keep in mind that these sites can be overly optimistic and may not be the most precise valuation of your vehicle.

Next, take your vehicle to some local dealerships and ask about their trade-in value. These values tend to be more accurate than those you will find online. For the residual value of your used car, lenders and dealerships will use a third-party company to determine the value. While you may be able to increase your trade-in or retail value, your residual value is solely controlled by the third-party company. Before you lease a car, research its residual value.

Selling Your Used Car to a Dealership vs. Trade-In Value

Is it better to trade in or sell a car? A common misconception is that you can only trade in a vehicle at a dealership for a new one. The truth is that there are dealerships that will buy your used car with no obligation. If you’re unsure what the best option is for you, we break down the pros and cons of both below.

Selling your used car to a dealership is faster and more convenient than selling privately. If you need to sell your car quickly, waiting for a private seller to find your online posting and commit to the purchase may not be the best option. By selling to a dealership, you may be able to complete the whole transaction in a single day. Additionally, selling to a dealership tends to be safer. A private sale could be riskier financially and put you in an unsafe situation.

When you sell to the right dealership, you won’t be obligated to buy from them, so you can sell your vehicle whether you plan to buy your next car from them or not. On the other hand, car trading may be better than selling if you want to purchase a used or new vehicle. One of the advantages of doing a trade-in is that you’re likely going to be offered more than you would for selling your car.

Trade-in Advantages

Your trade-in can be used as a down payment for your next vehicle to lower your costs. Alternatively, if you want cash for your used car, you can still get that with a trade-in.

How Does Car Value Impact a Car Loan Refinance?

If you want to refinance your car loan, your used car’s value can influence your refinance eligibility. Your loan officer may ask a few questions to calculate your car’s value during your application process for a refinance. The loan officer will use this value to calculate your loan-to-value (LTV) ratio, which compares how much your car is worth versus how much you owe.

Your LTV ratio is calculated by dividing your loan amount by your car value and multiplying by 100. For example, if the current balance on your car loan is $5,000 and your car’s current value is $15,000, your LTV is 33%.

The lower your LTV ratio, the more likely you will be to qualify for a refinance. If your LTV is too high, it could mean you owe more on your auto loan than your car is worth, also known as being upside down on your loan. Keep in mind that even if you have a high LTV, you may still be eligible for a car loan refinance.

Ultimately, the lender wants to know how much risk they’re taking on by approving your refinance. This means evaluating how much they can sell your used car for to recoup any losses if you default on your auto loan. So the less you borrow compared to your car’s value, the less risk to the lender and the better the chances of application approval for you. Lenders also vary in their LTV ratio ceilings.

Along with your odds of loan approval, your LTV ratio can impact your car loan refinance in the following ways:

  • Down payment: Putting money down on your car will lower your LTV ratio and improve your odds of getting approved for a refinance.
  • Interest rate: Since a lower LTV ratio indicates less risk to the lender, you may be approved for a lower interest rate. This can save you money throughout your auto loan.
  • Equity: If you are approved to borrow an amount above your car’s value, you could end up with a high LTV ratio and owe more on your loan than your car is worth. If you choose to sell your used car with negative equity, you’d either need to roll it into your new loan or make up the difference in cash.

Essentially, your car value can impact both your chances for approval for an auto loan refinance and the terms you secure. Reach out to us at RefiJet to learn more about our auto loan refinancing.

Used Car Value FAQ

Below are answers to some commonly asked questions we get about used car value.

How Are Used Car Values Calculated?

Sources like Kelley Blue Book track used car purchases and monitor consumer sales, sales by franchise and independent dealers and wholesale auctions in which dealers sell and buy vehicles. Factors used to calculate your used car value include mileage, condition, location, accident history, add-ons and color. NADAguides are also used for finding the value of used vehicles.

What Do NADA Values Mean?

The National Association of Automobile Dealers (NADA) uses several factors to calculate your NADA trade-in value. The four main factors that impact the NADA value are location, mileage, condition and optional accessories. Optional accessories that may add to your vehicle’s value include air conditioning and an automatic transmission. Typically, the more optional accessories the vehicle has, the higher its NADA value.

Four Main Factors That Impact NADA

How Much Less Is Trade-In Value?

The trade-in value will likely be less, but how much less will depend on various factors. If the dealer needs to repair the car before they can resell it, for example, your trade-in value will typically be lower. If your vehicle is in good condition, relatively new and low mileage, the difference may not be as significant.

Can You Increase the Value of Your Used Car?

Though there are a few factors outside of your control, like your car’s age or model, you may be able to take a few simple steps to increase your used car’s value. Make your vehicle as presentable as possible by taking the vehicle to a car wash, buffing out any scratches and vacuuming the interior. A clean car with no clutter, dog hair, dirt or bad smells will be more enticing than a dirty vehicle. Some features that best hold their value at resale or trade include:

  • Sunroof
  • Alloy wheels
  • Leather seats
  • All-wheel drive
  • Air conditioning
  • Performance packages
  • Automatic transmission
  • Silver, black or white color
  • Mobile device compatibility
  • Power controls for door locks, seats and windows

If you want to increase your used vehicle’s value, make sure these items are in top condition before selling or trading in your car.

What Does a Max LTC Auto Loan Mean?

The maximum loan-to-cost (LTC) for an auto loan is the comparison of your loan to the costs of your vehicle. You can calculate your loan-to-cost by dividing your loan amount by the cost. This maximum will vary from lender to lender, so ask your lender about this.

Similarly, there are a few different auto loan terms, such as 24, 36 and 48 months, though many lenders now offer auto loans as long as 60, 72 and 84 months. Ask us at RefiJet about your auto loan term options.

See if You Are Eligible to Refinance Your Auto Loan

At RefiJet, we offer our auto refinance program to consumers across the nation. With our program, you can get the best vehicle loan that you qualify for. We offer customized lending options and refinancing for personal use vehicles. When you refinance your auto loan, you can lower your interest rate, lower your monthly payment or remove or add a co-borrower. Additionally, we offer options for adding Extended Service Contracts, GAP, lease buy-outs and cashback.

No matter your situation, we make our refinancing method smooth, efficient and secure to put you in the best possible position with your new auto loan. Contact us at RefiJet today and determine whether you’re eligible to refinance your auto loan.

See if You Are Eligible to Refinance

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