7 Things to Keep in Mind While Calculating a Second-hand Car’s Price

A second-hand car can be the perfect solution to your travel woes, especially if you are looking for convenience and comfort without spending a bomb. Not only will it cost less than a brand new version, but insuring and maintaining it will also be less taxing. Plus, if you are new to driving and do not want to get a new car scratched or dented, buying a used car first can be a wise move. However, if you are not careful, you might get duped into paying a private seller or a dealership more than what is right. So, how to calculate the prices for a used car? Here are some major factors to keep in mind.
 

1. Age of the car

   Remember that a car’s value drops the moment it leaves the showroom, and with every passing year, it depreciates further. The rate of depreciation might depend on the model, make, variant and other factors related to demand and supply. So, the greater a car’s age is, the lower will be its price, and vice versa. Also note that if the car is really old—say, 10 years or more—you should check whether the model has been discontinued or not. In that case, though the second hand car’s price will be significantly lower than functional models, you might have a hard time looking for spare parts.

 
To have a better understanding of how the car’s age affects second hand car valuation, let's look at it from the insurance perspective and in the context of depreciation.
 

Sr. No.	Car's Age	Depreciation % for IDV calculation
1	If the car is less than six months old	5%
2	If the car’s age is between six months and one year	15%
3	If the car’s age is between one and two years	20%
4	If the age of the car is between two and three years	30%
5	If the car’s age is between three and four years	40%
6	If the car’s age is more than four years but less than five years	50%

 
The term IDV in the above table refers to the car's current market worth after deducting depreciation from the selling price listed by the manufacturer. The table clearly states how the car loses its value with each passing year. 
 
Also Read: Essential Guide for Buying a Used Car
 

2. Distance already covered by the car

   If a car has been driven around a lot, it will cost you way lesser than one that has been used rarely or only for short distances. For computing old car valuation using distance parameters, you must check its odometer. If the average annual distance covered is more than 10,000 to 15,000 kilometres or if the total distance covered is more than a lakh, you can expect to bag a low price.

 

3. Whether the car is insured or not

   A second hand vehicle’s price also depends on insurance. Although we have already addressed how a car’s age, or more specifically, depreciation, affects the IDV, it is important to remember that the insured cars will cost you more than those without insurance. Or, if the car’s insurance is about to expire and is not being renewed by the previous owner, you can negotiate for a lower price. However, buying an insured car means less hassle, even if you have to shell out more.

 

4. The number of owners

   If the car you are planning to buy has had many owners, it should cost you less than a car that has had one or two owners. That is because more owners usually mean more wear and tear. However, if someone claims that multiple owners guarantee a lower price—it is a myth. The condition of the car is still the most important factor in calculating the old car price.

 

5. External and internal condition

   Always check the exterior of the car thoroughly for dents, scratches or cracks. Take a close look at the tires and their tread. Then go on to examine the interiors, seats, steering wheel, clutch, brakes, gear system and engine. Gear oil, engine oil, air filter and oil filter are some other aspects of a used car that you must check carefully before settling for a price. Try and get an experienced mechanic to help you in case you do not have much knowledge about cars. Ideally, you should go for a test drive and watch out for strange noises or vibrations, any tendency of skidding, any leakage, and so on. The better the condition of a car, the higher will be its price, and vice versa.

 
Also Read: How Much Should You Spend on a Second-Hand Car
 

6. Service and accident history

   While estimating a second hand car’s price, take into account its service and accident history. If a car has been serviced regularly by previous owners and at authorized centres, it is likely to be in good shape. Find out if any part has been changed too, and if so, then check if the replacement is genuine. A used car with good service history will cost you more than one that has not been maintained well. Also, check if the car has ever met with an accident, and if so, whether they were minor or major. Minor or cosmetic damages might not affect the price of a car much, but in case of full-on collisions or major mechanical or structural damages, the price of a used car will be significantly low. However, if you settle for the latter owing to the cheap price tag, you might face secondary problems in future or it might be tough to get it insured at an affordable premium. This is because accident-prone cars are considered risky and attract higher than usual premiums.

 

7. Personalised car

   If you are planning to buy a pre-owned customised car but are unaware of how to calculate the second-hand car price for such cars, read ahead. Customised cars are those that have had numerous alterations and modifications made to the factory-installed components. To revamp the original model, the first owner goes for oversized wheels, rear spoilers, modified engines, and so on. However, all these things lower the car mileage and also add to the insurance burden. Therefore, while buying personalised cars, refrain from shelling out a high amount. 

 

Other factors to keep in mind

Location, colour, documentation and the current demand for the make and model are some factors that can also determine the final price you need to pay for a second-hand car. So, go online and research well first. Many comparison and dealer websites feature used car price calculators where you have to just enter details such as the brand, make, model, original year of purchase, number of owners, and location to get an approximate price. However, the actual price might be slightly different as these used vehicle calculators often do not account for servicing and accident history. So, you can compare the prices you get on different sites and go through online ads for similar cars to get an idea about what you have to pay.
 

Car's Documents

This is without saying one of the most crucial aspects that helps in second-hand car price evaluation. The key documents that you need to check before buying a car on a used car loan include a registration certificate, PUC certificate, road tax payment receipt, and some more. If the paperwork is in order, you may have to spend a bit more, but in the long run, this will secure you from any legal complications and penalties.
 
Also Read: How to Get the Best Price for Used Cars Online