Market Value
Market value is sometimes referred to as “fair” value. It can be described as the price an item can be sold or bought for between an agreeable (willing) and knowledgeable buyer and seller in an open market transaction. It is the current value of an item, if it were to be replaced by an identical item, being of similar age and wear and tear. Note that we are dealing with the value at a specific time – the time the loss took place.
Market Value is very important when dealing with car insurance. We look at three different values:
- Retail Value: Refers to the price a car dealer might be able to sell the car for.
- Trade Value: Refers to the price a dealer might pay you should he buy the car from you.
- Market Value: Is halfway between the Retail and Trade Values.
Most insurance companies will only insure your car for its current market value. If they are prepared to insure at retail value, you will pay a higher premium. Because the market value of a car is continually declining you should be paying less insurance on your car every year (bearing in mind the effect of inflation on insurance premiums.) Ensure that you request your insurer to reduce the insurance value of your car annually. The Auto Dealers Guide is a good tool to use when determining your car’s market value.