Used Cars Price Vs Value
Establishing a fair price is not an exact science, especially when youre buying a used car. A vehicles price is determined by a range of factors, from make, model and mileage to the condition of the car and the demand for it in the market.
The Consumer Protection Act (CPA) entitles you to the fair pricing of goods and services. If youre charged a price that is unfair, unreasonable or unjust, the transaction can be voided. The National Consumer Commission can impose on a supplier that charged an unfair price a fine of up to 10 percent of its turnover.
So how do you know youre paying a fair price when buying a used car?
The motor industry uses the Trans-Union Auto Dealers Guide when setting prices for used cars. The industry is emphatic that the Guide (formerly known as the Mead & McGrouther Auto Dealers Guide) is exactly that: a guide. However, the insurance industry uses the Guide to determine the value of your vehicle, and for some insurers the Guide is more bible than guide.
Some Insurers | Small Business Insurance Durban will cover your vehicle for no more than the retail price as stated in the guide (see What the terms mean, below). So if you paid more than the retail price in the Guide, youll be out of pocket in the event of a total loss of your vehicle.
A Personal Finance reader recently found herself in this predicament. A fortnight ago, she bought a 2011 Ford Figo for R100 000 cash. When she wanted to insure the vehicle, the reader discovered that her insurer would not insure the car for more than R90 300, which is the retail price of the car, as per the Guide.
The reader says she didnt check the Guide before buying the car, partly because she bought it from a large, reputable dealer. Have I been done in by the dealer, or am I being done in by my insurer? she asks.
When the reader asked the dealer to explain the discrepancy between what she was charged for the vehicle and the retail price in the Auto Dealers Guide, the sales manager at the dealership reiterated that the Guide is merely a guide.
The Guide provides dealers with high and low selling prices, and reflects how many of a certain model that dealers countrywide sold in the previous month, he says. Theres a high demand for 2011 Figos, because they are popular, and the Guides high retail price for a 2011 Figo is R109 995 in the current market, he says. (The low retail price in the Guide is R71 000.)
Nearly 200 units are sold each month. When vehicles are in high demand, dealers have to pay above book value to procure such stock, which is the case currently on Figos, the sales manager says.
The dealer disclosed to the reader that her Figo was owned previously by a car rental company. Sagie Moodley, who hosts Buyers Guide on Ignition TV, says dealers procure such stock for a song: usually for less than the trade price, which, in the case of a 2011 Ford Figo, is R80 600.
Moodley says he believes the reader paid too much.
This is not to say she got a bad buy, but she is paying dearly for not doing her homework, he says. She ought to have checked the Guide (see How to check the guide, below).
You should never pay more than retail price for a former rental car. They usually have a buy-back value of cost plus R10 000, so the dealer could have paid as little as R65 000 or R70 000 for the car.
I wouldnt have paid more than R85 000 for that car. Besides, at 51 700 kilometres on the clock, the mileage isnt low either, he says.
Moodley says the advantage of buying from a dealer is that, in terms of the Consumer Protection Act, the dealer is responsible for repairing any defects in the car for six months. The cost of doing this has most likely been built into the price, but it may provide the consumer with a measure of comfort, he says.
The reader is not being done in by her insurer.
The models retail value today is R90 300, and its trade-in value is R80 600. She should therefore have paid less than R90 300 to buy the car.
If the car gets stolen tomorrow, the payout of R90 300 will be enough for her to buy the exact same car she had.
The reader would be in the same situation she was before the theft with a car that is worth less than what she paid for it.
If the car has any non-standard or non-factory-fitted extras (which it doesnt), that might account for the extra she paid.
Most reputable Insurers dont allow you to insure your car for more than the retail price in the TransUnion Auto Dealers Guide.
Our default option is to insure vehicles for their full retail values as per the Guide. We also offer clients the option to insure for the market value in order to reduce the premium. The vast majority of clients go with the retail value option, being the higher amount.
What is ultimately important is what your insurer will pay out when you have a claim.
Here, the starting point would be the actual retail value at that time as per the Guide, adjusted up or down for mileage, condition, and so on.
You can opt for credit shortfall cover to top up the amount owed to the bank or credit provider over and above the retail or market value of the vehicle. But you can buy this cover only if you bought the vehicle on credit.
The Consumer Protection Act (CPA) entitles you to the fair pricing of goods and services. If youre charged a price that is unfair, unreasonable or unjust, the transaction can be voided. The National Consumer Commission can impose on a supplier that charged an unfair price a fine of up to 10 percent of its turnover.
So how do you know youre paying a fair price when buying a used car?
The motor industry uses the Trans-Union Auto Dealers Guide when setting prices for used cars. The industry is emphatic that the Guide (formerly known as the Mead & McGrouther Auto Dealers Guide) is exactly that: a guide. However, the insurance industry uses the Guide to determine the value of your vehicle, and for some insurers the Guide is more bible than guide.
Some Insurers | Small Business Insurance Durban will cover your vehicle for no more than the retail price as stated in the guide (see What the terms mean, below). So if you paid more than the retail price in the Guide, youll be out of pocket in the event of a total loss of your vehicle.
A Personal Finance reader recently found herself in this predicament. A fortnight ago, she bought a 2011 Ford Figo for R100 000 cash. When she wanted to insure the vehicle, the reader discovered that her insurer would not insure the car for more than R90 300, which is the retail price of the car, as per the Guide.
The reader says she didnt check the Guide before buying the car, partly because she bought it from a large, reputable dealer. Have I been done in by the dealer, or am I being done in by my insurer? she asks.
When the reader asked the dealer to explain the discrepancy between what she was charged for the vehicle and the retail price in the Auto Dealers Guide, the sales manager at the dealership reiterated that the Guide is merely a guide.
The Guide provides dealers with high and low selling prices, and reflects how many of a certain model that dealers countrywide sold in the previous month, he says. Theres a high demand for 2011 Figos, because they are popular, and the Guides high retail price for a 2011 Figo is R109 995 in the current market, he says. (The low retail price in the Guide is R71 000.)
Nearly 200 units are sold each month. When vehicles are in high demand, dealers have to pay above book value to procure such stock, which is the case currently on Figos, the sales manager says.
The dealer disclosed to the reader that her Figo was owned previously by a car rental company. Sagie Moodley, who hosts Buyers Guide on Ignition TV, says dealers procure such stock for a song: usually for less than the trade price, which, in the case of a 2011 Ford Figo, is R80 600.
Moodley says he believes the reader paid too much.
This is not to say she got a bad buy, but she is paying dearly for not doing her homework, he says. She ought to have checked the Guide (see How to check the guide, below).
You should never pay more than retail price for a former rental car. They usually have a buy-back value of cost plus R10 000, so the dealer could have paid as little as R65 000 or R70 000 for the car.
I wouldnt have paid more than R85 000 for that car. Besides, at 51 700 kilometres on the clock, the mileage isnt low either, he says.
Moodley says the advantage of buying from a dealer is that, in terms of the Consumer Protection Act, the dealer is responsible for repairing any defects in the car for six months. The cost of doing this has most likely been built into the price, but it may provide the consumer with a measure of comfort, he says.
The reader is not being done in by her insurer.
The models retail value today is R90 300, and its trade-in value is R80 600. She should therefore have paid less than R90 300 to buy the car.
If the car gets stolen tomorrow, the payout of R90 300 will be enough for her to buy the exact same car she had.
The reader would be in the same situation she was before the theft with a car that is worth less than what she paid for it.
If the car has any non-standard or non-factory-fitted extras (which it doesnt), that might account for the extra she paid.
Most reputable Insurers dont allow you to insure your car for more than the retail price in the TransUnion Auto Dealers Guide.
Our default option is to insure vehicles for their full retail values as per the Guide. We also offer clients the option to insure for the market value in order to reduce the premium. The vast majority of clients go with the retail value option, being the higher amount.
What is ultimately important is what your insurer will pay out when you have a claim.
Here, the starting point would be the actual retail value at that time as per the Guide, adjusted up or down for mileage, condition, and so on.
You can opt for credit shortfall cover to top up the amount owed to the bank or credit provider over and above the retail or market value of the vehicle. But you can buy this cover only if you bought the vehicle on credit.
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