Selling your car can be a real headache. You have to worry about ensuring it’s in top condition, consider what your desired price is, get your car inspected, and research the current market trends for that specific model. As if that wasn’t enough, you have to consider what a dealership is willing to pay. Trying to understand what goes into a dealership’s offer on your vehicle is essential to knowing your car’s value and securing the best value possible. Let’s demystify the process and take a look at how dealerships determine what they’ll pay, so you can decide whether it’s the right price for you.
Purchase Cost
When a dealer considers purchasing your car, their first step is to research the actual retail and wholesale sales for similar vehicles in the recent past. This involves analyzing data from automotive websites like CarGurus.com and Cars.com, which provide insights into what cars like yours are selling for in your area, as well as wholesale auction sites, such as Manheim.
It’s a good idea to do some independent research too, that way you’ll know if you’re being lowballed. You can use sites like CarGurus.com, Cars.com, and CarandDriver.com. Look for vehicles that match the specifics: trim, year, mileage and any extra features. Don’t be afraid to broaden your horizon if you don’t find an exact match nearby, any information is good information!
Reconditioning Cost
Everybody loves that new car smell, that new car look, that new car “everything.” Dealerships are well aware that excitement is what drives customers. When you sell your car to a dealer, chances are they’ll take extra steps for reconditioning and make it ready for retail. Depending on the state of your car, that expense can be significant.
If you’re selling a Honda Accord with a few nicks, a dealership won’t have to spend too much to get it ready for resale. But if you send them that same Honda Accord with a dying powertrain or malfunctioning safety suite then chances are that’ll significantly cut into the price a dealership offers.
To give yourself an edge, consider getting an independent inspection of your vehicle before listing it for sale. The inspector will provide a Condition Report, detailing the car’s current state. Sharing this report with potential buyers boosts their confidence and can lead to higher bids. Plus, it helps you feel in-the-know about your car’s value, so you can more easily evaluate a dealership’s offer.
Transportation Cost
A dealer that is purchasing a car on the internet means it might be located hundreds of miles away and will need to pay to have the car shipped to their store. Depending on the distance and method of transportation, this cost can range from a few hundred dollars to over a thousand dollars. Dealers that purchase a car online have to take this cost into consideration when making an offer.
Title Transfer and Administrative Cost
Most car sales, especially those involving dealerships, involve a significant amount of paperwork, from processing the title transfer to paying off any existing loans. Dealers have dedicated title administrators who handle these tasks, ensuring that the car has a clean title and is ready for the next owner.
This administrative process can be both time-consuming and costly, especially if the dealership needs to resolve any title issues or liens. Depending on how prepared you are for the sale, the dealership might have to spend more just to get all the paperwork in order. These costs are factored into the dealer’s offer to ensure they can cover these expenses without compromising their profit margin.
Interest on Loan
Dealers often use lines of credit to acquire vehicles. This means that each day a car sits on the lot, the dealer incurs interest charges on the loan used to purchase it. As a result, cars that are in high demand and likely to sell quickly are more attractive to dealers. These vehicles can command higher offers since the dealer anticipates a faster turnaround, minimizing the interest paid on the loan.
If you’re selling a low mileage 2023 Ford F-150, a popular choice for both individuals and businesses alike, then chances are the dealer will offer more. There’s a wide range of potentially interested buyers and the truck is from a recent year. A dealer looks at the chance for a quick return when calculating what they’d pay for the vehicle.
When you’re planning on selling your car, consider how high in demand it is. This can be tricky, you know how great your vehicle is better than anyone – but try to be objective in your evaluation and consider getting a second opinion.
Commissions
Dealerships compensate their salespeople through commissions, which vary depending on the dealership’s policies. These commissions are part of the overall cost structure that affects how much a dealer can offer for your car. A dealer must ensure they can cover the commission paid to the salesperson while still making a profit on the sale.
Putting It All Together
When you add up all these factors – purchase cost, reconditioning cost, transportation cost, title transfer and administrative cost, interest on loan, and commissions – it becomes clear why a dealer’s offer might not be what you were expecting. However, the benefits of selling to a reputable dealer and ensuring you get paid for your car in a safe and secure manner often outweigh the risks of trying to sell your car to a private party for a few more bucks.
Understanding all the factors that go into determining a dealership evaluation of your vehicle can solidify whether looking at alternative 3rd party options are right for you.