Car dealers are notorious for trying to bargain their way out of giving away money when it comes to negotiating prices on buying or selling used cars. Usually, they will try to convince the person they are dealing with that their calculations of ‘book value’ are the best and most lenient, and assure you that they are giving you the best price possible “without costing them too much out of their own pocket”. This sounds familiar to anyone that has ever tried to buy, sell or trade in a used car, right? However, not many people really know what ‘book value’ is supposed to be, so they end up having to trust that the dealer has done the right calculations and isn’t trying to take advantage of the situation (which happens more often with females, as dealers tend to think of them as not being very ‘car-savvy’).
Book Value
‘Book value’ is a term used by accountants to determine the value of an asset as it has depreciated up to a certain point. This means that the ‘book value’ of a car is the amount it is worth as an asset a few years or months down the line. The technical equation (Purchase price of asset - Approximate salvage value ÷ Estimated useful life of asset) used to calculate the depreciation of an asset is quite simple, so there is no reason why it cannot be used by anyone looking to double-check their dealer’s estimation. The approximate salvage value is the amount you would expect to get back if the asset were sold for spare parts. The estimated useful life of the asset is the amount of time the asset is expected to perform optimally (assets such as computers have an expectancy of 4-6 years, and cars between 10 and 15 years).
For individuals that are too lazy to bother trying to figure this all out by themselves, there are quite a few reliable websites all over the internet that will calculate it all of you. Your best option will be to visit a few of them and make sure their calculations all coincide to be sure that you have the right value.
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