One of the biggest challenges for any car owner is to determine a realistic value for their car when trying to sell it.
getWorth director Mark Ridgway provides some insights and tips to help buyers and sellers:
The industry provides various price predictions, the most well-known being the long-standing auto dealer’s guide published by Transunion. One shouldn’t place too much reliance on such sources.
For some vehicles, the price predictions are a pretty accurate reflection of the current market value, but for others they can be quite far off the mark.
The statistical models that they use to predict prices are only as good as their data, and data quality is a huge challenge in the South African car market. As a result, some cars are worth more than those predictions, and others a lot less.
That is not to say the industry sources should be ignored, they are a useful guide, so one can use them as a starting point. It is also worth understanding that they play a subtle but powerful role in the market.
Banks are more reluctant to finance cars if the price exceeds these values. Also, the method by which most used car dealers finance their vehicle stock makes it difficult for them to purchase cars at a higher value than the predicted ‘trade’ price, no matter what the actual market price is.
Car owners need to build their own idea of a car’s value. They should start with research and get a good idea of the market value of the car. Thanks to the online listing platforms like autotrader.co.za and cars.co.za, there is a wealth of information available.
Look at the list prices of cars with the same registration year and similar mileages. Remember to compare apples with apples. With the thousands of different car variants out there, one has to be very careful that one is looking at the same specification and one also needs to understand that this is an asking price, not necessarily a realistic retail price.
There are often a range of prices in the market for the same car. People tend to ignore the lower list prices and often think their car should be valued amongst the top prices. This is seldom the case – buyers have access to the same information, and it is the lower priced vehicles that sell. More importantly, there is often some play in the list prices – many cars end up selling somewhat lower than the listed price.
The trade value versus retail price is another debate. When one sells a car to a dealer, one cannot expect to get the retail price because the dealer needs to make a margin as well. However, there is no simple standard. The difference between trade and retail pricing can vary significantly depending on how much reconditioning work is required on the car, the age and mileage, how long it might take to sell or the confidence with which the selling price can be estimated. As a rule of thumb, a dealer will need a higher margin to cater for slow-movers, high price uncertainty and higher risk of returns.
It is the price uncertainty in the market that led getWorth to develop a novel product called getMore. Rather than requiring a high margin because of uncertainty, getWorth partners with the seller to ensure that the car sells for what it is worth.
getWorth pays the seller upfront for the car, allowing the seller to set the price, and then pays out the profit when the car sells. This de-risks the process for the seller and allows them to achieve a far more realistic price for the car.
– Adapted from Press release