What Is the "Market Value" of a Car?

Knowing a car's market value is a prudent idea for several reasons.

The "market value" or "fair market value" of a car is a measurement of the worth of that specific car on the open market. If the car is new, this number is more easily computed than if it's used, but in both cases, a car's market value is important and useful to know -- whether you're buying or selling a car, donating one to charity or simply trying to estimate the value of your assets.

What Affects It?

The first and most important factor in a car's market value is, of course, the model and year of the car. For new cars, this is in fact the only factor: a combination of the retail price suggested by the manufacturer, the "dealer price" the car dealership actually paid to the manufacturer, and the current popularity and perceived reliability of the car's model and year. A used car is additionally affected by its condition and mileage, and its market value is much more variable and specific.

Why Should I Know It?

The point of knowing a car's market value is that dealers should know it too, and it's thus theoretically close to the amount for which you should buy or sell the car. Generally, this value will be somewhere between the dealer price -- under which the dealer would lose money -- and the suggested retail price (MSRP), which is often considerably higher than the market value. Even if you aren't buying or selling a car, but rather donating it to charity, it's important to know its value so that you can claim an accurate tax deduction.

How Do I Find It?

You can cobble together a rough estimate of a car's market value yourself with a little research -- looking on the Internet for information about similar cars -- but resources exist to make this process a lot easier. Sites like Kelley Blue Book and Edmunds.com (see Resource section) contain searchable databases with the current market value of many different car models; these databases are also geographically sensitive, so you can get an idea of a car's market value in your area.

Negotiating

Negotiation strategies vary by dealer and by car, but a good rule of thumb is to open at a $500 distance from the car's market value -- $500 under if you're selling and $500 over if you're buying. This will help you to haggle a dealer to something close to the actual value, and keep you from having to immediately move away from your opening figure in negotiations.

references & resources