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Buying a Used Car

 
 
Reply Tue 1 Sep, 2015 05:17 pm
I live in Tampa, FL and one of my two cars was destroyed in the recent flooding. Insurance declines to fix it, but will pay me the typical retail value for it. In a day or two I will receive the insurance check and will head off with my wife to buy a replacement. We plan to kick in a little extra money and update our car by a few years.

Let's say that I look in the NADA book of car prices and find that the average retail price of a car I am considering buying is $10,000. I get the dealer to agree to sell me the car for $10,000. I initiate a purchase and find that the contract I am asked to sign has an additional $500 charge for XYZ. I Google XYZ and find that it is a legitimate extra dealer fee. Is it now fair for me to pay $10,500 for the car, or should I still be paying $10,000 after all fees (but before taxes)?
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Type: Question • Score: 1 • Views: 1,291 • Replies: 19
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roger
 
  1  
Reply Tue 1 Sep, 2015 05:21 pm
@Brandon9000,
Not my field, but I never heard of that. A dealer prep fee on a new car is expected, but sounds kind of grubby on a used car. If it needed detailing or something, I assume they recovered that when they accepted it.

Comparison shop other dealers, or just ask them.
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Brandon9000
 
  1  
Reply Tue 1 Sep, 2015 06:18 pm
But if it were legitimate, should it be before or after the Kelley Blue Book average retail value?
neologist
 
  1  
Reply Wed 2 Sep, 2015 12:05 am
@Brandon9000,
I sold trucks for a while. Dealer prep is what we called a "gross builder". It makes an ordinary deal into a fat commission. Calling an undercoat a "high pressure chassis seal" is another ploy. There are no doubt many more tricks. Negotiate an offer and stick with it.
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neologist
 
  1  
Reply Wed 2 Sep, 2015 12:07 am
@Brandon9000,
Average retail value reflects what your neighbors have paid and is not necessarily the fair market value.
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Brandon9000
 
  1  
Reply Wed 2 Sep, 2015 04:29 pm
If Google says the additional charge is real, should it go in before or after the $10,000 price of the car? This is the only question I am asking.

If the Kelley Blue Book value is $10,000 and the dealer agrees to sell me the car for this price, is it fair for me to then pay $10,500 or should it still cost $10,000 after all additional dealer charges?
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engineer
 
  2  
Reply Wed 2 Sep, 2015 04:31 pm
@Brandon9000,
I've gone through buying services like USAA before and they tell me those are normal and should be thought of like taxes, something that gets added to the agreed upon price. That said, it would be best if everyone agreed on the walk out the door price ahead of time.
neologist
 
  1  
Reply Wed 2 Sep, 2015 05:14 pm
Do not become emotionally attached to a vehicle. Be prepared to walk.
Also:
Don't be afraid to offer less, so long as you are honestly ready to buy. They won't be offended.
chai2
 
  1  
Reply Wed 2 Sep, 2015 07:04 pm
@neologist,
Related question neo.

I'm planning on buying a new car, probably a Prius, within the year.

Barring any unforeseen events, my present vehicle would last me a few years beyond that, so it's not like I have to buy a car, I want one.
I know you can walk into any Toyota dealership and find one. In additon, they are such a common car now.

I've glanced at various dealer sites, prices really vary by maybe $1500 for the same model. Even if I walked into the dealership that was offering the best incentive, should I make a lower offer, as I would be totally ok with walking out if I didn't like the color of the salesmans shirt? For a car that's oh, $21 to $25K how much less should I offer?
neologist
 
  1  
Reply Wed 2 Sep, 2015 08:18 pm
@chai2,
It's s lot easier to compare new vs. new especially when the optionls are the same. Neighboring dealers normally have nearly equal prices. You can decide on location and reputation- a hundred or so dollars doesn't really make a lot of difference. There is a difference between pricing for new vs. used. So, when it comes to making offers, there is considerably more leeway in used cars than with new. With used cars, there is no set wholesale/retail formula. A dealer can take in a trade for less than value, for example.

I've been scratching my head trying to think of a few things that might be helpful to keep in mind. Here's a few:

Your trade:
Try to get a good estimate for the value of your trade in before you go shopping. Clean the car and remove all your favorite junk. It might make you a few extra dollars and it will serve to assure the salesperson that you are serious about a deal. You could save $1000 on the price of a new car and receive $1500 less than your trade is worth. You wouldn't be the first.

For a new car:
Research the car you want with the prices of factory and/or dealer installed options. Check ads for the dealer to get an idea of the options available in their stock. It can get really confusing when the dealer inventory is considerably different from what you expect. Remember that the manufacturer's suggested price includes dealer prep. But some dealer addons, like trailer hitches may have unpublished value.

Also, a dealer may advertise selling a car for invoice, or $100 over invoice. They will even show you the invoice. But dealer's get spiffs and rebates from the factory. So a $20,000 invoice may give considerably more profit than just $100. Also, don't forget they can build profit on your trade.

Financing:
The store finance manager can build gross profit by directing you to their partnered financial institution. It's best to talk to your own banker before you sit at his desk.

Used Cars:
The same considerations for trades and financing apply, plus:
There is no set wholesale/retail formula. Blue book is only a guide. Commissions are based primarily on a %age of the gross store profit. If a dealer has taken in a trade at under value, or if they allow less than value for your trade, they create profit on the wholesale end. If they sell for over value, sell you addons, and use their partnered finance institution they make profit on the retail end.

There are a lot of reputable dealers, more than there are flakes. Unfortunately the flakes give the business a bad name. Ask your friends and relatives if they have dealers they recommend.

And, you can't offend them with a low low priced offer, if you really are serious about buying.
0 Replies
 
chai2
 
  1  
Reply Wed 2 Sep, 2015 08:37 pm
I'm going to buy new. If I buy a prius, I know the exact model I want for the type of driving I do. That's decided.

I'm either going to give my old car to someone, or sell it myself. Not an issue.

I don't care about financing, I'll either pay cash, or buy it with financing if that's a better deal, and pay it off the first month. That's why I'm waiting about a year to do this. Saving up that last few thousand.

I've looked at the dealerships and at identical cars, the same cars price various by I think about $1500, as I said before. The same exact car.

Of course I would go to the one that has the best price all told. I was just wondering if the car was priced between 21K and 24K, how much less should I make an offer for it?

I know they don't make much off of basic cars like this, I just wondered what was considered a decent amount less to offer. I mean, I'm not going to walk up to someone and say "I'll pay 15K for that new 24K car" I was simply curious about what kind of cushion should I subtract.
neologist
 
  1  
Reply Wed 2 Sep, 2015 08:58 pm
@chai2,
chai2 wrote:
. . .Of course I would go to the one that has the best price all told. I was just wondering if the car was priced between 21K and 24K, how much less should I make an offer for it? . . .
Keep up on the sale prices, invoice sales, etc. for a while before you buy. Check on the Costco deals if you are a member. Generally they are the same as fleet deals. If you do a Costco or a fleet deal, the store will generally have a different sales person just for those deals. The unit commission is smaller, but he makes it on volume.

If you can figure the fleet price, it might be a good place to start your offer. They do have to make some profit, however.
Good luck
Brandon9000
 
  1  
Reply Wed 2 Sep, 2015 09:05 pm
@engineer,
engineer wrote:
I've gone through buying services like USAA before and they tell me those are normal and should be thought of like taxes, something that gets added to the agreed upon price. That said, it would be best if everyone agreed on the walk out the door price ahead of time.

Thank you for being the only person to answer the question which I actually asked.
chai2
 
  0  
Reply Thu 3 Sep, 2015 07:58 am
@neologist,
neologist wrote:

chai2 wrote:
. . .Of course I would go to the one that has the best price all told. I was just wondering if the car was priced between 21K and 24K, how much less should I make an offer for it? . . .
Keep up on the sale prices, invoice sales, etc. for a while before you buy. Check on the Costco deals if you are a member. Generally they are the same as fleet deals. If you do a Costco or a fleet deal, the store will generally have a different sales person just for those deals. The unit commission is smaller, but he makes it on volume.

If you can figure the fleet price, it might be a good place to start your offer. They do have to make some profit, however.
Good luck


So, in other words, you don't have an answer. Rolling Eyes

Why didn't you just say that?

Not directed at you specfically, but all this is what annoys me about sales people in general. It is few and far between to find one that actually not only listens to what you say, but remembers it and directly address it.

I thought I pretty much asked a direct question, and let you (surrogate for a salesman) know exactly what I wanted.

What I got back was advice on cleaning my car, Kelly BB value, how dealerships have different models, and on and on. When asked again, I again got some vague answer. I really wish if you couldn't give me (again, not directly you) a direct answer to a direct question, you'd just say so, instead of acting like you are answering the question, knowing damn well you're not.

If I had been speaking to an actual salesperson at a dealship, I would have felt my intelligence was being insulted and I would have felt launched into the typical "I walked out the door this morning happy I was going to buy a car, and yet again, like every car buying experience, you are bound and determined to make this a nerve wracking and unpleasant experience.
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chai2
 
  1  
Reply Thu 3 Sep, 2015 08:02 am
@Brandon9000,
Brandon9000 wrote:

engineer wrote:
I've gone through buying services like USAA before and they tell me those are normal and should be thought of like taxes, something that gets added to the agreed upon price. That said, it would be best if everyone agreed on the walk out the door price ahead of time.

Thank you for being the only person to answer the question which I actually asked.


I know, isn't that refreshing?
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ehBeth
 
  1  
Reply Thu 3 Sep, 2015 08:12 am
@chai2,
chai2 wrote:

I've looked at the dealerships and at identical cars, the same cars price various by I think about $1500, as I said before. The same exact car.

Of course I would go to the one that has the best price all told. I was just wondering if the car was priced between 21K and 24K, how much less should I make an offer for it?


I think you've sort of provided your own answer here.

You can see by looking at the ads that there's about a $1500 spread in advertised prices on cars in the 21 - 24k range. I'd start with offering 10% less than the lowest price I can find. I'd show them the ad for the lowest price you've found.

So ... they're asking 23k. You found an ad for the same vehicle for 20k. Show them the ad. Tell them that you're going there next. Offer 18k.

Make sure you're there in the last 2 -3 days of the month when they're fighting to make quota. If they fall on a weekend, so much the better. If you can somehow find out who's furthest from reaching quota, get that salesperson (sometimes the salespeople's quota is posted in a lunchroom or something - I've found them a couple of times after I went looking for water).

ohhhhhh do not tell them THIS is the model that you are 100% hooked on. Do a web search to figure out what that vehicle's closest competitor is. In the portfolio/folder/envelope you take along, make sure you've got ads for that other vehicle. You don't have to flash the ads, but it doesn't hurt to let them be seen and/or mention that there's not only another Prius being considered, but that you're looking at a city-driving car as well.
ehBeth
 
  1  
Reply Thu 3 Sep, 2015 08:18 am
@chai2,
chai2 wrote:
Of course I would go to the one that has the best price all told.


you're not going to know what this is upfront

that's where your negotiation skills and the salesperson's desperation will take you

the lowest advertised price is not necessarily the lowest price when the deal is completed

___

see if you can find out who the highest volume dealer within driving distance is - that can really effect the deal you can get

there's a Ford dealer about a three hour drive from here that a LOT of people go to. they're the biggest dealer even though they're in a hinky-dinky little town - seems their dealer costs are lower than most.
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neologist
 
  1  
Reply Thu 3 Sep, 2015 11:09 am
Sorry I didn't hit the target.
Just wanted to let folks know the variables they may face.
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chai2
 
  1  
Reply Thu 3 Sep, 2015 09:08 pm
@ehBeth,
ehBeth wrote:

I'd start with offering 10% less than the lowest price I can find. I'd show them the ad for the lowest price you've found.

So ... they're asking 23k. You found an ad for the same vehicle for 20k. Show them the ad. Tell them that you're going there next. Offer 18k.




There ya go!
ehBeth
 
  1  
Reply Thu 3 Sep, 2015 09:10 pm
@chai2,
If it's not clear (probably not - I was a bit uncaffeinated), the ad for the lowest price that you're going to work off doesn't have to be at a dealership that you'd ever go to - you can pretend you'd consider driving 3 hours to get that price - right? Smile
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