How Do You Determine The Value of My Vehicle?
If you’re in need of fast cash and you own a car with a lien-free title, one option you may be considering is a title loan. This type of loan has a maximum loan value based off of your vehicle factors, which means the most the lender will give you depends on how much they think your vehicle is worth.
Considering how important the value of your car is with a title loan, it’s natural to wonder how the lender determines this. Here’s a breakdown of how the process works and what a lender will do.
How Car Values Work
To understand how a lender will determine the value of your car, you need to understand how car values work. For most cars, they’re at their most valuable when they’re new. There are a few rare exceptions, including some classic cars and exotic supercars, but the vast majority of cars don’t fall into those categories.
The moment you drive that new car off the lot, it depreciates because it goes from a new car to a used car, which can take thousands off of its value. Cars usually drop the most in value during the first three years of life, and then depreciation slows after that.
There are a few different factors that affect how well a car holds its value. One is the make and model of the car, as certain cars hold their value better than others. They’ll still depreciate, just at a slower rate. The mileage on a car is also important for depreciation. More mileage indicates that a car is farther along into its lifespan and has more wear and tear. Finally, the condition of the car will play a major role in its value. A car in excellent shape will be worth much more than the same model with scratches and dents.
Vehicle Value Guides
There are vehicle value guides available online, with the guide offered by Kelley Blue Book being one of the most popular. Title loan companies will use these guides as a tool to determine the value of your car. They plug in your car’s year, make, model and mileage, and the guide will provide approximate values based on the condition of the car.
These values will be in ranges. For example, a car could be worth between $6,500 and $7,200 if it’s in good condition.
Many title loan companies have online applications available that include a title loan estimate at the end, after you’ve plugged in your car’s information. This estimate typically assumes that the car is in good condition, and if yours is not, you won’t be able to borrow that much.
Once you visit a title loan company’s office to complete the loan application and get your money, they will perform a brief vehicle inspection. They’ll appraise the car’s condition, and then check the value for that condition in a vehicle value guide. During the inspection, they’ll be looking for any signs of visible wear and tear. Minor issues aren’t a problem, but major damage can significantly lower a car’s value.
Your Maximum Loan Amount
If you have an idea of your car’s current market value, one thing you need to keep in mind is that a title loan company probably won’t lend you anywhere near that amount. The typical title loan company will set the maximum at between 30 and 50 percent of your car’s current market value.
The reason for this is to protect the lender if you default on your loan. By only lending you a portion of your car’s value, the lender is likely to recoup any unpaid loan principal, interest and the repossession costs they incur should they need to repossess and sell your car. If they loaned you too much, they would risk being short on money after selling your car.