When buying a used car, do you sometimes wonder how much the car would have cost you minus the car dealer’s mark-up? How much do used car dealers mark-up? It is not unusual to find used car buyers bargaining for a lower price. This is because it is common knowledge that the given price includes the dealer’s profit. However, how low is too low a price to bargain to? How do you know you can still get the car at a lower price without affecting the dealer’s profits significantly?
User car dealers usually add between 20 and 45% the value of the car. Dealers expect buyers to negotiate for a better price. They have an amount below which they are not willing to sell, but are flexible enough to reduce the price to an acceptable level.
Sometimes, dealers will price the car at a higher price than their mark-up. This way, even when you negotiate, the rate at which you buy the used car will not affect their mark-up. For example, if the dealer’s mark-up is 25%, he may put the asking price at higher than that, at say 35%. This asking price may still be considered reasonable, especially if the dealer bought the car at a low price. This way if you negotiate for a 10% reduction, he still makes his 25%.
Things Dealers Look at When Considering Mark-up
The mark-up on used cars is decided carefully. Several things will influence the decision taken by the dealer as far as his profits are concerned.
How Much the Dealer Paid
Whether the dealer got the car from a private seller, a wholesaler, or auction, the price he paid will influence his mark-up. Dealers always look for opportunities where they can buy great used cars at a low price. This is because their profit will be higher when they sell the car at the market price. Dealers are also usually more flexible when it comes to the selling price when their profit margins are higher.
Further Reading
- What is The Markup on a Used Car? How is it Calculated?
- Online Salvage Car Auctions – capabilities and features
- How To Sell a Salvage Car and other Vehicles?
- How to Buy a Used Car Safely: What the Experts Say
Costs of Repairing and Reconditioning the Car
Repairing and reconditioning cars are not unusual to dealers. This is because selling a car with issues will affect the price. Buyers are willing to pay the asking price if they are not required to repair the car. If the cost of repairs is high, and if it takes a lot of time, the dealer may decide to raise his mark-up. Some dealers may choose a lower profit margin to sell the car quickly. If, however, the cost of repairs improves the appearance and the performance of the vehicle significantly, the dealer may consider having a high mark-up.
The Dealer’s Profit Objectives and the Overhead Costs
Most dealers have a desired profit they expect to make from every car they sell. Overhead costs often influence profit margins. Dealerships with high operating costs are likely to have a higher mark-up than those with lower running costs.
Dealers know buyers of cars, whether new or used, will only pay for a car they feel is reasonably priced. When coming up with their mark-up, dealers endeavor to sell the vehicle at the best price possible for the client, without negatively affecting his profits.
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