Do You Know the Difference Between Market and Retail Value?
In terms of affordability, the secondhand car market offers a cheaper alternative. Here is the difference between market and retail value.
Published: Saturday, September 24th 2016
With South Africa's economy constantly in the throws of political influence and turmoil, an increasing amount of prospective car buyers have been turning to the secondhand or used-car market.
In terms of affordability and variety, the secondhand car market certainly offers a cheaper alternative. The snag comes when determining a fair price. With little knowledge of market and retail value, it can be a difficult channel to navigate.
The Market Value of Your Car
Market value refers to the price a buyer is willing to pay for a certain brand of car. For example, a Toyota Hilux is one of South Africa's top-selling cars and is also quite expensive. Retailing for around R575 000 for the brand new 2016 Toyota Hilux V6 4.0 double cab Raider automatic.
Many consumers who can't afford this will thus pay more for a secondhand version than it actually retails for if there is limited stock.
Attie Blaauw, head of personal lines underwriting at Santam, explains, “Market forces dictate the price of a car, which means it can differ from region to region. Also in terms of type, mileage, condition, scarcity and manufacture of the vehicle."
Blaauw commented that because consumers would pay more for a secondhand car then for what it retails for, "it creates an evident escalation in market prices which affect a vehicle's value. Launching a new replacement model may well have a negative impact on vehicle values. But, in certain cases, it has also resulted in an increase in the value of used vehicles.”
A Car Valuation is Based on Various Criteria Including:
If you are in the market for a used-car, Blaauw recommends understanding how vehicles are evaluated and, more specifically, how it needs to be insured at the correct amount. Click on the button below for more information on comparing car insurance.
- Year of manufacture
- Added accessories.
The Retail Value of Your Car
The South African market is pretty on top of things when determining the exact retail value of a car. The Auto Dealer's guide is one of many linked central databases used by major second-hand dealerships.
These databases contain all the prices of cars sold and traded. They can indicate the average retail and trade value for a particular make and model.
“The retail value of a vehicle is normally the guideline price. This reflects the average price at which dealerships sold a specific vehicle recently,”
How Does the Value of Your Car Affect Your Insurance?
As a car owner, it is vital that you annually check the market and retail value of your car. Whether you are selling, trading or insuring your car.
In an accident, if anything should happen to your car, many insurers will pay out the reasonable market value based on the retail value, kilometres, condition of the car and any extras fitted.
Insurers adjust vehicle values frequently, however, and cannot account for the market value of a specific vehicle and its condition and mileage.
Annually checking the extent of your car insurance will make sure you have adequate coverage on your vehicle. This will protect you financially in the event of an accident.
The Most Popular Used Cars in South Africa
- Volkswagen Polo
- BMW 3 Series
- Volkswagen Golf
- Mercedes-Benz C-Class
- Toyota Hilux
- Volkswagen Polo Vivo
- Toyota Corolla
- BMW 1 Series
- Ford Ranger
- Audi A4
- Audi A3
- Ford Fiesta
- Isuzu KB Series
- Ford Focus
- Toyota Fortuner