The prices for used cars usually don't dip into the Whopper levels unless they have been flame broiled at 450 degrees. But you would be surprised where car dealers usually get their inventory at prices that are substantially lower than retail.
Where Do Car Dealers Buy Their Cars
This is where most cars that are traded-in, rented out, off-lease, repossessed or wrecked will go to be sold and bought. Over 97% of dealers go to these auctions according to the National Independent Auto Dealers Association and typically the discount over retail ranges between 5% to 50% depending on what you buy.
Other dealers. There are plenty of new car stores that will offer up their trade-ins to other dealerships before bringing them out to the wholesale auctions. Those older rides are usually a bit more rough. But every once in a while you can find a pearl amongst the swine (and old used car smells) that come with buying from other dealers.
Used car dealers get their inventory from a number of sources, which include trade-ins, auctions, rental companies, fleets, finance companies, private sellers, ex-demonstrators, and pre-registered new vehicles.
I know from personal experience that there are times when a dealer will go out of their way to do a deal on a new car to get a particularly desirable trade-in. Used cars are generally far more profitable than new cars, so it could even be worthwhile to break even or lose money on the sale of a new vehicle to get a trade-in that could offer an opportunity for a big profit later on.
There are some that sell vehicles from specific sources such as government auctions, which are where vehicles used by state and federal authorities and agencies are disposed of. However, not all of these more specialized auctions are open to everyone. Auctions on eBay Motors are somewhere car dealers can look for inventory, but you can beat them to it as anyone can buy from eBay.
Closed auctions are another type of auction dealers go to in order to obtain used vehicle inventory. Buyers have to register to be allowed to attend and bid at these auctions and to get registered buyers will have to present their trade credentials.
Even if they have had a thorough once-over before being sold to a dealer, the dealer will still put them through their own pre-sale preparation regime before putting them up for sale. They might have a lot of miles on them, but ex-fleet cars can still be a very good buy.
Not all dealers will advertise pre-registered as pre-registered vehicles. A lot of the time they will advertise them as demonstrators. These are new cars that have been registered to the dealership, just like a demo, but they are not used by the dealership.
Unlike demos, these vehicles owe the dealership exactly thesame as a brand new example. There has been no de-fleet bonus from themanufacturer, so, as they cannot be sold as brand new, they have to be pricedmuch lower than a brand new model where the customer would be the first owner.
The rise of online auctions has also changed wholesaling. Once traditional wholesalers were considered more cost effective than auto auctions. Wholesaling at a physical auction involved transporting the vehicle and going to the car auction where dealers would compete with a number of similar bargain buyers to get the attention of a limited number of buyers.
This method involves buying used cars from dealerships and reselling them to other dealerships at a profit. Dealer to dealer work can often be conducted over the phone and involves porters moving cars.
Some pros that have been in the business for years know how to make money wholesaling cars the traditional way. However, many dealerships today prefer new digital strategies for handling wholesale cars.
Selling cars wholesale is dramatically different today than it was just a decade ago. Wholesale insiders noted that the Internet was a game changer 20 years ago. The next major wave of innovation has come in the form of apps that can be used anywhere on smartphones and tablets.
Two factors put pressure on dealers to sell cars quickly and, in retailing parlance, "turn their inventory." One factor is the physical area they have on their sales lots. A non-selling car takes up the space of a vehicle that might sell quickly and profitably. Grocery stores don't want to fill their shelves with products that just sit there, and dealers don't want to do that with the sales lot.
But there is another factor that is equally important. Most dealers don't buy the cars they sell outright for cash. They finance them. So each car that sits on their lot is costing them interest on those loans, which are called "floor planning" in the industry. Time is literally money in this scenario. The longer a vehicle sits without selling the larger the cost of having that vehicle around.
Many dealers will try to motivate the sales of slow-selling older inventory by offering their salespeople special cash incentives ("spiffs") if they peddle such a vehicle. That's why some salespeople will steer you toward a vehicle that has nothing to do with what you told them you were looking for. In addition, the dealer will frequently offer larger discounts on the slow-sellers than on the quick-moving vehicles. The manufacturer also gets into the act, because it is in their best interest for dealers to sell the vehicles they have so they can buy more. That's why manufacturers offer incentive programs like cashback offers, special subsidized lease deals, and zero-percent or other low-interest-rate financing deals.
In certain circumstances, dealers might trade vehicles with other dealers in different locales where their slow-moving vehicle might be more popular with that region's buyers. Vehicle tastes are more regionally oriented than you might guess. For instance, all-wheel-drive and 4-wheel-drive vehicles are much less popular in the Southeast than they are in the Upper Midwest and New England.
A final resort for the dealer with vehicles that don't sell at the dealership is to sell them at an auto auction. Most areas have auto auctions that are frequented by new- and used-car dealers. The auctions serve as marketplaces that enable dealers to "offload" vehicles they just can't seem to sell to their retail customers. Through the auction process, they will sell the former slow-moving "dog" that was haunting them on their lot each day even if they do so at a loss.
One of the main ways that used car dealers buy and sell their inventory is through auctions, which are held across the country and can yield the widest range of vehicles that are available to the general public.
If you call local dealers asking for help with your lease buyout, they may try to persuade you to let them pay you money for your leased car instead. Many people are getting calls from dealers asking to buy their leased cars and some offers sound pretty good. But are they?
CarPro requires our Certified Dealers to meet certain customer service requirements in accordance with our Certification Process and Agreement. CarProUSA does not broker, sell, or lease vehicles. All vehicles shown on this website are offered for sale by licensed motor vehicle dealers, unless where otherwise noted. Used vehicles are subject to prior sale. By accessing this website, you agree to the CarProUSA Terms of Service and Privacy Policy. We strive to update our website in a timely manner however CarProUSA cannot guarantee that the inventory shown will be available at the dealership. We are not responsible for typographical and other errors, including data transmissions or software errors that may appear on the site. If the posted price, incentive, offer or other service is incorrect due to typographical or other error we will only be responsible for honoring the correct price, incentive or offer. We make every effort to provide you the most accurate, up-to-the-minute information however when you are ready to purchase products or services, it is your responsibility to verify with us that all details listed are accurate. Prices include all applicable rebates.
Automakers General Motors Corporation (GM) and Chrysler LLC have received $17.4 billion in loans under the Troubled Asset Relief Program (TARP) and have indicated that they may need up to an additional $21.6 billion in federal assistance to restructure their operations.(1) As a condition of the loans, the companies are required to develop plans to achieve profitability. Much attention in the plans has centered on getting labor costs under control. Among other measures addressed are ways to cut distribution costs. As part of its cost-cutting effort, GM has announced that it will reduce its dealership network from over 6,200 dealers today to 4,100. The cost of the auto distribution system in the United States has been estimated as averaging up to 30 percent of vehicle price.(2)
Early in the evolution of the auto industry direct manufacturer sales to consumers were not uncommon. At that time, production processes had not yet been standardized and industry sales volumes were low. Introduction by Ford of the assembly line technique early in the twentieth century enabled high-volume production and ushered in the era of mass-market sales in the United States. Ever since then manufacturers have sold cars through franchised dealerships.
Selling through dealerships has offered several benefits to manufacturers historically. Auto production is a capital-intensive business and a franchise system allowed manufacturers to concentrate their resources upstream while accessing capital through franchise fees from independent entrepreneurs at the retail level. Economies of scale in auto production also required having relatively few, large manufacturing operations located near essential supplies like steel. This contrasted with the nationwide distribution network needed to reach consumers, who could be more effectively served through local dealerships in a better position to assess demand in particular markets and to provide service and repairs.
Since running a dealership can require making a substantial investment in real estate and assets like showrooms and service facilities, the franchise system also had to offer terms that would make it attractive to dealers. This was accomplished voluntarily by contract, through franchise agreements, even prior to enactment of state franchise laws. Typically such franchise agreements give a dealer exclusive rights to a particular geographic sales territory of a manufacturer. This type of arrangement allows dealers to realize a return on their investment while giving them incentives to undertake advertising and promotional activities and to provide services, like showroom displays, test drives and other types of consumer information, valuable to manufacturers in marketing their vehicles.
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