Vehicular Ad-hoc NETwork (VANET) is a subset of Mobile Ad-hoc NETwork (MANET). In VANET, vehicles act as transceiver and are able to send, receive and forward the information at the same time. In this paper, signal strength and System Operating Margin (SOM) are estimated for vehicular ad-hoc networks in absence and presence of Rayleigh fading. The free space propagation model and ad-hoc IEEE 802.11 models are discussed and later has been used to estimate signal strength and system operating margin. Rayleigh fading was then simulated and signal strength and system operating margin are estimated in Rayleigh fading environment.