Buying a Car: Wholesale Price Explained
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When you are in the market for a used vehicle, used car wholesale price may become a topic of discussion while you are at the dealership. Learning more about used car wholesale prices can help you understand how dealerships purchase used cars for their inventory and help you leverage this information to negotiate a great deal at a used car dealership. It is important to remember that used car valuations are never set in stone, and that wholesale prices may vary up or down significantly based on local or national market conditions. This guide will help you learn how dealerships purchase used cars at wholesale prices and how other expenses can raise a dealership's investment in a vehicle.
Wholesale Pricing Defined
Simply put, wholesale value is the amount that vehicles may be purchased for at dealer-only, wholesale car auctions. Wholesale value is impacted by vehicle availability, mileage and condition. As used car dealerships aim to make a significant profit on their used vehicles, wholesale value is much lower than the retail price of a used car. Just as dealerships purchase at wholesale prices from an auction, similar values are offered when vehicles are appraised for trade-in at a dealership. The easiest way to estimate a vehicle's wholesale value is to use a trade-in value calculator like those available online via Kelley Blue Book or NADAGuides.com. Although the trade-in value is not equal to the wholesale value, they are similar enough to give you an idea of what a vehicle's wholesale value should be.
Additions to the Wholesale Value
While a dealership will attempt to purchase vehicles for at or below the wholesale value, there are other fees beyond the wholesale value that will increase the dollar amount the dealership owns the vehicle for. These additions to the wholesale value should be considered when you negotiate with a dealership and estimate their used car costs. The most common expenses that a dealership incurs after purchasing a vehicle are transportation, reconditioning, detailing and certification. Transportation costs will vary wildly, but the average vehicle that requires interstate transport will cost at least $500 to move. Reconditioning costs will also vary by vehicle, as some vehicles will require no maintenance and others will require thousands of dollars worth of work. Prior to a vehicle being offered for sale, most dealerships will also complete a thorough interior and exterior detail that will have an internal dealership cost of between $100 and $150. If the vehicle will ultimately be sold as certified pre-owned, there will also be a charge of up to $1,000 for the extended factory warranty.
After all of these additional charges, you will find why a dealership cannot normally negotiate as low as the trade-in or wholesale value of a used vehicle. The wholesale price is simply a guideline used by the dealership as they purchase vehicles for their inventory. As vehicles are shipped to and reconditioned at the dealership, over $1,000 of additional expenses can be incurred by the dealership before the vehicle is offered for sale.
