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I often wonder how a used car dealer values a car on his lot. Does he just pull a price out of the air and hope someone pays him that or is there a precise algorithm he uses?

7 Comments »

1. 

   Before taking ownership of a car a dealer will obviously need to decide what “trade” price they will be
   willing to pay and that decision is usually based on the following factors:

   The market conditions they are currently operating in.

   What the trade guides may tell them.

   The results of researching what cars are selling on the internet for and working back

   Experience – many trade buyers just know what their product is worth.

   Who they are buying from and how low a price they can offer to successfully conclude the deal.

   Stock profiling – looking at how much similar models have sold for recently.

   How rare, highly specified and how sought after a model is.

   The condition, specification and desirability of the car itself

   Once they have considered these factors they can then decide on how they will put a retail margin across the car, and again this will depend on how many they already have (their stock levels) how many are for sale in their own network and more than likely a sense check against similar models on the internet within their radius.

   Of course apart from the normal trade considerations about how much profit they are budgeted to make on each car and what they would need to spend on ensuring that car is prepared and presented properly, there are also things like regional variations and anomalies wherein diesels being inexplicably more popular in some places and automatics a safer bet in another.

   Comment by in51der — March 18, 2010 @ 6:39 pm

2. 

   Kellys blue book.

   Comment by William P — March 18, 2010 @ 6:39 pm

3. 

   Performance, look, model and requires servicing for resell

   Comment by http://dubai-besthotels.blogspot — March 18, 2010 @ 6:39 pm

4. 

   When buying they use the Black Book which is based on dealer auctions.

   When selling they use the Blue Book which is significantly higher than the Black Book for obvious reasons.

   Comment by STEWIE — March 18, 2010 @ 6:39 pm

5. 

   NADA Buyers Guide or Kelly Blue Book.

   They start with the average trade in value and deduct for any needed repairs or damages. If the car comes in at less than $2500, they will get a buyer lined up before they actually get you a price. Most of them can line up a buyer for the car in less than 1/2 hour.

   Forget the add-ons other that number of doors, convertible, engine size and automatic transmission.

   Then they deduct about $200-$250 for cleaning and prep.

   This will get you pretty close.

   Comment by Typo — March 18, 2010 @ 6:39 pm

6. 

   Kelly blue book is used . They go by year , type , model , miles , and options .

   Comment by Mogollon Dude — March 18, 2010 @ 6:39 pm

7. 

   Wow….

   first off, NO dealer that I know uses Kelly Blue Book any more. This is an outdated method of evaluating trade ins. Same with the NADA guides. These books are updated quarterly, which is not often enough in an economy and market tha tchanges weekly.

   Typicaly, a dealer will look for the most recent auction values on cars similar to yours. That auction value is the basis for our offer. This is for a couple of reasons.

   First, if I take your car on trade, and cannot sell it on my lot, I have to know what it is worth at auction. I cant take a car on trade, sent it to the auction and lose my shirt. The auction is my safety net so that I dont get burned too badly when I buy your car.

   Second, it tells me what I can expect to buy a car like yours for. If cars like yours are going for $8000 at auction, that is about what I would pay for yours. Why would I pay more for yours than I can get it for at the sale?

   Auction values are updated daily. I know from looking at MMR exactly what a car like yours will bring at the sale. Once I have that number, I decide if your car is particularly nice, and therefore worth the maximum auction price, or if it needs reconditioning and repair, which will come off the price I offer.

   Comment by xx_satanic_mechanic_xx — March 18, 2010 @ 6:39 pm

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