It would surprise most car-buyers to know, but your used car could be worth more to the dealership than the new car you’re buying from them. That’s because the “margin” dealerships maintain on selling used cars is often higher than the margin for selling new ones.
While the worth of used cars of the same year, make and model varies drastically depending on their miles and maintenance, all new vehicles are created equal. A white F-150 pickup truck with four-wheel drive, automatic transmission and a CD player can be purchased for almost exactly the same price, no matter which new Ford dealer you visit. Though there are some variables (such as sales volume, size of the dealership’s payroll, building maintenance costs, etc.) each dealer paid the manufacturer the same amount for that F-150. So all dealers have about the same amount of “wiggle room” in the price of such a truck, and good negotiating will result in a very similar purchase price on a new F-150, no matter what dealer you’ve selected.
In fact, some new vehicle dealers now slash prices so drastically and so routinely that new cars often sell for very little more than what the dealership paid the manufacturer for them – a slim “margin.” (The dealership then tries to make its profit on new cars by selling expensive add-ons, like accessories or undercoating, and through incentives from the manufacturer for sales volume, and from lenders for “originating” the buyer’s car loan.)
Meanwhile, on the used car side of the lot, business is handled very differently. The dealership knows precisely what it gave in trade for all the cars in its pre-owned inventory, and that price wasn’t a flat rate charged by a manufacturer, it was variable, and depended on the negotiating skill of the used car manager. If he “bought the car right” at trade-in time, then he has a lot of buffer between the price the dealership gave the former owner for it, and the advertised price of that car on the lot. … The dealer has lots of “margin” for profit in that car.
(Find out the value of your used car now through this service or at this site!)
So that’s why your used car is worth more to the dealer than the new car they’re selling; while they might make only $100 or $200 over invoice on the new car, they might make $2,000 or $3,000 on a used car sale, provided they didn’t give too much for the trade-in.
How is this information useful to you? By understanding that your car has considerable value to the dealer, you can have more confidence in negotiating a good price for it.
Used car trade-in sites such as this one and this one can give you a quote on what your used car is worth. Using that information, or figures gleaned from books like the NADA guide or Kelly Blue Book, compare the likely trade-in value of your car vs. the average retail price dealers ask for that same car, once it’s been placed on their lot for resale. The difference is the profit that the dealer hopes to make when he resells your trade-in, and knowing that figure can help you in negotiating the most for your trade.
Tags: Car trade-in
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