Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jan 11, 2012

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There are several factors that go into making an educated analysis of a vehicle’s value: age, usage, condition, and additions should all be considered when determining the price of a car.


Age is Just a Number… Right?


The age of a car is important for getting auto loan borrowers into the right ballpark when pricing a vehicle. Generally speaking, if a car is older then it’s cheaper. Granted, there are exceptions: classic cars, restored cars, and cars of limited availability are the most notable examples. But for most cars, value depreciates as time progresses.


This isn’t just due to the age of the car itself, but also because of what time does to vehicles. As cars grow older, their mileage tends to rack up. As a car’s mileage increases, the value diminishes since the engine (and other parts of a car’s guts) begin to grow less reliable and weaker. Age, mileage, and reliability have a direct correlation with how much an owner, or future owner, will need to put into this vehicle to maintain its usage. As a result, a car loan holder may be hesitant to purchase an expensive older vehicle.


Usage Leads to Wear and Tear


Often directly related to a car’s age, the amount of usage a vehicle has undergone is also important when determining its value.


Usage, like age, can be telling of what sort of shape the individual parts of a car are in. More often than not, as a car gets older, the components of the car suffer wear and tear that leads to a decline in overall price. If someone knows they’ll need to fork over more money on top of their auto loan for maintenance or replacement, they will insist on paying less for the vehicle.


However, some cars may receive more usage than others—which is why this should be considered separately from a car’s age. A vehicle used by an elderly individual who spends a lot of time at home in their local vicinity may not drive nearly as much as a commuting business person. Likewise, a truck owner who enjoys off roading their vehicle will subject their truck to more usage than somebody who occasionally hauls their surfboard down to the beach.


Condition of the Car


A vehicle’s condition: the younger brother of both Age and Usage. Unfortunately there is no formula one can adhere to when trying to determine what the actual condition of a car is. Rather, the condition is subjective, and sometimes even hidden.


When auto loan holders try to determine a vehicle’s value, they need to pay attention to both the interior and exterior. Dents, scratches, and replacement parts on the exterior all degrade the car’s overall condition. Likewise, tears, stains, and discoloring of the interior hints at a poorer vehicle condition.


A vehicle in great condition is obviously worth more than a similar vehicle in worse condition.


Any Extra Perks


If an owner put after-market additions onto the vehicle, then auto loan holders should, in most cases, expect to pay more for the vehicle. Custom rims, shifters, spoilers, exhaust, light covers, and paint jobs are all common additions that owners add to their vehicles, and, most of the time, these perks increase the car’s value.


On rare occasions after-market specializations could diminish the car’s value. Imagine a car owned by a high school student who paints it hot pink. Sure there are other car loan holders out there who would appreciate the color, but for most, that addition is undesirable and value-diminishing.


Use Modern Tools to Price Prospective Vehicles


One of the most valuable steps a car buyer can take when trying to price a vehicle is performing a comparative analysis. By looking at what other vehicles of the same year and make have gone for, buyers can gain a pretty good grasp on what the vehicle they’re interested in is worth.


Websites like Kelley Blue Book keep extensive records of car prices and rates, and relay that information to consumers, free-of-charge. This allows a buyer to become pre-qualified for an auto loan of the appropriate amount.