Shad034

With all the talk lately from folks looking for forum help with finding and eval'ing potential used purchases, I thought this was relevant. Interesting read from Jalopnik. Tom McParland is a car broker, you pay him, he finds and negotiates your car purchase. He's always got really good articles.

https://jalopnik.com/here-is-why-you...-us-1823917876

Luscombe8A

Great article and I agree.
I just placed a deposit on a 2011 LS460 Sport with ultra low miles, checks all the boxes on my must have list, consistent maintenance records and a clean Autofax. I have not seen it yet but will test drive before signing. It is an out of state purchase.
There was not much negotiating. They had what I wanted and were asking a fair market price based upon KBB and other sources. I have been looking for 4 months and spent way too much time consumed with the effort. It was time to pull the trigger.
If the car is not acceptable, I can walk away after a test drive but it will cost me a plane ticket. I'll invest in a PPI before I book a ticket. Given that this is a Lexus Dealer I am trusting we don't get sideways.

Thanks for putting up the reference to the article.

riknchar

Seems like a smart car guy, but I think his fundamental logic on used cars vs new cars is flawed. He tries to argue that new cars are quite a bit more negotiable due to things like manufacturer's incentives, rebates, financing terms, etc. However, I know for a fact that the profit margin on new cars is WAY lower than that of used cars.

Take my newly acquired 2010 Lexus LS460L as an example. It originally stickered at $80K or so. According to KBB, it has a current Retail Value of $23,400. The average Trade-in Value for this same car is $16,800. So I assume my Lexus dealer paid somewhere in the vicinity of $16,800 for the car. They put may (at best) $1,000 into reconditioning the car to prepare it for sale. It's not unreasonable for them to advertise it for full Retail ($23,400). So if they manage to sell it for $23,400, they net $5,600 on this car. Think about a new car with a sticker price of $23,400 (maybe a base Accord or Camry?). Do you think the dealer will net $5600 when he/she sells this new car. Ummm, no.

So I keep an eye on the 2010 LS460L for a while, and after it hasn't sold for 45 days, I step in with an offer of $20k for the car. The writer of the article claims most used cars only have a couple of $ hundred in negotiating room, so my offer is off-the-charts low, right? Wrong. The dealer counters at $22,500, I counter at $21,500, and the dealer says "okay." Based on the article, I think I've really put one over on the dealer, getting him to drop his price by $1,900! But the dealer just netted a tidy $3,700. Not bad, especially when compared to what most dealers make selling cars that retail at $23,800.

So I do think that discounts of $ thousands are still very possible/common in the used car business, especially on cars that have sat on a dealer's lot for between 30-60 days. I think it's bad advice to tell people to expect only a couple of hundred off most used cars. Just my opinion...

Shad034

I hear you, but this is literally Tom's entire business. This is all he does, find cars for people and negotiate the best price on them. I'd take him at his word on most things car-purchase-wise. However, I think you missed part of the advice. He's talking about expectations not what can possibly be done.

"The problem is that so many folks have been trained to “never pay sticker price” they’ll assume they have to get a certain percentage off the asking price or they didn’t get a good deal. While that may be the case for a new car, it’s not true for pre-owned. I tell folks all the time: if a dealer won’t budge and you have found the cheapest car in the area, that is the deal to take."

In your example, that car having been on the lot for 45 days is starting to become a dinosaur and they want to move it. So they drop the price, it moves. That's definitely your best case scenario there, the dealer is more desperate than you are. However, did you have a trade on that one or buy it outright? Many times the "savings" you've negotiated is just money they would have, but didn't, give you in the trade allowance. Potentially, lots of moving parts in a car deal.

riknchar

I do think Tom makes some good points, but the main takeaway from the article is that used car buyers should only expect to be able to negotiate a couple of hundred dollars off the asking price. And I think that's simply bad advice for most people.

He's absolutely right that a great deal on a car might come with zero discount (if the car is right and the price is right in the first place), and that even with a huge discount, some used cars may be really bad deals. For those who pay dealer asking price for a used Lexus LS, simply because the car is exactly what they are looking for, and the price seems fair, I say that's perfectly fine. But for those willing to expand their search nationwide and specifically target good cars that have sat on a dealer's lot for 30-60 days, huge discounts can be had. That's all I'm saying...

Shad034

No I get what you're saying, but what the article is saying is "Don't be surprised if you can't get a grand off the car". It's saying that prices are so competitive these days that, in a lot of cases, the internet posted price is just about as low as it's gonna go. He says you should try to get it lower, but to not feel like you got ripped if no dealer with give you what you think you should get. That pad that used to be in there that drove me, and pretty everyone else, to shoot for a 10% drop before we felt like it was a good deal, doesn't exist as much anymore.

No question there are dealers out there looking for a kill on an uneducated buyer and starting it high. However, most volume dealers posting to the internet will want to move it quickly so they'll post it in line with all the rest of the dealers. No one bothers to look at your car if every other comparable in the same webpage is 34k and you are 38k.

ptat

I'm gonna do the exact same thing as riknchar when I get my LS460L. First thing I'll do is offer 15% less than asking price OTD. I'll let them counter up until 10% off of asking price. If I cannot get the car at 90% of the asking price then I'm walking. The profit margin on used car is massive. They're not profiting anywhere in the hundreds like they do new cars, it's usually in the thousands.

Shad034

Exactly what I do. If you can get a dealer to come down 10%, I feel like I got a good deal. If you can't get any dealer to come down, you're probably bottom of the market and you're gonna have to suck it up. I've had better luck with dealers that do most of their business in person. Those dealers seem to be old school with a pad built in to their price that they're willing to budge on. Those dealerships that do a lot of internet business are usually a lot tighter on where they start pricing things.

When I was shopping for my LS in December, I managed to get Autonation to come down about 600, Carmax wouldn't move at all (they dont though so no surprise there) and the Lexus dealer dropped by 2k. They all ended up around the same price though. The Lexus dealer just starts high because they want to fight for their profit, Carmax had a decent price and you can take it or leave it. Autonation had a little pad in there, but not much and they'll drop it to make the sale.

Ultimately, it doesn't really matter where they started the pricing at and how much you got it down percentage-wise, it matters if you got it down to actual market value. Internet dealers start closer to market value, dealers without a strong internet presence tend to start higher.

DavidinCT

I agree. I use the same thought process. It all depends on the dealer. Some will stick to their guns, I walked away from a really nice car because they would not even take 2% off, they were a little higher than other cars around. Other place "sight unseen" dropped really low on the first call...made me wonder, I had to walk from it (very used looking)

The last one I did that on... I offered a what I thought was a fair based on market value. They said no, I left my business card and said, call me if you change your mind but, do it quick as I am looking over 4 cars (I was), I got a call the next day.

I read the OP's link, I see the point but, my point is hitting a car for a dollar amount, I wont even look if it's not even close. Wise man never pays full price for anything. I try to live by that.

Shad034

That's kinda the point the article is making, or at least the way I read it. Car dealers who post online are increasingly having to compete in public view on pricing and thus they are coming in with prices that don't leave much margin to shave off by negotiation. I think the authors point is that the old thought process of assuming there is a ton of margin in that posted price is increasingly becoming untrue and buyers should look at the price vs market rather than concentrating on the need to get the price some percentage lower than wherever it started at.

1WILLY1

iTrader: (9)

Here in Canada some dealers have no problem at all letting a car sit for months and even years.

I personally have only bought from a dealer once, and that was only because the deal was too good to be true, but other then that I always buy private .

Shad034

Thats really surprising. Down here, dealers usually have floor financing on their inventory. So they are basically paying interest on a loan sorta to have that car on the lot. They want to move it as quickly as possible as longer starts eating profit margin. 30 days is pretty normal, 45 is getting old and it usually won't make it to 90 before they start looking to send it off to auction or transfer it to another dealer.

mckellyb

March 6th, I flew to Denver to get my wife's new-to-her '17 RX 350. It was a loan car, but $10K off new with a whopping 8,200 miles on it. It had a strange options combo, but one I wanted, so $46.30 for a flight from D/FW to DIA, on American, non-stop. No haggling, which was fine, as @ $47,1XX, I was fine with it.

The BS $500 dealer extra profit fee irks me to no end, but I wasn't going to argue too much, being as I had a 12 hour drive ahead of me.

Doublebase

DavidinCT

EXACTLY, they are not going to sell cars unless they are making profit... buying a $15,000 car to make $200 is not great business sense. It's how dealers go out of business.

There is always room, just depending on the dealer. The funny thing is. If you see a smaller dealer who only has 5-10 cars, they tend to move more than the major 10,000 car dealers...

When I picked up my LS430, I got him down 5K in a matter of hours (small dealer)...but, when I got my LS460, there was very little room they would budge (large Merc dealer)