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Old 23rd December 2012, 09:43   #1
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Default *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

Howdy Fellow Team Bhpians, I am sure many of us have been in a quandary about how to calculate the value of a used car. Abroad, we have a couple of guides like Kelly’s Blue Book, etc for used car valuations. These guides are fairly accurate. In India the used car market is mostly unorganized and there is hardly any accurate information for used car values. Hence I have put together a spreadsheet to calculate used car values which you take tweak based on specific situations.

I have made the following assumptions :
  • Useful/Reliable life of well maintained car: 10 Years or 120 Months
  • Approximate Usage over life of car: 18,000 kms per year or 1500 kms per Month
  • Residual Value After 10 years and 180000 kilometers. (This is the tricky part, but you can reach this value by checking carwale.com or calling a couple of used car dealers in your area, checking print/online classifieds, etc).
Basically the Formula Works like this:
  1. Find the original On the Road Price of the Car.
  2. Find the Residual Value after 10 years of usage. You will need to do some research including online and print media etc.
  3. Calculate the per month depreciation by Subtracting residual value from purchase price and dividing by the number of months.
  4. Calculate per kilometer depreciation by dividing total depreciation over 10 year period by 180,000 kilometers.
  5. Get the current value by reducing the depreciation (i.e. multiply no of months vehicle used since new with monthly depreciation amount) from the original on-road price.
  6. Make adjustments for mileage. Any additional mileage over assumed normal usage of 15,000 kilometers per month will reduce the value by the excess mileage depreciation (extra mileage above normal use times the per kilometer depreciation). If usage is below normal usage, then you can add the value obtained by multiplying the mileage deprecation with below normal usage kilometers.
In addition to this, there are other factors that come into play which can be considered only after seeing the car/records:
  1. How many previous owners does the vehicle have?
  2. Is the car for sale by owner or dealer?
  3. Exterior and Interior condition of the car. I have seen cars that show 30 to 40K on the odometer, but the interiors look more worn out than a car with 150K kilometers.
  4. Has the originality of the car been maintained? Take extra care to ensure that the OEM wiring has not been altered to add extra fittings like horns, lights, Chinese HID kits, DVD player etc.
  5. Can the mileage be authenticated, with service records? In Chennai, I found many dealers offering cars with doctored odometers. When you ask them to come with you to dealer to check service history, they generally slither away quietly.
  6. Accident history of car.
  7. Condition of Tires, body, Powertrain, etc.
  8. Popularity of car, current wait period of the car etc. For example given the long waiting period for Swift diesel, it may carry a premium as opposed to say Indica diesel in the same segment.
I have attached version 2007 and older version of the spreadsheet, which you can download and play around with the values and formula.
Attached Files
File Type: xlsx UsedCarValuationVer07.xlsx (10.8 KB, 13457 views)
File Type: xls UsedCarValuationVer97.xls (22.0 KB, 9335 views)
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Old 23rd December 2012, 10:05   #2
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Default re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

Awesome stuff

I go with Carwale valuations, they are always below the Market price when you are going out to buy a used vehicle and luckily they are above the Market price when you are selling your vehicle, so helps a lot in bargaining when you have that print-out in your hand and can pull up the website on your phone

In the end its all about how desperate the guy is to sell and you are to buy

One trick that has worked for me especially at a Dealer is, lets say I want to buy a CRV, spot a CRV at a used dealership, I walk in and start looking at SCORPIOs and other like vehicles, the Dealer gets fooled thinking I am looking for a SCORPIO and starts quoting inflated prices, I start bargaining on the price and then pop the question "what will I get for cheaper?"and slowly the CRV comes into the picture, this way I'm able to get realistic prices from the Dealers. If they know you are there for the CRV then they will surely inflate the price, but they get tricked into under-quoting the price of the CRV hoping you will pick the SCORPIO

Also, everyone first wants to cheat you, only when they realise they cannot cheat you or you won't get cheated will they start an honest deal
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Old 23rd December 2012, 14:27   #3
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Default Re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

The formula works fine only if the car and its current owner are clean.

In india, i have seen that almost all the dealers first do is, they tweak the meter so that the car shows less miles/KM's.

Now a days, i have seen that some of the common people are doing it and selling their cars. . In such cases, it becomes very difficult for the buyer and he might end up with a lemon.

I think, the best way is that, there should be a mechanism embeded in the ECU itself which counts the number of hours the vehicle was running. As ECU's are expensive, many will not try to tweak it. Maybe this would give more information to the buyer.

Last edited by gemi_kk : 23rd December 2012 at 14:29. Reason: there was a spelling mistake.
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Old 23rd December 2012, 21:10   #4
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Default Re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

At the end of the day, what matters most is SUPPLY and DEMAND for that particular model. That's why you see diesels holding up value comparatively better than petrols and Toyotas holding value better than Fiats.

Now if you could somehow capture the new car sales of your model & compare it with its immediate competitors, you will get a rough idea about the supply/demand in the used car market. Eg: Toyota Fortuner sells 1000 units per month while Chevrolet Captiva sells 100.

Naturally, this will show up in the resale value - Fortuner will have a higher resale value than the Captiva.
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Old 24th December 2012, 14:35   #5
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Default

In this artificially skewed market, thanks to the GoI's notorious fuel pricing policy, I believe well-maintained pre-owned petrol cars make a lot of sense, if one's average monthly usage is low enough. Diesel cars that are older/clocked many more kms seem to have an asking price that's much more than newer petrol cars that haven't run as much and are in way better condition.

If one is savvy enough to do the maths, I believe one can get a great deal on a petrol car that's not only newer, less (ab)used and better maintained but also from a higher segment (or even two) and/or a more loaded variant that has better features (including safety features). I mean, if as an example, a loaded petrol Verna (not the Fluidic one) or a loaded SX4 or a similar car in a better condition can be had at the same price as (or even less than) say, a bare bones diesel Swift/Dzire (old type) about the same age, then it is a no-brainer as far as I'm concerned for my kind of usage (assuming both are legally clean, non-accidental cars). Not only will I be getting a more loaded, comfortable car with a more refined engine and more bhp/PS (not torque), the expenses that I'll incur to replace or repair broken/worn-out parts are bound to be less as well. And since the first owner has taken the lion's share of the depreciation hit, I can use the car for a few years and sell it off without getting a headache over its resale value.

I believe many first owners are selling off their petrol cars (less than 3 or 4 years old) in good/very reasonable condition believing they would be better off with a diesel, given the gulf between petrol and diesel prices, even without doing the maths about usage and depreciation. My friend, who has a 3-year old i10 (1.1) in very good condition (I've driven it) asked me how much he could expect for it, and which diesel hatchback he should buy. I believe he does not need a diesel car at all, given his low daily usage. I showed him the math to prove that he was looking at a bad deal financially, and since he was happy with his car, I advised him to stick with it. He was convinced after looking at the financial spend and his lack of need for a diesel due to his low usage (if he was still adamant about selling it, I wouldn't have thought twice about buying it at a mutually beneficial price, plus he would be assured of his car going into the right hands and even get to drive it occasionally). But thankfully, he saw the benefits of keeping the car.

I believe there are quite a few like him, who want to sell their petrol cars which are doing perfectly fine and purchase a diesel instead. It's a psychological thing (seeing the difference at the pump) and a herd-mentality thing as well. But if one really cared to calculate the financial aspects of the deal, many would stick with their current cars.

If one can buy a petrol car from a person in the above-mentioned situation, it would be a cool deal. Of course, as long as one's usage warrants a petrol. I'm not a fan of aftermarket LPG/CNG kits, but that option is also open for those who can find a good gas-kit installer and mechanic.
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Old 14th June 2013, 16:31   #6
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Default Re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

Folks I came across this website, Indian Blue Book, They are in to valuation of used/pre owned cars. It looks like a new venture and not much details about the team behind is not known. Have any one heard/used their service..?
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Old 17th June 2013, 11:10   #7
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Default Re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

Quote:
Originally Posted by MaxTorque View Post
Folks I came across this website, Indian Blue Book, They are in to valuation of used/pre owned cars. It looks like a new venture and not much details about the team behind is not known. Have any one heard/used their service..?
This looks good. At least it throws up a value that sounds reasonable for the car. Thanks a ton.
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Old 10th July 2016, 18:10   #8
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Default Re: *Attached* : Formula for Used / 2nd Hand / Pre-Owned Car Valuation

Quote:
Originally Posted by MaxTorque View Post
Folks I came across this website, Indian Blue Book, They are in to valuation of used/pre owned cars. It looks like a new venture and not much details about the team behind is not known. Have any one heard/used their service..?
We can evaluate the car at Team-Bhp site also at;

http://classifieds.team-bhp.com/used-car-price-check/

Its powered by indian blue book, works fairly decent.
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