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I looked up the used car I wanted buy under the feature "What is my car worth" on KBB and Edmunds. I figured this has to be close to what the dealer paid for the car. What I've found is dealers are selling cars for 20% more than this price! This is quite a mark up plus they try to slip in the "Dealer Assistance" fee for $649.
What is an appropriate profit margin for a dealer to make using KBB as a starting point?
I would not bother to use any online resource as a "starting point".
Once you have decided what vehicle you want, research the ads in your locality to find out what those vehicles are selling for. When you have several located, compute the average price, as in take the asking price for 10 vehicles, add them up, and divide by ten. This gives you a "real world" starting point for your locale.
Now, decide what YOU are willing to pay for the vehicle. This should be your maximum "out the door" price, AFTER all the dealer "add ons" are included. Even the "Doc fees" are negotiable. I have had them eliminated, and I have had them cut by half.
If the dealer you choose won't accept that price, or very close to that price, walk away. How close the dealer has to come is strictly up to you. YOU determine your "walk away" point, then stick to it. There will nearly always be another acceptable vehicle somewhere. If the salesman says "Well, I have a customer who will give me our asking price as soon as he gets back, you need to buy NOW!" tell him "You best sell it to that customer real quick!" then walk away.
Im not sure I would trust KBB, and I dont think there is an appropriate profit margin that most dealers stick to, its going to be different for every car, depending on its condition and mileage.
I remember back when I was looking at trucks that were about a year old, on car lots, i was shocked how much they were asking for these trucks, they were not that much cheaper than brand new, ( I thought everyone knew that new vehicles automatically loose like 25% or more of their value the first time they are driven off the lot, you would not know that looking at dealer prices though!
I saw this kind of thing when I was looking at SUVs awhile back too, the ones that were under a year old but still used, they had them marked up way too high.
Thanks to CarMax the art of negotiating seems to have disappeared. I used to be really good at it. I never pretended I was smarter than the dealer, they will never sell at a number that won't work for them, I was just better at it than most buyers. But now they advertise "No haggle pricing" as if that's a perk. No it just means you pay their price.
I agree, "No Haggle Pricing" or "Market-Based Pricing" is all just an excuse for the the dealer to not negotiate. Car dealers started the whole negotiating your best price thing. They made their bed. Now mega dealers come into a market, create a monopoly and do the "no haggle pricing". The whole process is so frustrating. I am now working with a non-monopoly dealer 125 miles away and the pricing is much better.
I did walk away. They knew my budget, they gave me a price on my trade-in and knew I had financing lined up. I was all tee-ed up and they let me walk away! They didn't even offer to show me a model in my price range! They didn't even counter me! Maybe they could tell I wasn't one to negotiate. These big mega dealerships are awful!
I looked up the used car I wanted buy under the feature "What is my car worth" on KBB and Edmunds. I figured this has to be close to what the dealer paid for the car. What I've found is dealers are selling cars for 20% more than this price! This is quite a mark up plus they try to slip in the "Dealer Assistance" fee for $649.
What is an appropriate profit margin for a dealer to make using KBB as a starting point?
Can't answer that, but personally I go to (not sure if C-D will allow me to list the name: one of the larger car aggregation sites on the Web) and find comps. I chart it out in Excel or Google equivalent which is free. Private and dealer, if possible. More the merrier. Few will exactly match. Break down by region, if you can. More columns, the better (color, condition, mileage range). Shouldn't take more than couple hours of research? That then becomes this moment in time's "objectively fair" average asking price.
Use that as baseline point of negotiation.
Dealers should be asking 20% more, that's how they keep their lights on/doors open after all. Have to pay the overhead after all. They can "slip in" whatever they want, that's their racket and it's mine to beat it.
In this way, I bought my '15 911 C4 GTS, used. It was outside of Little Rock, Arkansas, opposite end of the earth from where one would usually find such sports cars (although NW Arkansas, maybe 200 miles NW, is seeing a big influx of money and executives. So this trend will change in the Fayetteville area!). Price went down, down, down, and the third time they lowered it I figured it was off to auction soon so made my strike remotely from here in WA State where such fare fetches quite a bit more. We worked a deal that was agreeable to all parties.
In this way, I bought my '15 911 C4 GTS, used. It was outside of Little Rock, Arkansas, opposite end of the earth from where one would usually find such sports cars (although NW Arkansas, maybe 200 miles NW, is seeing a big influx of money and executives. So this trend will change in the Fayetteville area!). Price went down, down, down, and the third time they lowered it I figured it was off to auction soon so made my strike remotely from here in WA State where such fare fetches quite a bit more. We worked a deal that was agreeable to all parties.
Wally World HQ, they enticed my friend and his family to move down there.
I did walk away. They knew my budget, they gave me a price on my trade-in and knew I had financing lined up. I was all tee-ed up and they let me walk away! They didn't even offer to show me a model in my price range! They didn't even counter me! Maybe they could tell I wasn't one to negotiate. These big mega dealerships are awful!
If they have your information I'd be inclined to think they will contact you tomorrow. They have to keep track of customers, potential deals, etc. Then they have to follow up with those which did not pan out to try and get them back to salvage a deal.
I walked when I was shopping for my first decent vehicle back (read: not a sub-$1000 beater) in the 90s. It was on a Thursday after 5PM when I left the place. The next morning I was out bright and early trying to find another vehicle. The salesman and the manager were calling my house, left probably ten messages on my answering machine.
Since my father had bought a car there, they had his information. He was there with me because I was a young pup in my 20s looking to buy my first car for real money. They actually called him around lunchtime. He told them I was out shopping elsewhere, and that is why they could not get a hold of me. They asked him what it would take for me to come back. He told them $1000 less than the offer they rejected and hung up. He called me on my cellphone and told me what happened. While we were talking the manager called him again and told him that if I came that day they would meet our demands (including the $1000 off my father asked for).
So we went back and I bought the truck.
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No Haggle Pricing
