Why you shouldn't expect a big discount on a used car
03-26-18, 11:10 AM
#16
Lexus Fanatic
I would rather buy private and not deal with all the tacked on fees from a dealership that can raise the price significantly but in the US it is about 1 in 30 to 40 LS460's or GS350's for sale are offered privately, it is very rare to find them sold by private owners and the ones you find are normally older with a lot of miles and in rough shape or way overpriced.
03-26-18, 11:23 AM
#17
Lexus Fanatic
I do tend to agree that the Internet has changed buying and pricing a used car. True. But I don't agree about the margin of profit on those used cars compared to new cars. You don't actually see or truly know what those dealers payed for those cars at auction or in trade. The $2,000-$3,000 cushion could easily still be there. Easily. And on a new car it isn't.
But there always exceptions to the rule when buying used (pricing). There will always still be "good" times to buy. Like around holidays when it's slow, or if the dealer is having a bad month. Or if there isn't comparable vehicles in the area. Or if here is. Some of these places still want to play (at times). And some of these places don't really care so much about the Internet prices out there, but rather just want to move a car.
But the article is right, a lot of these cars are priced "competitively" to begin with and you might not easily knock these prices down much...or you may have to wait for the price to drop on its own when the car ends up sitting on their lot. I think the biggest thing right now - and has been for a while - is their fees...the document fee, the handling fee, the this fee, the fee fee. Know what those fees are BEFORE going in because any negotiating you may have succeeded at can and will be totally wiped out after those fees.
But there always exceptions to the rule when buying used (pricing). There will always still be "good" times to buy. Like around holidays when it's slow, or if the dealer is having a bad month. Or if there isn't comparable vehicles in the area. Or if here is. Some of these places still want to play (at times). And some of these places don't really care so much about the Internet prices out there, but rather just want to move a car.
But the article is right, a lot of these cars are priced "competitively" to begin with and you might not easily knock these prices down much...or you may have to wait for the price to drop on its own when the car ends up sitting on their lot. I think the biggest thing right now - and has been for a while - is their fees...the document fee, the handling fee, the this fee, the fee fee. Know what those fees are BEFORE going in because any negotiating you may have succeeded at can and will be totally wiped out after those fees.
03-26-18, 12:42 PM
#18
So the car that I'm currently negotiating on the dealer came down about 5% with me barely asking. I'd like to get down to 10% off asking price. They've had the car for almost 2 months. What's your suggestion on the % off to ask for if I want to end up at 10% off? I don't want to insult them either.
Last edited by Mbbarron; 03-26-18 at 12:54 PM. Reason: correct improper grammer
03-26-18, 08:01 PM
#19
So the car that I'm currently negotiating on the dealer came down about 5% with me barely asking. I'd like to get down to 10% off asking price. They've had the car for almost 2 months. What's your suggestion on the % off to ask for if I want to end up at 10% off? I don't want to insult them either.
03-27-18, 05:56 AM
#20
Instructor
So the car that I'm currently negotiating on the dealer came down about 5% with me barely asking. I'd like to get down to 10% off asking price. They've had the car for almost 2 months. What's your suggestion on the % off to ask for if I want to end up at 10% off? I don't want to insult them either.
If the car is being sold by a dealer, you can fairly assume he/she paid somewhere around the KBB Trade In (Good) price for the car, and had to put some money into reconditioning to offer it for sale. The dealer must make a profit to stay in business, but if the car has been on the lot for 30-60 days, the dealer is more likely to accept a fairly low profit margin on the car (maybe $1,000 over Trade In price, instead of $3-4k over Trade In price).
Dealers who primarily sell through the internet may initially price their cars closer to their "true" value, with less room to negotiate (I think that was the basic premise of the article that started this discussion). If the price advertised is right, you can get a great deal paying full asking price. If the price is over KBB Retail to start with, you can get a 20% reduction and still be paying too much.
Bottom line (in my opinion): Don't worry about how much discount you're getting from the starting price, focus more on the price as it compares to the car's real value using KBB, Edmunds, and NADA.
03-27-18, 09:00 AM
#21
Driver
Thread Starter
I don't think chasing a % off of asking price is a very good strategy for used cars. I think the best strategy is to use KBB, Edmunds, and NADA to come up with an accurate Retail price and Wholesale price for the vehicle you're interested in. Then try to drive the price you pay as close to Trade In (wholesale) as you can.
If the car is being sold by a dealer, you can fairly assume he/she paid somewhere around the KBB Trade In (Good) price for the car, and had to put some money into reconditioning to offer it for sale. The dealer must make a profit to stay in business, but if the car has been on the lot for 30-60 days, the dealer is more likely to accept a fairly low profit margin on the car (maybe $1,000 over Trade In price, instead of $3-4k over Trade In price).
Dealers who primarily sell through the internet may initially price their cars closer to their "true" value, with less room to negotiate (I think that was the basic premise of the article that started this discussion). If the price advertised is right, you can get a great deal paying full asking price. If the price is over KBB Retail to start with, you can get a 20% reduction and still be paying too much.
Bottom line (in my opinion): Don't worry about how much discount you're getting from the starting price, focus more on the price as it compares to the car's real value using KBB, Edmunds, and NADA.
If the car is being sold by a dealer, you can fairly assume he/she paid somewhere around the KBB Trade In (Good) price for the car, and had to put some money into reconditioning to offer it for sale. The dealer must make a profit to stay in business, but if the car has been on the lot for 30-60 days, the dealer is more likely to accept a fairly low profit margin on the car (maybe $1,000 over Trade In price, instead of $3-4k over Trade In price).
Dealers who primarily sell through the internet may initially price their cars closer to their "true" value, with less room to negotiate (I think that was the basic premise of the article that started this discussion). If the price advertised is right, you can get a great deal paying full asking price. If the price is over KBB Retail to start with, you can get a 20% reduction and still be paying too much.
Bottom line (in my opinion): Don't worry about how much discount you're getting from the starting price, focus more on the price as it compares to the car's real value using KBB, Edmunds, and NADA.
THIS! All of this.
I'll sell you my 2013 at a 50% discount if you want, I've listed it at 90k, but I'll discount it to 45k for you happily.
03-27-18, 11:33 AM
#22
I think making any generalizations on buying a used car is a foul. There are plenty of dealers that know their competition and will price a vehicle fairly to get a buyer in the door. Price it too high and no one will even come by. However, there are plenty of dealers that will shoot for the moon on price in the hopes some uneducated buyer will stop in. The entire business is a crap shoot and all depends on the manager writing the sticker. The main thing any buyer needs to do is educate themselves on what a fair price for the particular example is through regional prices, NADA, KBB, TMV, etc... I've bought cars with only a few hundred off but I knew I was paying a very fair price but I've also gotten thousands off because the dealer had priced high-he knew it and I knew it. As with any business transaction, educate yourself.
03-27-18, 12:00 PM
#24
Former Sponsor
I used to work for OEMs, in engineering. So, nowhere near the front line of sales. Yet with Hyundai, I did have to work directly with a couple dealers. And I will say this, I don't believe there is a more dishonest business than a new and used (combo) dealer out there. Unless someone can prove to me otherwise, I think a new car dealer makes more profit on a new car sale, than most think. I think there is still a big mystery on how much a dealer pays for the cars they sell. Holdback schmoldback, I still think they are lying. Why? Because a new / used car dealership lies every time they open their mouth. Big time props for the work an OEM (corporate) puts into developing a car. Zero respect for the sales side.
As for a true used car dealer. I have more respect for them. If they procure a car for nothing, put $2 into it and sell it for $5k, that's their business. More power to 'em. I'm not advocating selling complete junk like it's gold. That doesn't mean all used car dealers are good either. But probably very close to 100% of new car dealers are crooks. Maybe 50% - 75% of used car dealers are crooks. JMHO after having to work behind the scenes with new car dealers.
As for a true used car dealer. I have more respect for them. If they procure a car for nothing, put $2 into it and sell it for $5k, that's their business. More power to 'em. I'm not advocating selling complete junk like it's gold. That doesn't mean all used car dealers are good either. But probably very close to 100% of new car dealers are crooks. Maybe 50% - 75% of used car dealers are crooks. JMHO after having to work behind the scenes with new car dealers.
03-27-18, 12:37 PM
#25
Lexus Test Driver
Used to work in the car sale industry out of college, went as high as the F&I office before shifting industries. I can say back in early 2000s (when shopping for cars online was emerging) the average FEG (Front End Gross....price of car - cost of car) hovered around $3k per car. There was also BEG (Back End Gross...warranty, financing, doc fees) was around $1200 per car. These numbers are purely indicative and an average.
With the advent of internet shopping and available tools like NADA, KBB as well as for some, Manheim (the true test of vehicle values) those FEG's have gone down. This was a few years back but I remember investors liking Carmax compared to Autonation because while Autonation sold more cars (volume), they had a lot of new vehicles which impacted FEG whereas Carmax is mostly used cars so the FEG was higher, thus more margin and more incremental growth. Carmax FEG was ~$2600 (again this was a few years back) while Autonation FEG was around $2100.
All that to say there IS margin for all used cars, more so than new cars in many instances, but always assume the dealer has $2500-$3500 FEG in when-first-listed price except on econoboxes like Corolla's or Elantra's. I'm ok with dealers making money, but of course not THAT much money. There are extremes of course; when shopping for my LX570 I saw a dealer drop almost $10k in price over the course of 3 months meaning they had an insane FEG margin for the when-first-listed price. www.iseecars.com/vin is super helpful in understanding the price history of a vehicle (to see how many price drops, when the car was first listed etc.), US dealers usually hold onto a car for 60 days given floor financing, the closer you are to the 60 day mark, the more desperate the dealer is to get rid of it...
With the advent of internet shopping and available tools like NADA, KBB as well as for some, Manheim (the true test of vehicle values) those FEG's have gone down. This was a few years back but I remember investors liking Carmax compared to Autonation because while Autonation sold more cars (volume), they had a lot of new vehicles which impacted FEG whereas Carmax is mostly used cars so the FEG was higher, thus more margin and more incremental growth. Carmax FEG was ~$2600 (again this was a few years back) while Autonation FEG was around $2100.
All that to say there IS margin for all used cars, more so than new cars in many instances, but always assume the dealer has $2500-$3500 FEG in when-first-listed price except on econoboxes like Corolla's or Elantra's. I'm ok with dealers making money, but of course not THAT much money. There are extremes of course; when shopping for my LX570 I saw a dealer drop almost $10k in price over the course of 3 months meaning they had an insane FEG margin for the when-first-listed price. www.iseecars.com/vin is super helpful in understanding the price history of a vehicle (to see how many price drops, when the car was first listed etc.), US dealers usually hold onto a car for 60 days given floor financing, the closer you are to the 60 day mark, the more desperate the dealer is to get rid of it...
03-27-18, 12:41 PM
#26
Former Sponsor
Sorry, that was a bit rant-ish. Didn't mean it so much that way. It just brings back bad memories thinking back about working for Hyundai / Kia and the time spent at their dealers. But like I said, I don't know the numbers, but I have to believe they make a fairly fat stack on new car sales (on average).
One point of reference. I bought a brand new Touring Oddity about 10 years ago. I paid $35,low for it, no trade in. My mother-in-law, the year prior, bought an EX-L (one trim level lower than a touring) and paid either $41something or $42 something. Now ... tell me they didn't make AT LEAST an additional $7k on that deal. More than that likely, since the EX-L is normally less expensive than a Touring. I would have to guess they made a solid $10k on their sale to her. And, she's not an anomaly. There are suckers paying too much for cars all day long, every dagum day.
On top of that, she had a very nice used Ranger extra cab (could have probably sold for $5k), and they gave her like $1,200 for it. That stuff happens all day long, every day. So ... do I believe a dealer makes $500 profit on a new car? On an occasion, yes. But on average, I bet they make A LOT MORE THAN $500.
One point of reference. I bought a brand new Touring Oddity about 10 years ago. I paid $35,low for it, no trade in. My mother-in-law, the year prior, bought an EX-L (one trim level lower than a touring) and paid either $41something or $42 something. Now ... tell me they didn't make AT LEAST an additional $7k on that deal. More than that likely, since the EX-L is normally less expensive than a Touring. I would have to guess they made a solid $10k on their sale to her. And, she's not an anomaly. There are suckers paying too much for cars all day long, every dagum day.
On top of that, she had a very nice used Ranger extra cab (could have probably sold for $5k), and they gave her like $1,200 for it. That stuff happens all day long, every day. So ... do I believe a dealer makes $500 profit on a new car? On an occasion, yes. But on average, I bet they make A LOT MORE THAN $500.
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