The book value of a car can be defined as the original price of the car minus the accumulated depreciation. Here, depreciation means the deterioration or damage of the car that may be because of wear and tear over the years. Calculating the book value of your car will help you know how much the actual value of your car will be if you are going to sell it in the open market. However, the book value is just a theoretical value and by no means will be equal to the actual selling price in the open market.
If you want to know the actual selling price of your car, you will have to first know its fair market value. The book value of a car, therefore, can be either higher or lower than the fair market value. You must also know that the book value can also be equal to the fair market value.
What is the purpose of calculating the book value?
If you want to sell your car, knowing the book value can be helpful. It will also help the buyers to know the actual value of the car. You can calculate the book value of the car by the following formula:
Car’s Original Cost – Depreciation = Book Value
For example, if you buy a car whose original cost is $20,000. However, the depreciation cost here can be equal to $5000. Therefore, the book value here will result in $15,000, i.e., ($20,000-$5000).
Maintaining a record of the book value proves to be beneficial when calculating the total expenses. For example, when you buy a car, you should immediately make an entry in your accounting book. For each depreciation cost, you should make a new entry that will reflect the amount of depreciation cost required to fix the wear and tear. There might also be a loss in the value of the car, this too should be noted down in your book. You can have an asset impairment if the book value of the car is less than the fair market value of that particular car.
Keeping all the above-mentioned calculations in mind will help you understand the importance of car valuation. Below are a few reasons that you should consider for car valuation.
You will know what price to estimate your vehicle at
When you have to sell your car, you will want to sell it at the best price possible, even though the car is second-hand. Doing the car valuation on your own can sometimes be tough. Therefore, you can refer to the online car valuation tools and websites that are available. For using these tools, you will need to enter your car model, miles driven, and other details. Once you have entered all the necessary details, you can view the best possible price for your car. This will also prevent you from selling your car at cheaper rates to a used-car auto dealer.
You will know the industry trends well
To know the right price of the car, you need to know and understand the market thoroughly. Researching thoroughly will help you determine the right price for your car in the market. You will also know about the important points about that particular car model. You can also come across different offers available on the internet to sell the same car model. Therefore, having industry-based knowledge will help you offer the right deal to individual car buyers or used car auto dealers.
Car valuation also helps to increase confidence while negotiating. The negotiation part becomes easy for you if you know the right book value of your car. The car valuation process makes the entire process of selling your car easy and convenient as you are already aware of the accurately estimated price of the car. Therefore, being aware of the car industry is the best option for you if you have to sell your car in future. You can, therefore, opt for Blue Book Car Value Calculator for this purpose.
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