The difference between the retail, trade and market value of a vehicle is often a confusing concept. Without knowing the true and fair value of a vehicle, the second hand car market can become a tough to place to negotiate. You have to know what you are talking about. Understanding the difference between retail, market, and trade value can be a great help when it comes to buying and selling your car.
The price you pay at the dealership
This is the price you see advertised on a car's windshield at the dealership. As such, it is the highest amount that the car could be sold for based on its make, model, and condition. It is also sometimes referred to as the replacement value. If possible, you should use this value when insuring your car, as it will allow you to replace it with something similar without making a loss.
The amount a car dealer will be willing to pay for your car
Sometimes also called the ''book value'', this is the average amount a car dealer will be willing to pay for your car. This value is determined by what similar cars have sold for in the past. The trade value is typically lower than the retail value purely because the dealership still needs to add a profit margin to the price. Although you can easily find out the trade value of your car through various online tools, it is always important to remember that this is not the only thing car dealers take into consideration when making an offer on your car.
The price between the retail value and trade value
The market value is, as the name suggests, linked to the market. The market value is usually somewhere between the retail value and trade value, but can be higher or lower depending on the demand for a certain type of car. For instance: bakkies in South Africa are highly sought-after and generally retain a high market value. The market value of a car is also dependant on a few variables such as mileage, service record, accident reports, and the car's overall condition.