USED CAR PRICING AND NEGOTIATING

Buyers and sellers of used car often wonder how the price of used cars is determined. How is the value of a used car set? Who sets it?

If you are a buyer, is the seller's asking price being fair? Am I paying too much? Can I talk the seller down on his price? What price should I pay?

If you are a seller, how much should you ask for your car? What is a fair price to ask? How do I determine used car prices?

These are all common questions. Let's try to answer them here.
Used car prices are not an exact science

We all know that a brand new car's value begins to depreciate as soon as it's driven off the dealer's lot, often as much as 20% of MSRP (Manufacturers Suggested Retail Price - sticker price). Once it changes from a new car to a used car, it has less value. That value is based on a number of factors, such as year model, mileage, options, accident history, condition, and even the area of the country in which the vehicle is located.

Nobody "sets" prices for used cars. However there are "price guides" from companies such as Kelley Blue Book (kbb.com), NADA Guides (nadaguides.com), Edmunds (edmunds.com) and a number of other companies who provide used car value estimates based on data from auction sale prices and dealer transaction prices.

There are always differences between the estimated values of different guides. Which is right? Which is more accurate? Since these values are simply educated evaluations of data, none are "right" or "more accurate."

In short, used car values are based on what buyers are willing to pay. If a particular car make and model has a reputation for bad reliability or poor quality, buyers will not be willing to pay as much as for a make and model with better reliability or quality. Or if large gas-guzzler SUVs are less desirable in times of high gas prices, values will drop, and values of fuel-efficient hybrids and small cars will rise.
How to read used car price guides

When you look up a used vehicle price online you'll be asked for your zip code because prices vary depending on where a car is being sold. You'll also have to specify mileage and what options are on the car. You'll also be asked to make a judgment about the car's condition. Then you'll be shown three or more sets of values that are generally as follows:

Dealer Retail Price is the price you would expect to pay if buying from a licensed new-car or used-car dealer — retail price. Dealer prices will always be higher because of business costs and need to make a profit. Furthermore, dealer retail price is always for a car in "excellent" condition — the highest possible value. Price guide publishers don't want to create price conflicts with used car dealers who advertise on their web site. Smart used car buyers will use this price to guide them in negotiating with dealers.

Pricing and Negotiating Part 2