Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Less precise tools base estimates only on make, model, year, and mileage. If you’re looking to sell your car, or you’re in the market for a used vehicle, it’s important to familiarize yourself with how automobile valuations work.
Here’s what you need to know to help you increase your chances of getting the best deal.
What to Know About Instant Dealer Trade-In Quotes
A number of dealerships and websites — such as Carvana, Vroom, Truecar and Kelley Blue Book — offer instant cash or instant dealer trade-in quotes for your car. Often, all you have to do is share a few details, such as the vehicle identification number (VIN) or license plate number, and the company will come back to you with a cash offer for your vehicle.
Though a lot of companies make it sound like the process is as simple as that, know that there is likely an in-person review of your vehicle before anyone will cut you a check.
Check your score with SoFi Insights
Track your credit score for free. Sign up and get 1,000 SoFi Reward points.*
Recommended: What Credit Score is Needed to Buy a Car
What Do Dealers Base Their Car Estimates On?
Instant quotes and valuations usually look at a few quick measures, such as year, make and model, and mileage. This information is enough to provide a rough estimate of value. However, other factors will also come into play. Here’s a closer look.
(Keep in mind, these terms apply only to cars you own outright; different calculations go into valuing a leased car.)
Make and Model
You can think of the make and model of a car as the brand and the specific product on offer. For example, Toyota is a make of vehicle, while the Corolla is a model. Some makes and models are more popular, which helps them hold their value longer. For example, a certain make and model might be known for fuel efficiency or to be safer or more reliable.
There may be numbers or letters next to a car’s make and model that further delineate different features or trim level. Generally speaking, the higher a vehicle’s trim level — the more features it has — the more valuable the car will be.
Recommended: How to Buy a Used Car
A vehicle’s body style is its shape. It might be a minivan, hatchback, or pickup truck. Information about a vehicle style is contained in its make and model. And certain styles are more valuable than others. For example, trucks tend to retain their value better than other car styles. In other words, they depreciate more slowly.
Your vehicle’s condition means both cosmetic issues like scratches, dents, and wear to upholstery, and also the wear and tear on the engine and other components. The better condition a car is in and the fewer impending repairs needed, the more valuable it will be.
Mileage is an important factor to consider because it serves as shorthand for potential wear and tear. The more a car has been driven, the more likely it needs repair or will soon. As a result, cars with smaller odometer readings are worth more.
Accidents big and small will hurt the value of a vehicle. Even if a car was in a minor accident and shows no outward signs of damage, value can decrease. Buyers can look up vehicle history reports on sites such as Carfax and AutoCheck, using a car’s VIN.
When you buy a car new, you may be offered a series of add-ons, such as splash guards, alarm systems, and tinted windows. While these are often pricey to add to a new vehicle, that doesn’t always translate into increased value for used cars. In fact, according to some experts, once a car is two or three years old, add-ons have little effect on its value. Condition, mileage, and accident history often matter much more to the average used car buyer.
Number of Previous Owners
Used cars that have been owned by only one person may be seen as preferable because the vehicle will have had a consistent driving history and maintenance schedule. Multiple owners will not necessarily hurt the value of a car, but it may raise a red flag if there have been many owners in a short period of time.
If a car is still under warranty and that warranty is transferable to a new buyer, it can add value.
Geography can have an effect on car value. For example, the harsh winters and salted roads of the Northeast can take a toll, causing more wear and tear than a warm, dry climate.
Additionally, some types of vehicles may be in higher demand in certain areas, driving up price. For example, you might have an easier time selling a pickup truck in a suburban or rural area than in a big city.
The less time an individual has to sell their vehicle, the more likely it is that they may have to accept an offer that’s less than the fair market value, especially in areas where there is not much demand.
The value of used vehicles can fluctuate with changes in the economy. For example, supply chain issues and increased consumer demand over the course of the COVID-19 pandemic drove up the price of new and used vehicles. The median price of used vehicles jumped 44% between December 2019 and December 2021.
Rising interest rates can also make borrowing to buy a vehicle more expensive, putting downward pressure on demand, as can a struggling stock market.
Recommended: What Credit Score Is Needed to Buy a Car?
What Buyers Are Looking For
Ultimately, supply and demand drive the value of used vehicles. If buyers are looking for hybrid vehicles over gasoline-only cars, value for hybrids increases. If a certain color falls out of favor, a car may end up being worth less than an otherwise identical model in a different hue.
Recommended: What is The Difference Between Transunion and Equifax
How to Prepare Your Car and Your Expectations
Prepare your car for the highest valuation by tackling as many repairs as you can, from fixing a broken brake light to replacing worn out brake pads. Before an in-person valuation, you’ll also want to have your car washed and detailed to make sure it looks like it’s in the best condition possible.
Manage your expectations for values by doing a bit of research. If you’re looking to sell your car, check out valuation estimates from multiple sources, including Edmunds, Kelley Blue Book, and online dealers. You may even want to bring your car to a local dealership to see what price you might get there.
Similarly, if you’re looking to buy, you can look up the value of various makes and models to help you understand whether the price you’re quoted is close to fair market value.
Recommended: Does Net Worth Include Home Equity
Monitor Your Car Value With Insights
Good car value estimates will factor in as many as a dozen data points, including geographic and economic influences. Tracking your car’s value is especially important as you plan your budget and save up for a new car. The reason: Your current car’s value can have a big impact on what you can afford in a new or used car.
The SoFi Insights money tracker app now has an Auto Tracker feature that can give you a better understanding of your net worth and help you identify good times to sell.
What is the best way to determine the value of a car?
Find out the value of a car through trusted online resources such as Kelley Blue Book or Edmunds. Enter the VIN, license plate number, or the year, make, model, and mileage of your car or truck to get an idea of what it may be worth.
Which car value estimator is most accurate?
Kelley Blue Book and Edmunds are two of the most trusted car value estimators.
How do you know if a car deal is too good to be true?
Red flags that may suggest a car deal is too good to be true include a seller who is rushing you, a seller who won’t give you an accident report, signs of rust or disrepair, and a price that is much too low compared to fair market price.
Photo credit: iStock/Talaj
*Terms and conditions apply. (Must click on the link to be eligible.) This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the Rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.
SoFi’s Insights tool offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.