How Car Dealerships Price Their Used Cars

Franchise dealers have a fairly simple model for valuing used cars. You simply choose a percentage of the value of the car that is appraised in the wholesale market. This wholesale market value is determined by the age of the car, the make and model of the car, as well as the choice, mileage, and overall condition of the car.

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Based on these factors, the dealer determines how high the additional cost for a used car will be. The first thing they consider is the price they paid for the car. They may have taken the car as a bargaining chip to buy a new car, meaning they didn't pay for it, or they bought the car from a private seller, auction, or wholesaler.

The second thing to consider is the price you pay for the necessary car repairs and restorations. Then they end up having to stick to price more in order to make money. After all, this is the business they run.

The markup set by the dealer is affected by all these factors. As you can see, there's clearly more than one thing that affects how much people pay for a used car. If you want to be an educated used car buyer, your goal should be to figure out the wholesale price of the car and then how much the dealer is investing in getting the car ready. This will tell you how to plan your negotiations as the trader will almost never go deeper than these two.