Automobile Loan Value: knowing how to price a car right.

The sticker price that comes on a car isn’t necessarily how much it’s really worth. You have to ask yourself, “What is the REAL worth of this vehicle?” when securing financing for its purchase. In other words, ask yourself what the automobile loan value of the car is. The real value of a new car comes from two main sources: the invoice price, which is the amount a car dealer pays to buy a car from the manufacturer, and the list price, the manufacturer’s suggested retail price (also known as MSRP or sticker price). The difference between the two can be between 10-20%, which is also the profit margin of most car dealers.

Knowing the real value of the car you’re purchasing will determine the finance amount available to you, taking into account your credit rate, the type of vehicle you’re buying, the source of financing, and so forth. The value of the car is also based on several factors about the vehicle such as brand, make, model and accessories. Ultimately, all these factors will determine just how much financing is available to you from your chosen credit source. It is best to be aware also of the loan to value relationship of your financing or loan arrangement. You don’t want to end up paying more for the real worth of your car right? But with the wrong loan terms and interest rate, you will. So be mindful of these factors.

In the end, knowing the true value of a car can save you plenty of money during financing discussions. Shop around and don’t be afraid to ask questions. After all, it’s your money and it should be well-spent.

Written by: Katrina Marion

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