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Do dealers have flat rates that they pay on trades or can they pretty much all set their own rules.
I had one dealer say the didnt want to match the Carmax price because of some wholesale issue or they will sell higher mileage cars..They ended having match it but did not want to.
First off, they don't go by KBB or NADA. There are other "blue books" that are available only to dealers that they generally use as a baseline, but they mainly go by their own experience.
By the way, the dealer you dealt with didn't "have" to match the Carmax price, they did it because they could do it and still make money.
Dealers logon to manheim.com and see what cars just like yours are going for at auction. This is wholesale to t hem, what they can assume the bottom line what the car is worth. It's a gamble obviouslly, so dealers will low ball you even lower than the auction prices because of the risk.
So Carmax can offer more in most cases since they are not taking the cars to auction?
Duster, they would have lost out on the deal if they did not match the CM price.
Every dealer is going to approach a trade in slightly differently. There are "dealer only" guides for what they should be offering, but it is also based on current market conditions. Ultimately it comes down to what the dealer is going to do with the car. In almost all cases, they will do one of two things:
1. Sell the car to a wholesaler who will then take it to auction.
2. Retail the car themselves.
If they are selling to a wholesaler, it is all about the current auction value of the vehicle. The dealer usually makes nothing to around $250 on the sale to the wholesaler. What they don't want to have is a situation where they overpaid for your trade and lose money. Also, the wholesaler isn't going to buy the car for what he can sell it for at auction. Even if he is only looking to make a small profit, he still needs to profit.
If they are retailing it themselves, they have far more flexibility on what they can offer you as they know about how much they can sell the car for and how in demand they are. Many times widely differing prices on trade-ins between dealers are the result of it being one dealer who wants to wholesale and one dealer who wants to retail. The guy who offers it at retail is willing to pay a little more since he doesn't need to deal with the wholesale and auction end of it to get the car.
An example would be a car that was going for $10k at auction. A dealer looking to wholesale would most likely offer you $8,500 - $9,000. They will flip it to the wholesaler for around $9,000 and then the wholesaler will try to sell it for $10,000 at the auction. A dealer who wants to retail the car, will know he can sell it for $14,000 on the lot. He also knows the same car at auction would cost him $10,000 so he is willing to offer that amount to you to get the inventory. Simplistic example, but it is basically how it works.
On the consumer end, the thing that complicates it is that the dealer is basing everything on the "total package" meaning how much is he making on the trade and selling a new car to you. They can play with the numbers on either side of the deal to make it look better for you wherever your pain point is. Think you are getting screwed on the trade, but the dealer is getting a nice margin on the car they are selling you, they can make it "look" like they are paying you more for your trade when in reality they are just taking money from another pot and moving it around.
So Carmax can offer more in most cases since they are not taking the cars to auction? .
Carmax wholesales 50%+ of the car they buy and has the 2-3rd largest wholesale auction in the country. What they offer is generally based on what they believe the vehicle is worth on the wholesale market (Mannheim and their own auctions), but they do at times go strong on the offer if it's a car that's in high demand/they want to buy to sell retail.
Just a suggestion, get a quote from carmax on your car.
Go to a dealer, say nothing about carmax, haggle haggle haggle. They will give you a better deal on your new car, but make the money up by giving you a poor price on your trade in.
After you got a good price for the new car, kind of set. Then bring up the offer from carmax, assuming its more then what they offered. They will haggle with you, you might get the price, or a better amount for your car. If not, take the car to carmax and get a check for it and get your new car at the better rate.
Dealers will sometimes give you a great deal on your trade in, but a crappy deal on the new car price to make up for it, and vice versa. Probably take a couple days of haggling to get to this point.
You do not have to use the old car as a trade in.
It is common to just sell your used car to a dealership and buy elsewhere.
In certain states and depending on the price of the car there can be tax issues that would make this not so "common".
In NJ you pay tax on the net of the new car price minus the trade in. So right off the bat just to "break even" you have to be getting 7% more from the other dealer.
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