Fair Market Value Vs. Wholesale

by Brandi Berry-Fulton

If you have recently decided to trade your car in or purchase a used car then you have probably heard a few new terms. To understand what you should be offered for your old car or pay for a used car, make yourself familiar with some of the commonly used terms. When buying or selling a used car you often hear fair market value and wholesale value. Although the two terms sound similar, the difference in each price can range from hundreds to thousands of dollars.

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Fair Market Value

Fair market value is defined as the price at which a car goes from a willing seller to a willing buyer. Both the buyer and the seller have a reasonable amount of knowledge, and neither party is forced to sell or buy the car.

Wholesale Value

Wholesale value is defined as the price that a dealer would pay for a vehicle. The current wholesale value of a car is the car's current value in its present condition. The wholesale value is also referred to as the trade-in value. Retailer trade reports or auction results form the basis of wholesale value.

The Difference

The difference between fair market value and wholesale value is that the wholesale value is usually less than the fair market value. The fair market value typically assumes that a car is in excellent or good condition, meets both manufacturer and state requirements, and has no major issues. The wholesale value is a starting point for dealers to estimate a vehicle's actual worth, depending on its condition.

The Kelley Blue Book

The Kelley Blue Book is a resource that both dealers and private owners use to estimate the worth of a vehicle. The site offers retail values, wholesale (trade-in) values and private party values. The Kelley Blue Book is a trade publication intended for use by the wholesale industry but open for use of private consumers, either in print or on the company website. The values offered in the Kelly Blue Book for wholesale values assume that a vehicle has no problems and is taken by the dealer AS IS.

Use Resources

If you have questions about how much you should pay for a car or how much you should sell your car for, use the resources available to you. Start with the Kelley Blue Book, then compare prices of cars by online dealers, and actual dealerships. You will find that the research you do can help you get top dollar for your car or save you from spending too much on a used car.

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