When it comes time to trade in a car, you have to know cars wholesale prices. When pricing a car there are three distinct values: retail, private party and wholesale (otherwise known as trade in value). The retail price is the price a dealer is expected to charge for a car prepped and ready for sale. The private party price is the expected value when purchasing a car from an individual. The wholesale price is what a dealer will normally offer for a trade.
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.
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. Simply put, wholesale value is the amount that vehicles may be purchased for during 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 values are much lower than the retail price of used cars. Just as they purchase at wholesale prices from an auction, similar values are offered when vehicles are appraised for trade-in at a dealership. 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.
Let’s say you see a 2007 Honda Civic LX sedan that sold at auction for $4,360. That would seem like a great price and it might be a vehicle that you would like to purchase from a used car dealer. However, before you dial your cell with your credit card in hand, think about this. A Honda Civic LX is a mid-line vehicle that should sell in the $8,000-$12,000 range, even at wholesale auction.
When a car is traded in and doesn’t fit the requirements to be sold on the dealers used car lot, it is normally sold at an auction. The wholesale price is determined by an average of the auction selling price and is adjusted on a regular basis and is the raw information on which used car prices are set. To find the wholesale price of a vehicle, take into consideration the overall condition of the car and use websites like Kelley Blue Book or NADA GUIDES to estimate the value. Pay close attention to the condition descriptions and be as honest as possible to get the most accurate value.
Another way to obtain the wholesale value of a car is to have it appraised by a local dealer. Be aware that they might inflate the value in hopes of selling you a car. If they quote a number higher than expected, be wary. One way to help to get the best possible price when trading a car is spending a little time prepping it–a little time spent washing, waxing and cleaning the inside might gain a few hundred dollars more.
While a dealership will attempt to purchase vehicles for the wholesale value or below, there are other fees that will increase the dollar amount the dealer-owned vehicle. These additions to the wholesale value are worth considering when you negotiate with a dealership and estimate their used car costs. The most common expenses dealerships incur after purchasing a vehicle are transportation, reconditioning, detailing and certification. Transportation costs 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.
Subsequently, you will see 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 dealership managers as they purchase vehicles for their inventory. As a result, vehicles are shipped to and reconditioned at the dealership—more than $1,000 of additional expenses incurred by the dealership before the vehicle is offered for sale.
There is no disrespect intended in this step, as it is quite difficult to interpret what the pricing you are seeing means. Let’s say you see a 2007 Honda Civic LX sedan that sold at auction for $4,360. That would seem like a great price and it might be a vehicle that you would like to purchase from a used car dealer. However, before you dial your cell with your credit card in hand, think about this. A Honda Civic LX is a mid-line vehicle that should sell in the $8,000-$12,000 range, even at wholesale auction. If one sells for $4,360, you have to ask “what’s wrong with it?” Is it a flood car? Is there a title problem? Is it a high-miler? What are the issues that have kept its price so low?