There are many ways to calculate the residual value of an old car. In which the most popular is the calculation by vehicle condition and by year of use.
Factors affecting the value of used cars
Vehicle brand / origin
In Vietnam, brand is one of the most important factors determining the value of old cars. Traders Japanese car such as Toyota, Honda … have high liquidity and little devaluation. Samples Korean car such as Kia cars, Hyundai cars … have lower liquidity and faster devaluation.
- Analysis is lost when buying used cars
- The costs of keeping a car
- Should buy a used car at the company
In addition, vehicle origins such as imported or domestically assembled cars also greatly affect the value of the car. Because of many views that imported cars are better quality, so the durability is higher. However, the quality of imported cars is also highly appreciated by each country. For example, imported Thai cars are more valuable than Indonesian imported cars.
Actual vehicle condition
The actual vehicle condition is the most important determinant of vehicle value. This is even more important than a used car for several years. Even though it is an old car that runs through, but has ever been in an accident or been involved in hydrodynamics, the value is not high.
The actual vehicle condition will include the vehicle’s exterior (paint, system car lights…), interior conditions (car seat systems, air conditioning, entertainment system screen – car speaker…), chassis condition, ability to operate the vehicle …
Vehicle kilometers traveled
Vehicle kilometers traveled (ODO number) is one of the factors affecting the price of used cars. Because partly tells the “war history” of the vehicle. The ODO number and the vehicle price will be inversely proportional to each other. The higher the ODO number, the lower the car price. However, the current ODO can be completely edited by rewind the odometer. Therefore, the ODO is for reference only, which is no longer a reliable factor in determining old car prices.
Car paint color
The psychology of choosing a car color also has a certain influence on the value of the car. According to the survey, the silver and black used cars are the most popular. This means prices are also “increased” a little more. White cars for sale are very popular, but because white deteriorates faster, the value is no longer high.
The law of supply – demand
The law of supply and demand also has a significant impact on the price of used cars. The more people looking to buy a car, the higher the value, the more stable, and less devaluation. For example, the famous durable models such as Toyota Vios, Toyota Innova, Toyota Fortuner… there will be more people looking to buy, so the price is higher. Cars with few buyers, the price will drop faster such as old luxury cars, Korean car manufacturers …
New car selling price
The selling price of a new car also greatly affects the price of a used car. If the price of a new car is stable or increases, a used car will lose less value. If the price of a new car increases or decreases, especially decreases, old cars will lose their prices very quickly.
Oil motorbikes or gasoline engines
Oil motorcycles or gasoline scooters also affect the selling price of the car. Typically, old oil scooters are more expensive than gasoline motorcycles due to their more durable oil engines.
Vehicles in the “black list”
In the purchase and sale of used cars, there is a “black list” of used cars that should not be purchased such as used cars that have been in an accident, old cars that have been bombarded, taxis refunds, 10-year old cars … Due to the operating system. They are no longer good, so these vehicles are usually of low value.
How to classify old cars
Brand is an important factor determining the remaining value of an automobile. The position of an automobile brand is assessed mainly based on the popularity of its models.
In Vietnam, automobile brands are classified into the following groups:
- Group 1: Toyota
- Group 2: Honda’s motobike
- Group 3: Mazda, Mitsubishi, Ford
- Group 4: That, Hyundai, Nissan
- Group 5: Isuzu, Suzuki
- Group 6: Mercedes, BMW, Audi, Lexus
- Group 7: Porche, Vollkwagen and other luxury car and super car manufacturers
Besides the brand, the quality and condition of the car is the next most important factor determining the value of an old car.
Accordingly, the quality of used cars is classified according to the following 5 levels:
- Level 1: Old car well maintained and maintained. All the systems on the car are working well, the new car is from 80% – 90% or more.
- Level 2: Core systems like engines, gear, chassis, air-con … are fine. Vehicles with new degrees from 60% – 80%.
- Level 3: The system works well. Vehicles with new degrees from 40% – 60%.
- Level 4: The engine system, gearbox, chassis, interior, air-conditioner … have signs of deterioration. Vehicles with new degrees from 30% – 40%.
- Level 5: Vehicles classified in level 5 are usually cars with accidents, hydrographs, taxis disposed of, deep old cars … Vehicles with only 5% – 30% branding.
Years of use
This is also an important factor in determining the price of used cars. The more years a car is used, the more its value decreases. When classifying used vehicles by year, people usually rely on the following milestones:
- 0 – 3 years (when the car is still under genuine warranty period so the price is highest)
- 3 – 6 years
- 6 – 10 years
- 10 – 13 years
- 13 – 16 years
- 16 – 20 years
How to calculate the residual value of a car
Corresponding to each group, each level, the value of the old car will be different. The calculation of residual value of an old car is as follows:
- Group 1: Level 1 vehicle will lose on average 3.5% of its value / year, Level 2 is 4.5%, Level 3 is 8.5%, Level 4 is 12%.
- Group 2: Level 1 vehicle will lose an average of 4.5% of its value / year, Level 2 is 5.5%, Level 3 is 9.5%, Level 4 is 12.5%.
- Group 3: Level 1 car will lose an average of 5% of its value / year, Level 2 is 7%, Level 3 is 10%, Level 4 is 14%.
- Group 4: Level 1 vehicle will lose an average of 7% of its value / year, Level 2 is 8%, Level 3 is 13%, Level 4 is 15.5%.
- Group 5: Level 1 car will lose on average 7.5% of its value / year, Level 2 is 8.5%, Level 3 is 13.5%, Level 4 is 16%.
- Group 6: Level 1 vehicle will lose on average 8.5% of its value / year, Level 2 is 9.5%, Level 3 is 12.5%, Level 4 is 15%.
- Group 7: Level 1 vehicle will lose an average of 10% of its value / year, Level 2 is 12%, Level 3 is 14%, Level 4 is 18%.
Formula for calculating the value of old cars by year
In addition to the calculation based on the brand and actual condition of the vehicle, there is another calculation based on the number of years of service.
The formula for calculating the value of a used car by the number of years of use is as follows: Current car value = Value of the car when buying a new car – Amortization rate (value of a new car x years of use x 7%)
Depending on the vehicle brand and vehicle condition, depreciation rates from 7% to 10% may apply.
For example: Toyota Vios G CVT 2017 registered in Hanoi, when buying a new, the total rolling cost is 644 million VND. Selling price after 4 years of use = 644 – (644 x 4 x 7%) = 463.68 million.
The above are some of the most popular ways of valuing used cars on the market today. However, in order to negotiate the most reasonable price, you should still check the vehicle’s status to have a basis to pay the price, to avoid losing money injustice.
Frequently asked questions about how to calculate the value of used cars
? How to evaluate the residual value of a car?
Reply: The method of assessing the residual value of cars usually applies the following levels: used for 1 year to 90% of the value of the car, from 1-3 years to 70% of the value of the car, from 3 to 6 years 50% of the car value, from 6-10 years to 30% of the car value.
? What are the ways of appraising old car prices?
Reply: There are many ways of valuing used cars nowadays. Among them, there are common ways to assess used car prices based on brand, model, vehicle condition and years of use.
? How long is the life cycle of a car?
Reply: Depending on the type of vehicle, the life cycle will be different. Most car life is between 15 and 20 years.