Buying a Used Car from a New Car Dealer

When the buyer has decided what kind of car you want or need and he knows where to look for it, he needs to determine the value of the car, both retail and wholesale. Important details to be known are: the year of the car, the model, the mileage, the options and the general condition of the car.

Look up the Value in the Books

Several books about car pricing can be found at the library or bookstore such as The NADA Official Used Car Guide or Kelley Blue Book, that list the wholesale and retail prices of cars. The cars are charted by many details, such as: year, make, model, mileage and options. (Based on the information you have about the used car you're interested in, the buyer can determine retail value by adding the amount listed for options or subtracting for other conditions such as subtracting for excessive mileage, etc. )

The NADA book contains three columns of prices for each car listing. The "Trade In" price is the price a dealer will pay the buyer to trade in the car. The "Loan" price is the wholesale value and the "Retail" is, of course, the. Retail market price. The Retail and Loan (wholesale) prices are important. Other books may refer to these three price classifications by slightly different terms but it is easy to find out what is necessary. Information about books can be obtained at any library. Adding or subtracting according to the mileage. For most cars average miles per year is 12 - 13,000 miles per year. For luxury cars, also known as high-line cars the average is 8-9,000 miles per year. These figures are not set but are a range to start from.

The overall condition must be taken into consideration when mileage is calculated. Also the buyer should find out what kind of driving had been done. High mileage that is mainly from highway driving is much less wearing on a car than high mileage that was accumulated by driving in local, stop-and-go traffic. Rural, bumpy, dirt roads vs. smooth, paved highways is another mileage/wear-and-tear consideration. For every thousand miles over or under the average mileage, the buyer should add or deduct $75.00- $100.00. For luxury cars, $100 00- $175.00 per 1,000 miles over or under should be added or subtracted. For very late model luxury cars such as Mercedes, BMW or Porsche, the deduction could run as high as $500.00-$600.00. For example, an average car 5 years old with 75,000 miles on it is 10,000 miles over the average calculated at 13,000 miles per year. 10,000 miles x $75.00 per thousand comes out to $750.00 which you will deduct from the wholesale value of the car.

Adding or Subtracting for options

You must find what is standard and what is option according to the book and how much to subtract or add for them, on some cars power windows are considered an option. On other cars, power windows are part of the standard package. For some cars an amount is deducted if the car is a 5-speed instead of automatic. Standard means what comes automatically from the factory. Options are custom add-ons that must usually be specially ordered. All of this information is listed in the books such as the NADA book and the Kelly Blue Book, which are commonly used in the industry. Looking up this information and calculating the value accordingly is key to determining the right price of the car.

By following through and getting this information, you're putting yourself in a much stronger position to negotiate a good deal, no matter who you're negotiating with. Whether the seller is a private owner, a professional car salesperson or a public auction, you'll know what the car is worth to you and how much you will offer. The wholesale value is important because you want to start looking for cars that are listed at, or close to, the wholesale value. You will want to know the retail price also to make sure that you pay well below retail value. You always need to know both the wholesale and retail value of the car. You want to know that even if you pay a little more than wholesale value you are still getting a good deal. You are not always buying wholesale, sometimes it's how much below retail that is important.. Your calculation is based on this idea: Can I use the car for a year or two and still get my money back? Can I basically drive the car for two years for free? It's easy to look up the information and determine the book value of the car but you must keep in mind: There are no two used cars exactly alike nor are they worth the same because they have each had their own "life". Driven by different owners under different conditions is what makes each car uniquely different and must be given individual consideration. You must be professional in your approach and consider not only the "book" facts but also the history of the car - how it was maintained, what special situations it's been through.

By starting with the listed book value and adding and subtracting for these types of additional factors, you will determine what the car is really worth and be ready to proceed with the negotiations. Another quick way to find out the value of the car is to call your loan officer at your bank or lending institution.