What Is the Actual Cash Value of Your Car?
Last Updated on October 16, 2021
Knowing the cash value of your car can be very beneficial, particularly if you are planning on selling your vehicle at any point. When you know how much your vehicle is actually worth, you can make sure you are getting a fair deal when you sell it. Having an awareness of how much cars are worth can also be very helpful when you are shopping for a new car in the future.
You can use the actual cash value, or ACV, of your car for a number of different things – trading in the car, selling it to another party, or making an insurance claim. In this article, we’ll discuss what ACV is, how to calculate it, and why it’s important.
What Is Actual Cash Value?
Actual cash value is a term used to indicate the market value of your car given its current age and condition. This term is primarily used in the insurance industry but can be used for other things as well. It is used to determine how much money would be needed to replace your car with a vehicle of comparable quality. You may also hear the term ACV when discussing home insurance or when discussing insurance for other vehicles, such as RVs, boats, and motorcycles.
How Do You Calculate the ACV of Your Car?
Simply put, the ACV of your car is the cost of replacing the vehicle with the same make and model and then subtracting an amount that represents the wear and tear on your car, or the depreciation. While the formula for determining your ACV is simple, figuring out how much your car has depreciated can be a bit more complex.
Since the cost of depreciation is subjective, the ACV of your car may vary slightly depending on who you ask. However, there are estimation tools online that can help you figure out the approximate ACV of your car, using the same factors that insurance companies use. Edmunds and Kelly Blue Book are two examples of websites that have tools you can use to calculate the ACV of your car.
There are several different factors that insurers and car buyers look at when determining the actual cash value of a car. By assessing these factors yourself, you can get an idea of how much your car might be worth.
- Current market rates: One thing that insurers might do to determine the ACV of your car is to look at similar models that are currently up for sale and see how much they are charging. The market is dynamic, which means that car values can evolve over time. Factors such as current demand as well as the strength of the overall economy can affect market rates. High demand for models like your car can drive the ACV up, especially if these models are rare. Conversely, in a tough economic market, consumers may not have as much money to spend. This could drive down demand and therefore lead to price reductions for your car.
- Age: Your car’s age is another key factor to consider. Cars naturally depreciate over time, and you can look up the depreciation rates for your specific model online. As your car ages, its ACV will most likely drop. Of course, this depends on the condition you keep your car in. If you put in the effort to make sure your car continues working properly and you keep up with its appearance, its value won’t depreciate as rapidly as it would with no upkeep at all.
- Mileage: Your car’s mileage is another key consideration when determining the overall value of the car. The more you drive your car, the more natural wear and tear it experiences, which leads to natural depreciation. If you drive every day, your ACV will likely be lower than a car that has only been driven once a month.
- Extra features: If your car has any unique features that make it inherently more valuable, that will be factored into the final ACV total as well. For example, your car may have unique safety features or even AI features like automatic lane correction which would make it more valuable. Interior entertainment and comfort features are also factored in.
When Will I Use the ACV of My Car?
ACV is typically used when filing an insurance claim after a car accident. The ACV of your car could determine the total payout you receive after an accident. If the cost of repairing your car was close to or even more than the ACV of your car before the accident, your insurance company may call it a total loss instead of paying for repairs, which will affect the final claim amount. If your insurance company determines that your car is a total loss, they will most likely pay you its ACV minus your deductible. You can then opt to sell your car’s parts.
Keep in mind that you can dispute your insurance company’s ACV if it is lower than you were expecting. However, you’ll need to have some evidence to back up your dispute. One of the easiest ways to do this is to find cars that are similar to yours that are currently for sale for a higher price than the ACV they provided. The more listings you can provide to show a higher market value, the better.
It also helps to have an idea of the ACV of your car when selling it. Confidently knowing what your car is worth and being able to explain that to a potential buyer can help you get the best deal when selling your car. This is particularly important if you are selling on your own through a platform like Craigslist. Many local car dealerships offer appraisals, which can be very helpful in this process.
Actual cash value is a key insurance term to know, especially when your car has been totaled. Knowing how insurance companies determine ACV can help you ensure you’re being paid appropriately for your vehicle.