Here’s how to determine a fair price for brand new cars (see below for used-car pricing).
All new cars have a window sticker that displays the manufacturer’s suggested retail price (MSRP). It may also include destination charges, dealer-installed option prices, and other miscellaneous charges. The total of these charges is the price you would pay for that vehicle, less sales tax, without any discounts or rebates.
All these charges but destination charge can be negotiated. Manaufacturers charge dealers this fee for vehicle delivery, and dealers simply pass it along to customers without markup. It cannot be eliminated from the cost of a car.
Price can be negotiated for most vehicles. Unless the vehicle is a hot seller and in short demand, it’s usually possible to get dealers to discount the MSRP. But, how much? What’s the best price I can expect?
Let’s say you see a nice used car that you like on a dealer’s lot that is priced at $14,000. Is it a good price? Can I talk the dealer down to, say, $12,000? How much discount can I expect to get?
These are all common questions when shopping for used cars, especially if it’s your first car.
Let’s look at the answers.
Used car prices can vary greatly – even for the same make, model, year, and condition. Prices tend to follow the laws of supply and demand. Large gas-guzzling SUVs are cheaper in times of high gas prices. Convertibles are more expensive in sunny Florida than in cold North Dakota. Used car prices are cheaper when dealers have too many on their lots.
Dealers are experts at knowing local car-buying customers, what they want, and what they are willing to pay. They set their used car prices accordingly. However, dealers make more profit on used cars than on brand new cars. This means there is a lot of “wiggle room” in used car prices – a relatively large difference between what the dealer has invested in his cars and the prices he sets for those cars. Unfortunately, there is no way for us as consumers to know what a dealer has paid for his used cars.
Check prices to know what is fair
The first step to getting a fair price on a used car is to find out how much the car is worth. Is the dealer’s asking price fair or not? If not, then it is time for some negotiation.
Some newcomers to car buying assume that there is some kind of “standard” price for used cars. It is not true. However, there are used-car pricing guides, such as Kelley Blue Book and NADA Guides, that compile data from a variety of sources to publish their version of suggested prices, based on make, model, year, equipment, mileage, condition, and region of the country.
These guides often differ significantly in prices for the same vehicle, same mileage, same everything. Confused car buyers often ask, “Which is right?” or “Which is more accurate?” Neither is more right or more accurate. However, the guides serve as a good benchmark for determining a fair price for a car you may be considering to buy. For example, if a dealer is asking $14,000 for a car that the guides show as only being worth $10,000, he’s asking too much and it’s time to negotiate a fairer price.
If you don’t check prices
We’ve seen questions from car buyers who ask something like, “How much can I talk a dealer down on this $14,000 car?” The answer to the question is really another question. It is not so much how much you can talk him down, as it is how much is the car worth?
For example, a dealer may put a $14,000 price on a car that is worth only $10,000. He hopes that he’ll get a customer who hasn’t done her price research and who will “talk him down” to $12,000. The customer is happy because she thinks she got a $2000 price discount, and the dealer is happy because he sold the car for $2000 more than it was worth.
Asking prices are not selling prices
Nearly all used cars are sold for a price that is less than the original “asking” price. Dealers post asking prices on used car window stickers. Individuals selling used cars advertise them with asking prices. Dealer asking prices may be 20% or more higher than selling prices. Individuals usually price their cars about 10% higher than the price they are willing to accept.
Negotiate based on car’s condition
If you find a car you like and the price seems fair for a car in good to excellent condition, make sure you get a mechanic’s inspection and have the mechanic document any problems he finds. Assuming the problems are not serious enough to stop you from buying the car, use the mechanic’s report to negotiate for a lower price.
Also get a Carfax vehicle history report and do the same thing. If the car has been in an accident, even if the repairs have been done expertly, use the information to try to get a better price.
Where to buy
Used-car dealers are an obvious source of used cars but it takes time to visit and find out which ones have cars you might be interested in. One way to save time is use an online site such as UsedCars.com that lets you search for discounted cars from dealers in your area.
If you prefer to buy from a private seller individual instead of a dealer, we suggest you look at the eBay Motors web site for a list of .
If you have less-than-perfect credit, your car buying choices may be limited to dealers, such as Drivetime.com, who specialize is dealing with people with credit problems. They have dealerships around the country.
