WeBuyCars founder, Faan van der Walt says that determining the value of a second hand car is a science.
Speaking to Bruce Whitfield on the Money Show, van der Walt said that using the book value exclusively as a guide can prove to be tricky. “The official book value is not only for the motor trade, it’s also for the insurance and banking industry.”
He said that although the book is based on statistics, it’s not always entirely accurate as it lacks data.
“We’ve taken the sales data of over 100,000 vehicles that we have bought and sold over our history, and we use that as parameters, together with book values, together with market trends.” Some vehicles, he said, do trade well under book value, with determining factors like mileage, warranty, playing a role.
Faan started the business with his brother Dirk in 2001, and now employs in excess of 700 employees and does 5,000 vehicle trades per month.
Naspers’ classifieds business, the OLX Group, announced an investment of R1.4 billion in WeBuyCars in September last year.
He told Whitfield that in the early days it was difficult to determine the true value of a second hand vehicle, due to a lack of online services. Today however, it is difficult to find a bargain because it is easy to determine the value of ones vehicle, he said.
Determining the value of a vehicle depends on various factors like service history – even spare keys for a car can set you back R5,000, van der Walt said.
Van der Walt has previously underlined the things that need to be taken into account when selling a car.
“Knowledge is paramount in order to avoid getting less than you deserve, or expecting more than you can realistically get, and you’ll need to consider certain factors including the demand for the car, its age and whether is it financed, before placing that ad or signing that agreement.”
If the car is not in demand, the older it gets, the more it will depreciate. If it’s a newer car, and is in demand, you’ll be able to get more for the vehicle.
“If the car is in demand we pay a lot more for it. What we also take into account is what we already have in stock. If we already have five or six of a certain vehicle, our offer will be less on any new ones that come through our website, as the ones that we have aren’t selling as well,” van der Walt said.
“We look at what we have available, what is available on the market, what type of specials there are at the moment, and we also look at the extra features that a vehicle might have.
“Extra features (like a sunroof) are expensive, if the vehicle is the standard one then we might be a little conservative on the offer, but if it includes features that most people look for when buying that type of vehicle, then our offer will be a little bit more.”
Another factor that plays a role in the asking price is the colour of the car. For example, black cars are usually in lower demand because the colour shows scratch marks, but a white or silver one doesn’t show scratches as easily, which increases demand. It does depend on the make and model of the car, but with certain vehicles, colour plays a big role.
Age, depreciation and warranties
With newer vehicles, you would normally lose between 15–25% within the first year. On a newer, more expensive vehicle, you lose a lot more, and the older the vehicle gets, the more influence the demand for the vehicle has on the price, said van der Walt.
“The age of the vehicle plays a big part in the amount you can sell your vehicle for, but for the buyer, the most important factors that should be taken into consideration when determining the value of a vehicle is supply and demand, current specials, mileage, vehicle condition and extras.”
On more expensive vehicles, a warranty is relatively important too, but the bottom line is still whether the car is in high demand or not. If it is still under warranty or a maintenance plan and it’s in high demand, you’ll definitely be able to sell the car for a higher price – whereas a car in low demand without a warranty or maintenance plan will have a significantly lower value.
In addition, dealers would be more inclined to purchase a car with a warranty in case something goes wrong in the time that the vehicle is on their floor as it would make it possible for them to have it fixed with relatively little hassle or expense.
Warranties and plans also go a long way in offering peace of mind that the vehicle was well maintained and looked after.