Maxim: Vehicle Value

The vehicle value maxim is one to apply to second-hand cars.

New vehicles are sold according to the manufacturer’s recommended price (plus a premium based on demand in some markets). The sale of a second-hand vehicle is more purely market based, relying on a myriad of factors: supply, demand, age, mileage, reputation, capability, collectibility and condition.

The value maxim became apparent to me over years of buying cars. A lot of people try to beat it. Few ever do. The sooner you accept the inevitability of the maxim, the more realistic your car purchasing plans might become.

The maxim:

Any given model of vehicle in good condition is worth X dollars. If you purchase the vehicle for X minus Y dollars, you will end up spending Y dollars on it (or Y plus Z) to bring it up to an acceptable condition.

How do you come up with a value for X?

There’s no fixed rule, but watching the market for your desired vehicle should give you a pretty good idea.

Taking an average of existing vehicles for sale is one way to give you a feel for value. For example, one model I’m interested in at the time of writing has six examples for sale right now. The prices are:

  • $16,000
  • $15,950
  • $24,950
  • $20,500
  • $19,500
  • $19,900

I’ve assessed each one based on what I can tell about condition and mileage and it’s no surprise that the one I’m going to investigate is in the middle of the range. And yes, I’ll expect that the car will eventually cost me around $20,000 or maybe a few thousand more because there’s invariably going to be something to fix on a second-hand car in the first few weeks of owning it.

Calculating that likely average value and factoring in the likelihood of repairs gives you a good idea of what to aim for when you bid for the car. Everyone likes to feel like their getting a bargain but if you manage to convince a seller to accept less than the asking price, know that there’s a decent chance you’ll spend the money you ‘saved’ on either repairs or upgrades.

That’s the value maxim.

To quote a well-known Australian who’s big in the meat industry: You know it makes sense.

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1 Comment

  1. I agree with this Maxim in general but there are times when you can find a good deal that is based on problems that can be easily fixed. When I bought my 02 9-3 convertible, the top was giving error messages because of bent micro-switches. Another buyer had passed on the car before me because of this and I used it to get a discount off the sale price. After some slight adjustments to the switch tabs the top worked great over the time I owned the car.

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