Topic: Black book prices surprisingly low

[stodge]

I just checked out the black book prices for some cars and I was shocked how low they were compared to the prices the cars sell for used on dealers' lots.

For example, the black book price for a 2006 Sonata GL I4 auto with 25000km was approx $13500 to $15500, yet you see them selling for almost 20k.

A Fusion SE I4 auto trade in is approximately $11738.00 to $13638.00. Yet they sell used for 17-20k.

No real question, just that I'm very surprised. Especially given both models are only 1 year old and well rated in the auto industry (as far as I can tell).

[johngenx]

The gaps are huge for almost every car.  Dealers make money on two things: Service and Used Cars.  Some friends of ours traded their nearly new Echo in a couple years ago on a new Sienna XLE AWD.  The dealer gave them $6K for the Echo and had it on their lot for $15K the next day.  I bet they sold it for at least $12,000.  The dealer made more on selling the used Echo than on the new Sienna.  The gap ebtween wholesale and retail on used cars is massive.

[Trainman]

I just checked out the black book prices for some cars and I was shocked how low they were compared to the prices the cars sell for used on dealers' lots.

Is that the dealer selling price or the sticker/asking price?  Do not forget the dealer asking price is usually higher than what they actual will sell for 

[stodge]

I meant the price advertised on the sticker.

[dorin]

It seems to me that dealer asking prices should be compared to Red Book prices.  Black Book prices are meant to give dealers room for as much profit as they can get.

[stodge]

What is the red book and is it accessible?

[dorin]

The Red Book is the equivalent of the Black Book but for retail prices.  AFAIK the Red Book is available at Ottawa Public Libraries.

[2latecrew]

It seems to me that dealer asking prices should be compared to Red Book prices.  Black Book prices are meant to give dealers room for as much profit as they can get.

From my experience Red Book is not relevant if you are considering buying a used car.

Yes Black book and asking price are very far apart. Every used car is different but when you a buy a NEW car you go at APA or whatever to give you COST and negotiate UP. Why would you try to negotiate DOWN from Redbook/Retail just because the car is used. its a losing proposition.

I can set my retail price at whatever I want. 20K is too much for a 1990 Neon? Fine I'll give you a $4000 discount!

Now if you know black book is 5k for the same Neon that 4k "discount" doesn't sound so great.

black book is not gospel (although dealers will tell you it is if its to their advantage).

Its a guide let the dealer build his case for why you should pay 5K more than blackbook rather than you trying to build your case for why you should pay 5 k less than retail.

[safristi]

Wot's all this BLACK BOOK Jive..IMUS protest.......Jamaica ,Bahama well my pretty Mama..Pay me NOW or Pay me Later.....Red books inna Sunset...No dealers gonna tell ya.........

[AVToller]

"I can set my retail price at whatever I want. 20K is too much for a 1990 Neon? Fine I'll give you a $4000 discount!"

A rare and special car indeed, considering the fact that they were introduced in 1995.

[Craig]

"I can set my retail price at whatever I want. 20K is too much for a 1990 Neon? Fine I'll give you a $4000 discount!"

A rare and special car indeed, considering the fact that they were introduced in 1995.

At least it would have been a modern car in 1990.

[articsteve]

Stoge; it's not as much of a gap as you are lead to believe. Run of the mill cars in your example usually net the dealer $1400-1800.  Direct costs to the dealer are at least $1000 per car.  Indirect costs could be another $500.

[2latecrew]

Stage; it's not as much of a gap as you are lead to believe. Run of the mill cars in your example usually net the dealer $1400-1800.  Direct costs to the dealer are at least $1000 per car.  Indirect costs could be another $500.

What "costs"?

Reconditioning costs? You mean the deductions dealers make from the black book value when they take a trade in?

If its going to cost a dealer $1500 to get it ready for sale he's either making sure he gets they car for $1500 less than its worth or he's sending it to the auction.

Its not uncommon for there to be thousands in markup on a used car in my experience.

[johngenx]

A friend of mine owns a new-car dealership, and confessed that they earn close to 3X from each used car compared to new car.  He buys most of his used cars as off-lease units from financing company auctions, and despite large numbers of dealers buying there, prices are low enough that they earn a healthy return on most things they buy.  However, ask him about the Saab 9-5 he bought and he nearly goes to tears...  (not of joy)  You can't win 'em all.

[airbalancer]

A friend of mine owns a new-car dealership, and confessed that they earn close to 3X from each used car compared to new car.  He buys most of his used cars as off-lease units from financing company auctions, and despite large numbers of dealers buying there, prices are low enough that they earn a healthy return on most things they buy.  However, ask him about the Saab 9-5 he bought and he nearly goes to tears...  (not of joy)  You can't win 'em all.

has he let view the website?
get his password

[Cord]

Average profit on used vehicles is around $1800 for a well run used car department of a franchised store.

I just checked out the black book prices for some cars and I was shocked how low they were compared to the prices the cars sell for used on dealers' lots.

Keep in mind, you really have no knowledge of what cars sell for, only what  the list price is. For people buying used cars it is all about the discount.

[articsteve]

Stage; it's not as much of a gap as you are lead to believe. Run of the mill cars in your example usually net the dealer $1400-1800.  Direct costs to the dealer are at least $1000 per car.  Indirect costs could be another $500.

What "costs"?

Reconditioning costs? You mean the deductions dealers make from the black book value when they take a trade in?

If its going to cost a dealer $1500 to get it ready for sale he's either making sure he gets they car for $1500 less than its worth or he's sending it to the auction.

Its not uncommon for there to be thousands in markup on a used car in my experience.

Its not uncommon for there to be thousands in markup on a used car in my experience.

Well I suggest you get yourself a car lot and find out first hand. 

[Cord]

Reconditioning costs? You mean the deductions dealers make from the black book value when they take a trade in?

If its going to cost a dealer $1500 to get it ready for sale he's either making sure he gets they car for $1500 less than its worth or he's sending it to the auction.

At a reasonably large used car lot carrying 100+ vehicles the average reconditioning costs are easily $1500 per vehicle. It is not uncommon to spend thousands in reconditioning to bring some vehicles up to prime saleable condition. When 98% of used vehicles are appraised for trade in value they are not put up on a hoist to receive a detailed mechanical inspection. As such many expenses are not known until after the dealership owns the vehicle. But even if it is known that a car will require $1500 worth of extra work then a used car manger would be a fool not to pay $1500 less than one that did not need that work. In such a case, the dealership is not "paying $1500 less than its worth", the dealership is paying just what it is worth.

[random006]

But even if it is known that a car will require $1500 worth of extra work then a used car manger would be a fool not to pay $1500 less than one that did not need that work. In such a case, the dealership is not "paying $1500 less than its worth", the dealership is paying just what it is worth.

Exactly.  That being said, they will always try to get the best deal. 

When I test drove the Sportage, the salesman and I talked trade-in values.  I told him I knew the black book value range (14,000 to 17,500) for my car and that at least one retail evaluation of my car put the sale price well over 18,000.  He advised me to sell it privately, stating that the used car guy on the lot probably wouldn't give me over 15,000.  It might even be around 13,000.  That's a potential difference of 5,000. 

Obviously, estimates eventually fall by the wayside in the face of an actual sale but they do give a framework in which to bargain.  Being a bit of a lazy sod, I might still consider a trade-in when the time comes but the price difference is an eye-opener.

[dorin]

Can someone please explain to me what a it is that a dealership does to spend an average of $1500 on reconditioning for a used car? 

I have a hard time figuring out how any decent dealer can possibly spend that much at their cost.