View Full Version : Used car pricing - where to start?
Where do you start with used car pricing? Obviously a dealership needs to earn a profit, but as a consumer, you want to maximize your dollar in the sales process. Most people I know have been robbed on their trade-in and don't receive the NADA or KBB suggested prices. Leaving me to think that there's even more profit between their asking price and what they purchased the vehicle for. Possibly even a cheaper price at auction.
What if their asking price is in line with market pricing and what other comparable cars are currently available? Would it be appropriate to start out at 80% of their asking price? 85% or 90%? Or, are you stuck at what the rest of the market's paying? Personally, I think NADA and KBB are a bit of a joke and especially when they reference the "invoice price." The invoice price is for the naive and gullible.
I priced out a car on both websites below.
As an example:
Dealer Price: $30,600
90% $27540
85% $26010
80% $24480
Dealer Price: $30,600
NADA Trade in: $28,500
KBB Trade in: $28,800 - $30,000
Sadly the "transfer" business model doesn't apply to the used car business.
When I sell a car I know I'll never get what it's actually worth so since I'm going to get beaten up I usually sell it to somebody I know who needs a car in that price range and I give a friend a very good deal.
It's a little trickier to buy cars and not get screwed.
It's a little trickier to buy cars and not get screwed.
That's the truth. I think I've done fairly well in the past but I'm looking to improve my game. :cool:
I always shoot for close, but slightly below kbb, both selling and buying. If I like the car, and it's close, I usually go for it. I think I paid $500 over kbb on my current car and it was from a dealership, end of the year.
Most of the dealerships I my area use "auction" prices as a guide instead of KBB.. Especially for a trade. The screw job with these people never quits..
Pricing guides like KBB establish values based on comparable sales but that doesn't tell the whole story. A buyer with a marginal credit score that is willing to sign a loan contract with a high interest rate can usually buy for a lower OTD price than the guy writing a check for the car. The loan and and other adds after the sale price has been negotiated are another source of profit for the dealer. I am not sure value guides reflect what people are really willing to sell a vehicle for.
Most of the dealerships I my area use "auction" prices as a guide instead of KBB.. Especially for a trade. The screw job with these people never quits..
Exactly. So, the consumer should be using those prices and scaling up for the amount of profit the dealer will be making off of the sale and not working backwards off of some hypothetical, made up number.
A buyer with a marginal credit score that is willing to sign a loan contract with a high interest rate can usually buy for a lower OTD price than the guy writing a check for the car.
I got a really good deal on the last motorcycle I bought using cash. I'll be paying cash outright for this car too but I don't think I'll mention that in the negotiations. I know that the dealer profits off of financing and that is worked into their equation as well.
Remember most dealer trade in prices are entangled with the new car negotiation. They'll meet your offer on the new, but lowball the trade.
Also, new car lots will usually not try to retail any vehicle which is not "clean" or better. Which means auction trade in at best if over 60k miles. If they can retail it they will pay a bit more
The difference between KBB/Edmund's trade in and private sale values is legit. Its cleanup/prep + profit + plus carrying cost of money and any market risk on resell
^^^ I won't have a trade in. Just sold the vehicle privately.
They want $30k. I think I'll offer $26k and go from there.
It's always best not to have a trade when negotiating even if you have one. Have your wife or friend drop you off at the dealership. Offer your trade after you make a deal you are happy with. That's the only way you know what they are paying for it. Don't be afraid to make them an offer. If they don't accept it tell them to call if they change their mind. Try to deal close to the end of the month. Most lots have monthly quotas to meet or floor plan payments to make. Try to deal with the used car sales manager. He is the one deciding the final price. The salesman has no idea what the dealer has in the car. Disregard my advice if what you are looking at is desirable and hard to find.
The car's been on the lots since April 6 so I think there's some leverage there as well. Obviously they don't want cars sitting on the lot for long.
With the car having been on the lot that long you do have some leverage but most dealers won't go below what they own a used car for. It would be toward the end of it's lot life span where I used to work. There is no back pocket cash from the manufacturer to cover the difference. KBB, NADA and Black Book are merely guides. We went primarily off of auction results for similar cars with similar miles. I found sites such as Edmunds to be among the most accurate for used car pricing.
I spent 4 years selling cars and running an internet sales department. With used cars the game is to try to buy them as low as you can, get them cleaned up and safe to drive then get them on the lot. That means they should be run through the shop, detail shop and then the lot. That costs money. Most dealerships, if they can't sell them will send the used cars to auction and try to re-coup what they own them for. On sales they want to make a profit, salesmen want a commission and buyers want a good deal. You can always make an offer, they can always turn it down. Harder to find cars and performance cars tend to command a higher price. Often times dealers will have an online price lower than what is on the window, this applies to new and used cars.
What are you looking at and what is the pricing? You can PM me if you'd like with the details and I'll let you know what I think .
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