Tips on Buying Cars: Buying a used car, unfortunate facts, purchasing a used vehicle

Question
So many dealers mark up the used cars almost 45% more than its wholesale value. And sometimes this is close to the Suggested Retail Value that KBB offers.  So my question is how much should i expect to be upside down when purchasing a used vehicle?  I assume everyone would at least be upside down the first year no matter what type of deal they get, but how much is too much when getting a used car - without a trade in?

Answer
Gina,

Thanks for your question.  Sorry about the delayed response, as I have been a little under the weather.  Most dealers do NOT mark up their cars that much.  45% is way to high.  Most dealers only have a markup of anywhere from 10 to 18%.  What KBB says the value of the trade is worth, is a good tool to use, but is worthless when it comes to the ACTUAL value of the vehicle.  The actual value of vehicle is determined by what the cars are going for at the auctions, and what a dealer might have to pay in reconditioning cost for the vehicle to be retail ready.  Now, for your question.  It really depends on the vehicle as to whether or not you will be upside down from the onslaught.  Most people are upside down, that is just the unfortunate facts of buying a depreciating asset, such as a car.  What you have to decide is whether the price that you negotiate for the vehicle is something that you are willing to pay for that vehicle.  Be reasonable.  Do your research, and on more than one website.  See what the cars are selling for on AutoTrader.com, see what Edmunds.com values them at, and KBB.  Use all of those resources, but realize that none of those are actually buying or selling cars with the exception of AutoTrader.

This will give you a good idea as to what a vehicle is worth, and then you can negotiate from there.

Hope this helps.

Thanks - JB