Collateral Value

You want to borrow money to purchase a boat, and the bank asks you for collateral in the event that you default on your loan. You put your car up as collateral. The current market value of the car is the collateral value.

That value is determined through an appraisal by a person who is qualified to make that assessment. In this case, it would be a person who knows how to properly valuate vehicles, and not an uncle who works in real estate.

Keep in mind that, as that car depreciates in market value, so does the collateral value. The loan company may call you up and ask you for additional collateral in the future to make sure that they’re protected from default. Or...you should just not buy a boat on credit, since they're money pits anyway.