Car Buying Tips - Part 6

Car Buying Tips
Part 6 - Research, learn and save

Used cars earn higher profits for dealers. The reason is that it’s more difficult for consumers to shop around for the best price on a used car. Why? It’s because each used car is unique. Consumers have no way of finding out exactly how much the dealer has invested in a used vehicle.

Yet, nearly anyone with Internet access can find out to within pennies how much a dealer pays for a new car. You can even ask your credit union or financial lender. They’ll know to the dollar because it’s their job to know the exact wholesale prices on the cars they’re financing.

However, it’s improbable that the average consumer can find out how much money the dealer paid for each used car on their lot. Internet reference services such as Edmunds.com and Kelly Blue Book (kbb.com) offer only general ranges on the wholesale versus retail values of used cars and trucks. Each used car has a unique set of traits including mileage, color, options and trim.

Most used cars sold by car dealers come from the three major national auto auctions and were likely former rental or lease cars, repos or cars that other dealers did not take delivery on. Only about 25 percent of the used cars at dealerships are traded in by former owners.

The so-called program cars offer the dealers maximum profit potential due to the lower than wholesale market prices realized from cars that were in a rental or lease program. A car that Kelly Blue Book rates at a retail market value of $15,000 may have been bought at auction for less than half that amount.

Many consumers walk into a dealership with the goal of owning a new car but leave in a used car because the salesman managed to switch the buyer to the far more profitable used cars. There’s a cliché in the business: “Switch and grow rich.”

The bottom line is that with the right research and a lot of self-discipline, you can find the car that fits your wants and needs while at the same time, fitting your financial model.

Don’t be afraid to walk away from a car lot if it doesn’t feel right. You have the upper hand. You have the money and hopefully the ability to qualify for the right auto loan, and that is a rare combination these days.

Car dealers only have cars, and they’ve got a bunch of them. Good hunting!