When you start looking at buying a car, or selling a car, the whole concept of how car prices are put together can seem quite peculiar. If you buy a second hand car from a dealership, for example, you pay more for the same make and model than if you buy it from a private seller. Also, you may receive preferential rates if you part exchange your old vehicle with a specific garage – essentially paying slightly less for the same make and model than if you have bought it at the full forecourt price.
The car industry sets its prices according to a number of guides, which are used by traders and garage owners to determine the value of the vehicles they sell. This value is the product of a matrix of different factors, which may include the mileage of the vehicle, and the location in which it has been driven, as well as what it is.
The prices listed in these guides may not correlate to the price asked for and paid by private sellers and their customers. This is because the actual demand for certain vehicles is dictated by immediate availability rather than the book value of a certain make and model with a specific mileage attached to it.
For instance, buying a pre-owned van in Devon costs more than buying the same pre owned van in Birmingham: despite the fact that the actual physical condition of a Devonshire van, which has had to live with sea salt and sand in the air, is likely to be worse than the physical condition of a van in Birmingham. This is a factor of demand. In Devon, vans are in short supply (because of the sea air) and always required by the majority of local businesses, which revolve around grounds maintenance, construction and farming. In Birmingham, on the other hand, there are plenty of vans and no sea air to hurt them. So it’s a lot easier to find one worth owning.
When a person in the market for a vehicle of any sort becomes aware that these local factors can affect car prices, he or she also begins to realise that the price of driving into the middle of the country to buy his or her next vehicle may be offset by the drop in price he or she pays for the new ride.
In general terms, the difference in price between a private sale (normally cheaper) and a forecourt sale can be explained by the security blanket the forecourt sale offers. Private selling is done “as seen”, which essentially means that the buyer is liable for any faults. If you buy a car for six thousand pounds from a private seller, and it blows up on the way home, you just lost six thousand pounds. If, on the other hand, you buy it from a forecourt and it dies on the way home, the trader is legally obliged to fix or replace it to the reasonable value of the sale you have just concluded.
Car prices may further be complicated, as noted, by the prospect of a part exchange. Where you part exchange your existing vehicle against a newer one, the book value of the existing car is taken into account as you take money away from the sale price of the newer one.
Caitlin Morgan is a motoring journalist. She is currently working on an article comparing car prices between private and public sales.
Yes, car prices are always complicated and plus when we go to purchase car, there are two prices on-road price and ex-showroom price.