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Know how second-hand cars are valued to get a good price

Factors such as age, condition of the car, distance travelled and the number of owners can play a big role

The demand for second-hand cars has seen a surge as many people are buying or planning to buy their own car to avoid public transport due to the ongoing covid-19 pandemic. In case you are planning to sell your old car to bridge the gap in your cash flows or to upgrade to a new vehicle, now may be a good time.

There are multiple options to sell a car. You can connect with your local dealer or visit portals which help in buying and selling cars online. Experts advise going through organized dealers such as online portals as they offer safety and convenience. “Organized dealers, including online portals, carry out proper checks and verification of the documents of the buyer. This helps in reducing the chances of the car being sold to a person who uses it for wrongful purposes," said Gaurav Vangaal, associate director, IHS Markit, a global information provider.

Source: Cars24
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Source: Cars24

We tell you the factors that buyers or online portals take into consideration while buying a car, to help you negotiate a better price.

Valuation factors

Most of these portals have online calculators to arrive at the expected price you may get for your car, on the basis of certain factors.

Age of the car: One of the most important factors is the age of the car. The value of the car drops the moment it is bought and depreciates every year. This is called age-wise depreciation (see graph). “When it comes to ageing, a car will depreciate at varying rates across its age. It can be 10-25% per year depending on make, model, variant and other supply-demand factors," said Umesh Hora, chief executive officer, used cars business, CarDekho Group, an online portal for buying or selling cars. Therefore, lower the age of the car, lesser will be the depreciation charged and higher will be the value of the car.

Others: Apart from age, there are multiple other factors that affect the value of the car. “Broadly, a used car’s price is based on the make, model, variant, kilometres run, condition, registration year, ownership frequency or status, as well as the state of registration of the vehicle," said Gajendra Jangid, co-founder and chief marketing officer (CMO), Cars24, an online pre-owned car buying and selling portal.

Models that are more in demand are likely to attract better prices. “Few of the automobile brands as well as models are in high demand as compared to others. For example, Maruti Swift and Hyundai i10. Therefore, you get a higher quote for them. In terms of colour, white is the most in demand and commands a higher price," said Jangid.

The frequency of change in ownership also impacts the car price. The higher the number of ownership changes, lower will be the price.

The car that has been driven more is likely to attract a lower price compared to a car that has covered fewer kilometres. “Ownership and odometer (which measures the distance covered) reading can impact the price of a vehicle up to 10% and the refurbishment cost on a used vehicle on painting, tyres, engine, among others, can be up to 7-8% of the price of the vehicle. However, the level of impact can vary across regions, make, model, variant, and other supply-demand factors," said Hora.

Cars with no accident history may also attract a better price as they may be in better condition.

Insurance: If you don’t renew the insurance of the car at the time of sale, the vehicle is likely to get a lower price.

“An insured car can get a higher value on sale, so it is recommended to have at least third-party insurance for your car. A lot of owners lapse their policy because they plan to sell their car. This should be avoided," said Animesh Das, head of product strategy, ACKO General Insurance.

Things to keep in mind

A car in good condition, which has been regularly serviced from an authorized center, adds to the value. “A full service at an authorized dealership will infuse new life in your car. Changing oil filter, air filter, engine oil, gear oil, air conditioner filter will help maintain the car in excellent running condition which will ultimately gain more eyeballs," said Hora.

Also, it is better to get dents or scratches removed before you put out car for sale. The cost of getting such repairs may not be high and it will help you negotiate a better price with the dealer or the buyer.

Having proper documentation is the most important aspect that is considered during the sale of a car. “All documentation related to the vehicle such as registration certificate (RC), valid insurance and pollution under control (PUC) certificate, service record, history report, financial contract and owner manual should be maintained to increase the valuation of the car," said Hora.

Also, very old cars may not be in demand. Experts say that you get the best price when your car is three to five years old. “While the average age of a used car in India is five to seven years, a car gets the best value after around three to four years. Post this age, the car’s price can depreciate faster, and the car owner can incur higher maintenance cost," said Hora.

Before selling the car, don’t forget to compare the prices you are getting on different portals.

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