Used car (truck) prices: Wholesale Vs Retail

[Hendog]

What's the mark-up on used vehicles? I'm looking for a truck; decided to go gas instead of diesel considering my requirements. I don't know what a reasonable offer "below asking" would be before it's considered "low ball".

I figure wholesale is 2/3 of retail. for example, if they're asking $18K, I figure they paid $12K, so my offer should be in there somewhere. I have no information on which to base this assumption however, so I may be way out in left field. Does anyone out there have more solid info than this to share? I'm really not a good negotiator...

[mudman]

Depends a huge amount on whether they took it as a trade or bought it wholesale. Your math seems accurate to me, but it was several years ago that I worked as a salesguy at a dealer.

All they can say is no, but count on a counter offer.

[KFC911]

Originally Posted by Hendog

...I don't know what a reasonable offer "below asking" would be before it's considered "low ball".

....I'm really not a good negotiator...

"Their lowball" might turn out to be your "helluva deal"! Nothing wrong with throwing that low, outside the strikezone, fastball, and see if they'll swing . It's a buyer's market in just about everything these days, if you haven't "insulted them", then you haven't been a good negotiator imo.

[IROC]

You might try Kelley Blue Book, NADA or some other site to gain some insight into wholesale, trade-in and retail values. The actual numbers will probably vary from what is on the internet, but at least you'll know where you stand. 2/3rds of retail is probably low, IMHO.

I offered a dealership NADA retail for a truck once and they refused. I thought that was perfectly fair. They said they had more than that in it. I said, "Well, good luck in selling it then" and left. About a month later it was still there, so I went back in and offered them NADA retail and they told me the same story. You just never know.

My FIL works at a Chevy dealership. They make the vast majority of their money on used vehicles.

[Dueller]

One thing that has happened in some segments of used cars is that some dealers are having a difficult time getting new vehicles, thus late model used vehicles are creeping up in price. Still, there is a limited number of folks who are in the market given the current economic situation. Things do seem to beginning to turn around here.

I would make a WAG that wholesale to retail markup is around the 25-30% range with the exception of shady "we tote the note" places.

[onewhippedpuppy]

My grandfather always told me, "if they don't say no once you paid too much". He's been damn successful in business, and is the master of getting great deals.

If you're looking for a deal, you're better off shopping individuals. Dealers start off higher due to BS retail pricing, which is predicated on the inspections, reconditioning, etc that they claim to do (but don't). Individuals have a personal stake, and don't know when their next buyer will come. It's very difficult to turn down a cash offer, particularly if you need the money. Not to mention that individuals can answer your questions regarding maintenance, repairs, etc. You can also somewhat judge how well the car was taken care of based on the seller.

[kaisen]

Originally Posted by IROC

2/3rds of retail is probably low, IMHO.

So a $30,000 used truck would have a $20,000 wholesale? You think they make $10,000 on a used vehicle?

Dealers make about $1500-2000 per vehicle, gross, before paying non-vehicle related expenses (like mortgage, utilities, salaries, advertising, etc). Net margins are about 1%.

Hendog, let me know what exactly what kind of truck you're interested in (year, make, model, miles) and I will look up what they've been bringing at auction the last few weeks. You can start there.

Look up trade-in values on Kelley and Edmunds, then add reconditioning (did it get new tires, etc?) then add $1000, and that's probably fair.

[m21sniper]

Originally Posted by kaisen

So a $30,000 used truck would have a $20,000 wholesale? You think they make $10,000 on a used vehicle?

Yes, they can- and often do.

Originally Posted by kaisen

Dealers make about $1500-2000 per vehicle, gross, before paying non-vehicle related expenses (like mortgage, utilities, salaries, advertising, etc). Net margins are about 1%.

Not on my planet.

[onewhippedpuppy]

Originally Posted by kaisen

So a $30,000 used truck would have a $20,000 wholesale? You think they make $10,000 on a used vehicle?

At times it's believable. I was offered a bit over $10k in trade on my SRX, at the time retail was over $20k. Despite their claims that it won't sell due to gas prices, I sold it for $18k to an individual. There's typically much greater than a 1% difference between trade-in and retail, and most dealers don't put much/any money into reconditioning used cars (despite their claims).

[Dueller]

Just checked on a late model escalade....WS c. $35K; retail c. $46K

[kaisen]

The statistics I'm quoting are National Auto Dealers Association (NADA) statisics, and Automotive News statistics. The AVERAGE used car GROSS profit is somewhat less than $2,000 (Some may be $6000+ and some lose $2000) and the AVERAGE used car sold in 2008 was a little over $14,000. Gross profit is calculated by true costs invested in the car and reconditioning subtracted from the actual sale price. The dealer still has to pay salaries, mortgage, utilities, taxes, etc. The average franchised dealer (NADA) NETS a little over 1% of gross sales when all is said and done. But remember that they measure annual sales in millions. I would guess 2009 will be much worse than average.

Since over 50% of prospective used car buyers shop/research online before setting foot inside a dealership, ASKING PRICE is important. It didn't used to be. Dealers used to ask whatever they wanted and figured the negotiation would start high. But now it's easy for consumers to find the lowest prices and they'll typically go there first. Pricing a vehicle high might place it on page five of a local search, and that car will never be viewed. This phenomenon is changing how dealers price used cars, and 'one-price non-negotiating dealers (like CarMax) has a pretty good grasp on what cars will actually sell for and how long it will take to sell at that price. ACTUAL retail price and SUGGESTED retail price can be two very different things.

In the 15+ years I've been studying the business, I can count on one hand how many five-figure gross profits I've seen over tens of thousands of transactions.

As I offered before, tell me exactly what year, make, model, body, miles, engine, and trim you are interested in, and I have access to REAL data for what that vehicle has sold for WHOLESALE. Remember that dealers still have reconditioning expense (Natl avg $650) added to their initial purchase.

E

[Wickd89]

Auction prices for American cars has crashed.
Friend went and got a 2008 Expedition (with $4k hood/fender damage-minior) for $8500.
Fixed it an now is selling.
Other gas guzzlers were in the same boat.
Luxury cars are down as well.

[Hendog]

Originally Posted by kaisen

As I offered before, tell me exactly what year, make, model, body, miles, engine, and trim you are interested in, and I have access to REAL data for what that vehicle has sold for WHOLESALE. Remember that dealers still have reconditioning expense (Natl avg $650) added to their initial purchase.

E

OK. I'm not ruling out any of the three domestic trucks; I'll go for any one of them if it's the right one. But my search generally is for a 2004-2005 Ford F150, extended cab, 4 doors (suicide), short box, 4X4, 5.4 L Triton, reasonably well appointed but not necessarily loaded, low Km (60-70K Km.), towing package would be a plus.

[onewhippedpuppy]

Originally Posted by kaisen

Remember that dealers still have reconditioning expense (Natl avg $650) added to their initial purchase.

E

Do they actually do this anymore? Seriously? Because I've looked at a lot of cars I'd be embarassed to sell. Even at CarMax, who advertise their comprehensive reconditioning, I've seen parts that were obviously broken, stains, sticky pop residue, etc. Perhaps I'm just not shopping for expensive enough vehicles, but I can tell you that the average used car for under $20k has had very little effort put into reconditioning.

[kaisen]

Originally Posted by onewhippedpuppy

Do they actually do this anymore? Seriously? Because I've looked at a lot of cars I'd be embarrassed to sell. Even at CarMax, who advertise their comprehensive reconditioning, I've seen parts that were obviously broken, stains, sticky pop residue, etc. Perhaps I'm just not shopping for expensive enough vehicles, but I can tell you that the average used car for under $20k has had very little effort put into reconditioning.

Well, averages are just that. They may spend $1200 on one, and $200 on another. In competitive markets, they have to be nice. But there is no shortage of poorly managed dealerships or stupid used car managers.

In their defense, somewhat, the best 'price' not necessarily the best product is what sells fastest. It may be that the vehicles you are looking at are the most attractively priced and you aren't seeing the ones that have been thoroughly reconditioned as they aren't priced as aggressively.

In general, contrary to some opinions here, wholesale prices have RISEN in the last couple months, as they tend to do this time of year. It's supply and demand, and the supply of used cars is low, low, low. If you care why, I'd be happy to outline it.

Hendog, sounds like you've switched gears completely! A half ton gas supercab? I'll look up some data and post some answers.

E

[LeeH]

Originally Posted by m21sniper

Yes, they can- and often do.


Not on my planet.

I thought the same thing until I got my wholesale license. Figured I pick up a car, each week and make a couple of thousand. Doesn't really work that way. It can... just not usually. There's a lot less profit than most people think. I've run auction results reports for friends who can't believe how much cars sell for at the auction.

If I buy a car, add auction fees, add a fee for my retail contact, add a profit for me, and add sales tax - then I'm going to have to sell for more than you can buy the same car for from a private party.... and why would you do that?

[kaisen]

Originally Posted by Hendog

OK. I'm not ruling out any of the three domestic trucks; I'll go for any one of them if it's the right one. But my search generally is for a 2004-2005 Ford F150, extended cab, 4 doors (suicide), short box, 4X4, 5.4 L Triton, reasonably well appointed but not necessarily loaded, low Km (60-70K Km.), towing package would be a plus.

In the United States:

The 2004's run about $13K on average with about 40K miles. The 2005's run roughly $1500 more. There is a LARGE window of values based on the condition, color, and equipment (I based data on the XLT package).

In my opinion, don't pay a premium for such low mileage. You are throwing away your money. The average 2004 is over five years old and has 76K miles (data average), so to find one with HALF the miles of 'normal', you are paying for it. And it still isn't under warranty, and it is probably coming due for tires and brakes and battery and...

Find a 2006 with 70-80K miles and wholesale is $11-12K. There is a much greater supply of 2006's just off three year leases.

[TerryBPP]

Used car markup from wholesale is usually 15% and you want to make 10%.

Franchise dealers mark up 20-30% and hope to make 10%.

Come from experience.

[onewhippedpuppy]

Originally Posted by kaisen

In their defense, somewhat, the best 'price' not necessarily the best product is what sells fastest. It may be that the vehicles you are looking at are the most attractively priced and you aren't seeing the ones that have been thoroughly reconditioned as they aren't priced as aggressively.

Agreed, but even CarMax has some pretty mediocre reconditioning. The 235k mile Saab 9000 Aero I sold last year was twice as clean as many $20k used cars on CarMax's lot. Maybe it's just my OCD..........

It's probably my natural mistrust of car dealerships, but I think they use the reconditioning and inspection included in retail pricing as a BS sales tool. I love looking at a car that has had a "150 point inspection" and finding glaring items like a CEL, hard pull when driving, obviously broken parts, etc. Damn guys, I guess you should have done 151 points, huh?

[kaisen]

Originally Posted by onewhippedpuppy

Agreed, but even CarMax has some pretty mediocre reconditioning. The 235k mile Saab 9000 Aero I sold last year was twice as clean as many $20k used cars on CarMax's lot. Maybe it's just my OCD..........

It's probably my natural mistrust of car dealerships, but I think they use the reconditioning and inspection included in retail pricing as a BS sales tool. I love looking at a car that has had a "150 point inspection" and finding glaring items like a CEL, hard pull when driving, obviously broken parts, etc. Damn guys, I guess you should have done 151 points, huh?

Yep, I agree completely. At $100 an hour, the used car managers don't want to fix anything. A simple stuck cupholder could be $200. Even though the average reconditioning is $650, it doesn't go very far. A mid-grade detail runs $120, and a basic inspection is another $100 (that 150 points takes an hour ). So before they 'fix' anything, they're in for a couple hundred bucks. I think they do fix the safety items like if the brake linings are at the rivets or the tires are bald, so that's where the other $400 goes. The little things get missed.

As for check-engine lights, my guess is they simply clear the codes and hope it doesn't come back. Stupidity.

Used vehicles are like snowflakes - no two are alike. As much as consumers like to commoditize their values, and dealers treat them like uniform products, there are always going to nice ones and junk heaps. Unfortunately, most of us shop on price and are more likely to buy a polished turd for a little less than pay a little more for the best example.

E