QuestionHello,
I have always heard that you aren't supposed to pay sticker price even on a used car. I have never bought a car and don't know how not to get taken advantage of. Any advice? The car is a 2007 Dodge Caliber SXT and it is $11,995 how much should I pay?
Thanks for your help
Answer
Car Guy
Hi Cassie...
Sorry it took me so long to get back to you.... the questions you asked is one I get asked a lot... "should I pay the sticker price ?"... "how much of a discount should I expect the dealer to give me?"... "how much profit is in a used car?" ..."how do I know if I'm getting a good deal"?
Here is how you can tell generally whether or not you are getting a good buy:
The first thing I would do is go to KBB.com and find out what the vehicles trade-in value and private party values are. In the case of a 2007 Dodge Caliber SXT and giving it only the most basic and predictable options like air-conditioning, all power features Windows locks, tilt wheel, Cruise control, things like that and the baseline number of miles of 50,500 (meaning the number of miles that neither add to or subtract from a car's value) and this is what I got:
Pvt. party value- excellent condition...... $9205.00
Trade-in value - Excellent Condition ......$7550.00
when a dealer buys this car or takes it in on trade he wants to own it for around $7500 because he knows what he is going to have to spend money reconditioning the vehicle to be sold. Ultimately he wants to be in it no more than $8000. The best rule of thumb for you to use that applies to almost every vehicle in every situation is to take the trade-in value and subtract it from the Pvt. party value divided by two and add that number to the trade-in value that's what you should pay a car if you want to leave no money on the table.
Here's how the math works on this vehicle we just made up:
9205.00 (private party value)
- 7550.00 (trade in value)
____________________
1655.00 Difference
1655.00 divided by 2 = $827.50
$827.50 + $7,550.00 = $8,377.50
Answer is $8,377.50 is what you should pay for this car provided it is equipped as I described and has the 50,500 miles I used in this example... If the dealer is in this car more than that then he ended up having to fix more things than he expected in the shop or he bought the car wrong or he has dealership "packs" added to the cost. The actual Kelly Blue Book wholesale value using the dealer version of Kelly Blue Book is $8,300.00. If a used car is a late model car like a 2009/2010 and the car is selling new with some significant factory rebates then you need to back up this number by approximately 50-70% of the amount of those rebates. In the case of the 2007 I wouldn't concern myself with the rebates if there are any.
The ultimate guide on what a car is really worth and the best indicator of what the dealer really paid for the car is a subscription-based valuation guide called the " MMR" which stands for Manheim Market Report. The Manheim market report gives the actual auction prices for this exact car at everyone of their auctions across the United States. I don't know which region here in geographically but in the Western region of the United States this vehicle has an MMR of $7275.00 to that number you add the auction buy fee, the arbitration cost (75.00) and any transportation expenses and reconditioning expenses to make the car frontline ready and I think you'll see that the price suggested by the formula I gave you above is very very close.
So the short answer to your question "Should I pay $11,995 for this car?"
only if you don't like money....this car is priced almost $4000 over what you should pay for it.
Hope this helps
My private e-mail is roadloans@Gmail.com if you have any follow-up questions feel free to ask them and going direct to this e-mail will get a much faster response as it gets sent directly to my phone and I check it constantly throughout the day. Good luck.
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I hope this helps
Roger
