Making the Ost Out of Your Used Car
No matter how much you love your car, there might come a time when you would need to purchase a new one. It could be because your family has grown and you need a bigger vehicle, or you need a more fuel-efficient car, or you wanted a car with more modern technologies such as safety features. Or simply, you feel that your current vehicle is gradually slacking in performance. Whatever the reason is, the next thing that comes to mind is what are you going to do with your current car – keep it or sell it?
Selling would always seem to be the practical choice, but how do you get the most value for it? Read on to learn more about a vehicle's resale value and a few other things that you need to consider before reselling your car.
- Resale Value Defined and Why It Matters
- Factors that Affect the Resale Value of a Car
- Calculating a Car's Resale Value
- Some Cars with Best Resale Value in 2020
- Philippine Cars with Best Resale Value
Resale Value Defined and Why It Matters
Resale value refers to the monetary trade value of a good that's been previously purchased. Since the product, in this case the vehicle or car, has already been previously bought or owned by someone, its value is lower than its original price. Many factors affect the resale value, such as the car's condition, brand and model reputation and age.
Having a deeper understanding of a car's resale value is crucial in making informed and wise purchase decisions, whether or not you are a new car shopper.
If you are re-selling, your objective is to gain the most value from your car so you need to bear in mind the things that will keep your vehicle's resale value high and competitive. If your plan all along is to sell your vehicle after three to five years, then you should purchase a vehicle that retains most of its value so that you will be able to maximize your investment. Remember, unlike land properties that gain more value over time, cars' value depreciates as they age.
On the other hand, if you are buying a second-hand car, you need to be able to determine whether the resale value of the car is worth it and that you are not being shortchanged.
Factors that Affect the Resale Value of a Car
Mileage and Age of the Car
The very first and primary criteria when deciding on the resale value of a vehicle is mileage or the distance that it has already traveled at the time it was put up on sale. It is called mileage because it is measured based on the number of miles that a car can travel per one gallon or liter of fuel. In the Philippines, we compute the mileage in kilometers not miles. And the ideal yearly mileage for a used car should be around 10,000 to 16,000 kilometers. The lower the mileage, the more you can sell the car for a higher value. Inversely, cars depreciate faster when you use them to the fullest, so don't be surprised if the resale value of your car dips lower.
It is easy to tell the mileage of a used car as this information is clearly displayed on its odometer.
The second major criteria considered in pricing a used car is its age. The longer the car had been in your possession, the lower its value becomes. And every year that you use it deducts tens of thousands of pesos from its resale price. Note however that mileage comes hand-in-hand with an age of the vehicle. A 2-year-old car with a mileage of 50,000km will have a lower resale value versus a 4-year-old car with only 20,000km mileage. Also, an 8-year-old vehicle that has traveled 80,000km is preferred over a 3-year-old car that has already covered 60,000km for obvious reasons. Still, there are other factors that will greatly affect the resale value; it's just that these two are the foremost considerations.
Regardless of low mileage or younger age, major damage can bring down your vehicle's resale value. Even minor damage, such as dents and scratches, is a minus factor. What more if the damage is substantial such as an engine, brake or transmission issue, or components that aren't functioning well such as the ventilation system, headlamps and taillights, windshield wipers or safety sensors.
If you're the seller, it is best to have the damage fixed first or have the broken components replaced before putting up your car on resale. If you are the buyer, consider having a certified mechanic or technician do a thorough checkup of the used car you intend to buy so that you can be sure there are no mechanical or technical problems that will arise once you have already bought it.
Proof of Maintenance
Irregular or improper maintenance affects the car's performance and eventually its resale value. It takes a lot of discipline and common sense to keep your vehicle well-maintained. For one, do not neglect to bring your car to certified service centers or automotive technicians for a regular checkup. Keep all your maintenance and repair receipts especially change-oil and tune-up receipts as these will come in handy for prospective buyers. They will appreciate the effort you've taken to take good care of your car.
Aside from system maintenance, the interior and exterior of your car should also be clean. A stained dirty carpet scratched upholstery, scratched plastic walls or dashboard, chipped paint, broken second-row seatbelts, small dents or worn-out tires are unpleasant to look at and may lead your potential buyer to ask for discounts. Make sure you take extra measures to prevent wear and tear to your car's interior and exterior and keep them clean at all times. Have your car regularly and properly car-washed. There are a lot of cheap car wash shops for you to visit or you can wash the car yourself if you have the time.
Before selling, check for such flaws and have them repaired. Replace your headlamps and/or tires if needed and repair any possible eyesore dents and chips. A properly maintained and well-kept car can fetch a good resale value than those that appear worn out even if they are relatively not older than 3 to 5 years.
Vehicle History Report
If you are a buyer, would you consider buying a car that's been in an accident for more than once? Or if it's been submerged in a deep flood for more than 24 hours? If it's been fixed and in perfect condition and the resale value is worth it, why not? But still, it is best to check the vehicle's history report before proceeding with a purchase. Secure a copy of the car's official receipt (OR) and certificate of registration (CR) and check with the LTO for any accident or other relevant history. If you can check insurance claims history, it would also help.
If you are a seller, honesty is always the best policy, so be transparent about your vehicle history. Prepare the necessary documentation, such as accident history reports and insurance claims. If you are confident that the resale value of your car is commensurate to its condition, you do not have to hide anything from the prospective buyer.
Brand and Car Model Reputation
Let's face it, there are certain car brands and models that have better resale values than others. You may have probably seen a Mazda3 2009 model having the same resale value as a Kia Optima 2014 model. This is because car model reputation is also a factor in pricing a car.
Brand reputation is also a factor. Volkswagen used to be a widely popular, highly-reputed brand. It still is but the Dieselgate scandal that started in 2015 has tarnished its reputation and the value of its diesel vehicles was affected. In the Philippines, at around the same year, 2015, the resale value of the Mitsubishi Montero Sport was highly impacted due to a number of accidents, referred to as a sudden unintended acceleration that was reported and caused a lot of safety concerns surrounding the SUV.
If you have plans of reselling, don't buy a brand or car model with some reputation issues, otherwise, you won't be getting much value from it during resale. If you are a buyer, research carefully on the reported issues and have a mechanic look into the car. A low resale value because of alleged issues may turn out to be an advantage if the vehicle is after all in perfect working condition and was highly maintained.
A vehicle with a manual transmission (MT) obviously has a lower resale value than an automatic transmission (AT) one. If you're one of those die-hard MT fans, you are in luck as you'd most probably be able to purchase an affordable manual car with a good brand and reputation. If you're a seller of a stick shift regardless of brand and model popularity, however, you must find contacts that value MT cars, otherwise, it might take time to dispose of your used car.
Fuel Used in Car Engine
As the second phase of the Tax Reform for Acceleration and Inclusion (TRAIN) Act gets implemented in the Philippines at the start of 2020, prices of commodities especially gas have soared higher. This puts more burden on gas vehicle owners. Thus, diesel versus gas engine type has become an unpredictable factor in the pricing of second-hand vehicles. Hybrid cars would fetch good resale value while gas-guzzling MPVs and SUVs such as the Toyota FJ Cruiser and Hummer H2 might not be practical to buy especially since resale values of such vehicles would still be quite expensive. In fact, both models have been discontinued by their respective manufacturers most likely due to lack of the desired traction as a result of their gas-hungry powertrains. It is interesting to note though that the FJ Cruiser has increased in value ever since it was taken off the market in 2014!
Note, however, that we are labeling this factor as unpredictable because no one can tell what will happen in the world market that may affect fuel prices. If they suddenly drop, then the resale value may have to be adjusted again. If you are a seller and not in a hurry to dispose of your vehicle, watch for spikes or drops in oil prices, and sell your car during the most favorable time for you. If you need to urgently sell your vehicle, however, then you have no choice but to adjust to the current market resale value. If you are a potential buyer, the rise and fall of oil prices can work to your advantage especially if you're looking at a particular gas-run car model.
There are other considerations that could also affect the resale value of a vehicle, though not as important as the ones earlier discussed in this article.
For electric vehicles, the availability of charging facilities may affect the resale, especially here in the Philippines, where the building of charging stations is still in the works and is yet to be seen.
If a prospective buyer is not a smoker, he or she will definitely steer clear of one that smells like an ashtray. So, if you've been smoking inside your used car, be prepared as most people believe that the carbon monoxide and tar that permeate in the interior can be toxic to one's health. It's like breathing in secondhand smoke. Unless the buyer is a smoker who does not mind the smell that would have clung to the interior and the health-hazard implication, your car's resale value will most likely be diminished.
Good quality tires that are well kept increases the value of a used car. However, having varying tire brands and styles might discourage potential buyers as you have to admit, having four tires that look differently aren't pleasant to look at even when they all look new. Best to stick to one brand and one type of tires for consistency and to get a good resale price for your vehicle.
While there's no actual proof that bumper stickers affect a car's resale value, it is recommended that you just leave the stickers in their place, especially since the stickers are hard to peel and might cause tiny scrapes or nicks to your car.
Yes, color has an impact on a car's resale value. According to multiple studies, orange and yellow vehicles have better resale values than their silver and beige counterparts, while gold-colored vehicles depreciate the most. In the Philippines, black, white and gray are always the safest bets and do not affect resale pricing. Unusual colors such as pink and purple especially the metallic versions of these shades are not very popular and will definitely influence resale value. Here are some ways:
Calculating a Car's Resale Value
A car can lose as much as 37% of its original standard retail price the moment you take it out of the dealership. There's no fixed formula to compute the resale value as it is dependent on numerous factors such as those discussed in this article. But don't fret as there are companies, agents or local dealerships with whom you can partner to compute your used car's resale value. Otherwise, you can research on the prevailing price in the local market via online channels that sell used cars such as Priceprice.ph. You can also check out print advertisements on used cars for sale.
There are 2 things you need to consider: the current demand for your type of vehicle and the current economic situation. In the Philippines, data has shown that SUVs and MPVs are high in demand, so these vehicle types could fetch you a good resale profit assuming you meet all the other criteria of a sellable used car. However, if people are holding off on big purchases due to economic uncertainties, the resale value will also be affected.
When you set the resale value, make sure you have a buffer for possible negotiations as most buyers would most likely haggle with the price. This is the time to show all your documentation (maintenance receipts, history reports, etc.) and assert that your car is all worth its price.
Some Cars with Best Resale Value in 2020
Kelly Blue Book (KBB), a well-trusted name in the US recently published its 2020 list of cars with the best resale value in North America. Subaru bagged the best resale value brand with its Impreza, all-new Legacy, Forester and the new Outback having the best resale values. Porsche bagged the 2020 Best Resale Value for Luxury Brand. The top 10 best resale value cars, not necessarily in this order are the Chevrolet Corvette, Jeep Wrangler, Chevrolet Silverado, Ram Pickup, Ford Ranger, Toyota 4Runner, GMC Sierra, Toyota Tacoma, Jeep Gladiator and Toyota Tundra.
Philippine Cars with Best Resale Value
There are no latest 2020 data on vehicles that depreciate the least in the Philippines but both 2018 and 2019 data showed that pickups have the best resale value even if they are older than 5 years, with the Toyota Hilux topping the list, retaining 79.91 percent of its brand new price after 5 years. Data compiled by OLX in 2019 showed that it takes at least 9 years for pickups to lose 50 percent of their suggested retail prices (SRP). SUVs, MPVs and vans also showed exceptional lower depreciation rates, with a little below 10 years before losing 50% of their SRPs.
USED CAR BUYERS GUIDE LIST
- Before Buying a Car
- Buying a Used Car
Selling your Car
- What determines a used car value?
- What do I change the owner in the documents of the car?
- How can I sell my car for a higher price?
- Is it better to sell my current car or trade it?
Car tips & Maintenance
- What happens when you don't change the oil in cars?
- When do you replace the brake pads?
- Is there a proper way in mainting a car aircon?
- Do I need to learn both AT and MT?
- How many years does a car battery last?
- Can I pick any tire size for my car?
- Are car insurance only for new cars?
- How do I handle a car accident?
- How do I know the meaning of the alert indicator signs?
- What is the proper way to drive?
- What is the correct way of washing your car?
- How do I know how my car delivers the power to the wheels?
- Should I turn my hazards on during rain while driving?