Correlating Market Value with Resale Value and Asking Price
The second-hand vehicle market is a free-for-all kind of playground.
As a buyer, you’re spoiled for choice. There are really a lot of options for the money. But tread too far, and you might end up taking a slide that’s too steep for you. Vehicles are priced very differently, and there are no firm rules enforced whether you're in a second-hand car lot, or searching online.
Let's see if we can help make some sense of it, and look at some important terms and what they mean, as well as factors to consider when evaluating the prices of a second-hand car. It's not easy, but it will be well worth the time.
What Is "Resale Value"?
That term is perhaps the one that merits a lot of arguments.
Resale value in the Philippine setting is something that isn't exactly defined. In other countries, it's called residual value, and they often refer to something as a guide like the computation used by insurance companies when covering older cars. In the U.S. they have the Kelley Blue Book which makes it somewhat simpler.
Insurance companies in the Philippines do have their own computations or formula for second-hand car values, but to our knowledge, they don't release it to the general public to serve as a yardstick. So all we really have to go on are the prices either in used car lots or online or a “Buy Me” on the windshield or the classifieds... if anyone still uses classifieds. When Car Buyer/Buy And Sell was still around, it was easier, but now not really.
The problem is that the “resale value” is muddled up or co-defined with another important term: the asking price.
The asking price is literally what it says: it's what a vehicle owner wants to sell his/her car for. But is it realistic though?
There are no rules governing what an asking price can or can't be. If an owner paid PHP 1 million for a compact car, they can post a price a year later asking for PHP 1.1 million if they wanted. It sounds insane given that cars immediately lose value the moment you sign the release and take delivery of the unit, but it actually happens.
If a certain model is a “hot unit” or a car that became so ridiculously popular in the market, there are individuals that will take advantage of it. Those that were able to get an allocation buy it for the SRP, then sell it for more. It's not illegal as far as we know; just business.
There are also times when we notice vehicle owners selling their modified second-hand cars with the cost of their aftermarket bits into their asking price. There are cases of some cars as old as some 1985 or 1986 models fetching up to more than half a million pesos because they’ve been restored, albeit mostly with non-OEM parts anymore. They would attribute this to a now-new term called “enthusiast tax”, but we’ll get to that a bit later on.
An asking price is anything the owner wants it to be, and you should take it with a grain of salt. Actually, take a whole bag's worth of it. The asking price is not resale value. What we also need to understand is market value.
We all learned that the value of any item is governed by supply and demand. The higher the demand coupled with a low supply, the prices go up. If it’s the other way around, then prices will flounder. For second-hand vehicles, it's basically an opinion on how much a car would sell for, based on the premise above.
Here’s the thing: if you’re looking at any car that’s about 2 generations (generations pertaining to model changes, facelifts, updates, etc.), then you don’t have that much of a supply for those models anymore. Why? Because they’ve already been changed and updated. If you’re looking at run-of-the-mill production models, there should be a lot of these old models already being disposed of. Some are priced quite fairly, and others astronomically. But we’ll get to that later.
Another factor affecting a vehicle's market value is a proper appraisal. By proper, we don't mean a check by your "suking talyer or mekaniko". Let's take Toyota's Used Vehicle program. It's mainly for trading in your old vehicle and uses its value as a sort of down payment for your new purchase. The dealerships have a standard checklist of items that their trained service personnel will put to the test to assess the car's condition. After checking, a certain number of checked plus unchecked items equate to a value that's based on what certain parts' conditions are if they are still usable without having to be replaced, if there's major bodywork that needs to be done, so on and so forth.
As far as getting a legitimate appraisal goes, it doesn't get as accurate as one from a specific brand's dealership. Many can argue that there are surplus or replacement parts that can be used for quick fixes, but in this day and age, original parts (should) greatly dictate any vehicle's market value.
So, breaking it down to the basics, the main question here is if a seller’s asking price is justified by the vehicle’s market value. For the most part, stock cars sold in the used vehicles market are priced fairly. We have to admit that some want to fetch a higher premium because of factors like low mileage or casa-maintained or some other similar criteria, but whether they are what they’re made out to be remains to be seen. That’s why we’ve also put up a guide dealing with such terms and pitches, but we digress. It’s with older and modified cars that this article may strike a nerve, and with good reason. But do hear us out first.
Barring one’s need for a stock car, a modded one is probably their vehicle of choice. Earlier we mentioned the loosely used term that is “enthusiast tax”. Market value is thrown out the window when this term comes into play, and some really do respect and accept it when buying a used car. We can confidently say that there are some ads where, if you do the math, the sum of all the restoration and/or aftermarket parts equates to more than what the vehicle’s true market value may be. In other cases, the demand for older performance-inclined vehicles (which has skyrocketed in the past few years) plus the above-mentioned factor, further pushes a used car’s value up.
So, what’s our point? If you’re in the market for something basic, bare minimum, something you really like, and at the same time get you from point A to point B safely and with spare change in your wallet, then find yourself a vehicle that’s close to stock as possible. Take into consideration its usage, its age, its mileage, and its general condition, and you’re bound to find a fair deal.
If you’re looking for a vehicle that you want to serve you everywhere from the streets, strip, track, or trail, and if you can’t reach for a brand new one just yet, then be ready to cough up a premium for what might tickle your fancy. Yes, you probably found one with all the knick-knacks you want, but are you and your savings account able to justify your (and the seller’s) being an enthusiast and subject yourself to a price far from what the market may logically dictate? If so, then good, you’ve found your unicorn.
Ultimately, what the market dictates and what the sellers ask for can be balanced and justified by only one factor: you. How much do you want it? Is it what you need? Will it serve your purpose and will you be happy with it? Yes? Then have at it, sign those sales documents, and congratulations on your second-hand vehicle purchase. Now your next step is to have that vehicle transferred to your name.
How? That’s another guide, for another time.