How to Calculate My Car's Market Value
Various terms and methods can be used to describe your car's market value. When using a printed or online value guide, you will see different amounts for "trade-in" versus "private party" market value. For donating your car as a charitable gift, the IRS has established guidelines to determine the fair market value as a tax deduction. Defining these different terms will help you get started on the right road to calculating the value of your car.
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Trade-In Value
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The market value is largely determined by how you wish to dispose of your car. If you are planning to use your car as part of the negotiation at a dealership, you will want to understand the trade-in value of your car. The trade-in value will reflect the current condition of your car and the margin that the dealer believes can be made in reselling your car. Dealers will deduct the amount they wish to profit from reselling your car after you trade it in. For this reason, the trade-in value is often the lowest type of market value for your car; however, it is also the easiest way to determine value and dispose of your car.
Private Sale Value
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Private sale value is the value that you can expect to use as the selling price of your car if you choose to sell it to a private party -- usually another individual. Because you are performing the sale and completing the paperwork yourself, you generally can expect to receive a higher value for your car than you would from its trade-in value from a car dealer.
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Charitable Gift Value
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The IRS specifies that the value of your car as a charitable donation is determined by its fair market value (FMV). According to IRS guidelines, you must determine the fair market value on the date of your donation. FMV is defined as "the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts."
In an effort to clarify this value and provide meaningful guidelines, the IRS has provided written publications 561 and 4303 for determining fair market value and the steps to take to ensure your tax deduction. See the Resources section for links to these IRS publications.
Value Guides
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Published guides for establishing the market value of cars are available in both printed and online formats. Printed guides, such as the "NADA Official Used Car Guide," are available at public libraries and at some banks, credit unions, insurance brokers and finance companies. Free industry standard online guides are also available on the Internet. See the Resources section for links to online guides such as Edmunds.com and Kelly Blue Book.
Tips
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Other factors that can enhance the value of your car include ownership records and maintenance records. Single versus multiple ownership of a vehicle can affect its market value. Ownership records are available online through services such as Carfax. You may want to use this resource to check what others will see about your car ownership records. See the Resources section for a link to this service.
Maintenance records, particularly oil changes, tune-ups and dealer mileage check-ups will also help in adding value to your car in a trade-in or private sale. If you have these records available, be sure to use them when negotiating the sale price of your vehicle.
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References
Resources
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