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Old 05-29-2001, 10:40 PM   #1
dedfish
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Question Does a honest approach at a dealership ever work?

Disclaimer: I have never bought a new car from a dealership.

I currently own a car that I owe $5000 on. If I walk into a dealership I doubt that I would get that for a trade in though. Edmunds TMV of my car is a bit over $4000. If I were to tell the sales guy where I stood and that I knew the invoice price on the WRX is X and that all I wanted to do was break even on my old car and allow the dealership to make, say $800 on the deal. What do you think their response would be? How does that all work? If I need to have a payoff on a current loan of $5000 and I need the price of the new car to cover this, does the dealership payoff the old loan? I’m a bit clueless about these things. :-)

Points to keep in mind:
1) I do not need dealership financing. I can arrange financing either in loan or lease form from Credit Union. Basically after deal was made a day later I could give them a check.
2) I am not prepared to spend over MSRP on vehicle.
3) I just signed up with http://www.imba.com so if I waited 6 months I could buy at invoice, also signed up for the free bike rack, and free bikes on planes, plus it just a great cause.

Basically what I am looking for is any advice on how you would handle a similar situation? I guess I am a bit nervous about the whole dealership new car experience from all the horror stories.

Would a dealer be more likely to go for a deal like this if I had to order the car?

Another question, if you think that there wouldn’t be much of a problem getting a deal, do you think $800 is a fair amount? If not, more or less?

Ok I think I rambled enough.
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Old 05-29-2001, 11:12 PM   #2
Albert
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TMV?? trade-in value or market value?

If the car is in inventory (on the lot) you stand a better change of cutting a deal.

If you owe the bank more than the trade-in value of the car, (upsise down), your chance of a deal below MSRP looks bleek. But, yes you can trade in the car.

In general you'll loose money on trade-ins, since you plan to wait six months why not sell the car yourself, even if you to pay the extra $800 out of your own pocket to complete the transaction. In six month flash your membership voucher and pay the invoice cost for your new WRX with no additional hassels.

Albert

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Old 05-29-2001, 11:13 PM   #3
CraigB
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I'd just put all the figures down on a piece of paper, and go in and try it. I doubt that you'll get to cut a deal on both ends of the transaction (i.e. buy the WSX at invoice and sell your car at above wholesale), but you never know...

What I'd do is put together a spreadsheet or some notes that show the MSRP and dealer cost of the new car with options, and then invoice + $800. Then put in your trade, showing the book value according to someone (hunt around and get the best number you can find, Edmunds, Kelly) for wholesale (or "trade in" price), then include a sale price from the local paper. Split the difference and say thats what you want for your car, and hopefully its over what you have left to pay on it. Sorta looks like this (the numbers are bogus so you'll have to get the actual values):

WRX MSRP: $25,000
WRX Invoice: $21,000
My WRX Offer: $21,800

Clunker trade (Edmunds): $4,000
Clunker sale (local paper): $6,000
My clunkder asking price: $5,000

Deal signed today: $16,800 + trade in


As far as paying off your old car, thats your responsibility if you're doing the financing yourself. Typically you'd go get a loan for $21,800 against the new car, give $16,800 to the dealer, and $5,000 to the bank to get the title clear on your trade-in. If you're getting your new car loan through the same bank as your existing loan is through, its easy and they can do the whole thing for you as part of the loan.

The dealership will want a clear title before they take the car.

Good luck!

Craig
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Old 05-29-2001, 11:17 PM   #4
gpxl
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I would say CALL, don't go to, all the dealers in your local area and simply talk to them and tell them your situation. It would be good if you had ammo from this board about what other dealers are willing to deal on and it is VERY important to know exactly what you want and are willing to pay. They can either tell you they can do it, or to shove it, but I think dealing with them over the phone cuts out A LOT of the BS that goes on with dealerships; and it saves you a wasted trip to the dealer.

My WRX was the first new car I've ever bought and it was also the easiest new car buying experience I've ever had. (I've gone with my parents and friends when they've bought their cars)

Oh, and good luck!
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Old 05-30-2001, 12:27 AM   #5
CosmoTheCat
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That Edmunds TMV is a retail price, not wholesale. If you go into a dealership asking retail for your trade, but expect to pay wholesale for the new car, you will be laughed off the lot.
If you want the WRX close to invoice contact CARR in Portland, OR, or Van Bortel(??) back east, wherever it is. I have heard that they are most willing to deal. BUT, sell your car privately.

If you have read the agreement IMBA has with SOA, you know that it is up to the dealership if they want to sell a car at invoice. Most places are excluding the WRX from that deal right now.
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Old 05-30-2001, 05:20 AM   #6
makua11b
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I sell Subarus. Your situation occurs on a daily basis for dealers. Edmunds values are seldom if ever accurate, they are usually way optomistic, read high. That does not mean you're out of luck. Also, if you try doing anything over the phone your work will be quit a bit harder. The dealer will probably fill your ear with a lot of sunshine to get you into their place then dissappoint you when you show up. Don't waste your or their time.

There's two parts to the equasion. Leave your trade in out of it to begin with. 1) Find the best deal on the car you want. That means shop around. Know the invoice, however if it's a WRX you want you may have to pay a bit more over invoice then say for a Forester. Also, what does each specific dealer consider their invoice to be. Does it include adverting at $0 to $300; does it include any documentation fees or prep charges? For example A2 Subarus invoice is $150 less the other metro Detriot dealers because we don't have their advertising fee. Also very important is the total cost of the new car. That means the selling price plus other charges including but not limited to tax, title and licensing. Unscrupulous dealers may have hidden charges that they calculate into the delivered cost so your $24,000 car becomes a $28,000 car. The only legitimate addional charges are Tax, Title and licensing. Be prepared for sales tax, it might suprise you. In Michigan it's 6% of the selling price. On a $24,000 selling price that's another $1,440.Once you have found the dealer you want to go with then broach the trade in.

My suggestion is to first take your car to a dealer that sells the brand of car you own and ask them what they will buy your car for, not a trade but buy. This will give you a pretty accurate idea as to what the fair market value of your car actually is, be prepared to be disappointed. Edmunds and the other services give you a number which is great but meaningless if no one will buy it or take it on trade for that figure.

Your next stops are the dealers who have offered the better deals, there probably will ony be a few hundred dollar difference between them. Have them appraise your trade. You now have your two numbers; the cost of the new car and the trade value. It's time to make a decision.

Other details: Most banks will only lend a maximum of 105% of the sticker price while lease companies may go as high as 120%. That means if you have huge negative equity (that is the difference between the amount you owe and the amount they are giving you on trade)it may be easier to lease then buy. Hopefully, through a combination of dealership discount on the new car and cash out of your pocket you will wind up in a acceptable financial situation.

Tips: Approach each dealer with a nuetral attitude and be cordial, try to reflect the same attitude the sales person has. I've become close friends with many of my customers. Yes, that's correct, close friends, dining out, talking on the phone etc. but I've also flat turned my back on jerks. Find a good sales person, if one sales person is being a jerk don't be afraid to approach another sales person at the same dealership if you want, if you can explain what happened with the first to the second there shouldn't be any problems switching sales people.
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Old 05-30-2001, 06:22 AM   #7
scott_gunn
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Give it a shot. I went into my dealer with an offer instead of letting him make me an offer. I said, "I'll order a WRX from you for $800 over invoice and options at dealer cost." He called back later that day and said, "Ok!"

So just know all the figures before you go in and know what you are prepared to pay and see if he'll do that or not. Chances are, he will.
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Old 05-30-2001, 07:27 AM   #8
ba_feitl
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makua11b ...

I agree with the don't discuss trade in until you have a deal on the WRX ...

but what do you do when the salesperson is bugging you about if you will trade in your current car ? I don't want to out and out lie but they typically refuse to go on much if you don't tell them how you existing car will be handled ...

Brad
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Old 05-30-2001, 09:09 AM   #9
makua11b
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ba_feitl
There really should be no harm in allowing the dealer to appraise the trade but it's on the salesperson to be logical. There's no point in appraising the trade if they haven't landed you on a car yet, even an ordered car.

Make it very clear to the sales person that you want to deal in real numbers i.e. what amount over invoice for the new car and the actual trade value for the old car.

If they want to start an appraisle then it's fine to let them. The thing you want to avoid is having the dealer "over allow" on the trade. That means them saying that they'll give you more for the trade then it's actually worth. The difference gets made up on the selling price of the new car.

For example:The real world fair market WHOLESALE value of the trade is lets say $5000. But Edmunds etc. is telling you it should be $7500 so that's what you tell the sales person you want for it (the salesperson most likely will ask). There's a $2500 difference that that they have to try and cover. That means selling the new car for what ever profit they're willing to accept plus adding something to that to try and cover the $2500 difference.


Other Tips: I've seen Edmunds, Kellys etc. be more then $5000 off target and I've never seen them be closer than about $1500 on target.
Do as much homework on your trade in as you will on the new car. Take your trade to a few different "On Brand" dealers and find out what they will buy it for.
Trade in value and wholesale value are synonomous.
Dealerships are for profit businesses and it's fair to allow them to keep some money, it's up to you as to what you think is fair.

[This message has been edited by makua11b (edited May 30, 2001).]
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Old 05-30-2001, 06:33 PM   #10
kpratte
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Having bought a few cars in my day, makua11b is pretty much right on target. I've been told that my trade just doesn't have a market and nobody will want it, etc. Looking thru the papers, etc. confirmed this.

Here are my tips for ya when shopping for a new car:
- Know exactly what the maximum you can buy the car for. Some dealers will throw around all kinds of numbers, but if the magical number is 20K after all the trades, taxes, etc., then it's 20K. Do your math ahead of time. Showing up with a piece of paper listing everything out wouldn't be the best idea. In reality, you don't care if he didn't give you much for your trade provided they discounted the new car enough. Let them fudge the numbers all they want, just make sure you know what your magical numbers are.
- Clean up your trade-in. Wash it, wax it, clean the interior, make the thing spotless. Some people say why bother, I'm trading it. If the dealer doesn't have to do much to the car, then it's more money in their pocket and hopefully yours. It's also about presentation. If the car is spotless, then possibly the owner did a good job on upkeep and thus little needs to be done to it.
- Last but not least, DO NOT spend a ton of the salesguy's time! If you test drive a car at a dealership, come back, test drive again, talk numbers both times, etc. The salesguy has spent a lot of time with you and will want to get more money from you because you kept him from other customers. This is why everybody tells you to go to the dealer that you don't want to buy the car from and test drive their cars, then buy at the local dealer.

- Ken
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Old 05-30-2001, 10:20 PM   #11
jasony
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Exclamation

One Thing I would also be careful of:

Dealers wil lask you before even giving you a price if you are going to finance it, lease it, etc... Tell them finance if that's what you are doing, but DON'T tell them if you already are approved for a loan.

I have been told (and it makes sense) that dealers get kickbacks from the banks for which they sell loans. This means you might get a better rate somewhere else. It also means that they don't make as much money if you use your own bank. Thus, would they have to jack-up the purchase price.

So, I would leave out the fact that you already have a loan until you get a final price.

Has anyone else heard this, or am I just paranoid?

[This message has been edited by jasony (edited May 30, 2001).]
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Old 05-30-2001, 11:13 PM   #12
Danimpreza
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I've had good experiences using Edmund's #'s as a tool to buy both my 1999 OBS and 2001 (gasp) Chevy S10. Both times I've kinda used the #'s as a crutch against the salesman. When he'd try and raise the price a little bit. I'd just refer back to Edmund's eventually they caved 2 out of 3 times. And actually the one that didn't cave right away emailed me one week later and offered me my truck at the price I requested in the first place.
I'd also like to know if the salespeople get a bonus for getting you to finance w/ certain banks. Definately get pre-approved and give as little info as possible to the Salesman.
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Old 05-30-2001, 11:14 PM   #13
Danimpreza
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I've had good experiences using Edmund's #'s as a tool to buy both my 1999 OBS and 2001 (gasp) Chevy S10. Both times I've kinda used the #'s as a crutch against the salesman. When he'd try and raise the price a little bit. I'd just refer back to Edmund's eventually they caved 2 out of 3 times. And actually the one that didn't cave right away emailed me one week later and offered me my truck at the price I requested in the first place.
I'd also like to know if the salespeople get a bonus for getting you to finance w/ certain banks. Definately get pre-approved and give as little info as possible to the Salesman.
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Old 05-31-2001, 05:19 AM   #14
makua11b
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Bank to Dealer Reserve.
There's two interesting points here.
1) Yes, most but not all financial institutions have "incentives" for dealerships. It's called Reserve and ranges from a flat $50 to as high as 3% of amount that is loaned before interest. The amount is based mostly on the borrowers credit rating, but the dealer also has some discretion. The key here is KNOW YOUR CREDIT RATING. If you know you have perfect credit and your debt to income ration is appropriate, usually less then 35%, then you should qualify for the best interest available.

2) Discounted Rates. The dealership I work for receives discounted rates from the financial institutions we are signed up with. Automobile lending is very competitive and banks want dealership participation because of the mass lending opportunity so they will offer lower rates through the dealerships hoping for the obvious: high numbers of contracts signed with very little work required on the banks part.
Example: Customer Joe goes into his local branch of National Bank of Wherever and asks for a car loan. They tell him the interest rate is 8%. Joe then comes to me and asks me what rate we can get him. Presuming he has good credit I tell him we can get 7% through National Bank on Wherever.
Why is it like this? The answer is simple: 7% of $140,000 is a lot more then 8% of $20,000. We'll send as many as ten credit apps a day to NBoW and 7 of those will be turn into signed contracts with an average loan amount of $20,000.

Be aware: Dealership F&I (Finance and Insurance)Department will most likely but not always try to maximize dealership profits by any means necessary. They will quote you a higher interest rate then you qualify for because of the higher reserve. KNOW YOUR CREDIT RATING. Don't be afraid
to question the F&I Manager pointedly. F&I Departments are found in almost all medium sized and bigger dealerships. Be aware.

Point: Credit Unions are about the only place that may offer lower rates then what is available through the dealership.

Small Dealerships: The dealership I work at is very small. We sell only Subaru through four sales people. Each sales person is responsible for their own deals. We rely almost exclusively on repeat customers and referrals. It's in my best interest to take get the lowest interest rate possible for my customers.

Important: KNOW YOUR CREDIT RATING. Twice a year order your credit report from the three big credit reporting agencies. Most Subaru owners are in the upper 20% household income level and ideal candidates for identity fraud. At least a few times a year I have a customer who can't account for their derogatory credit. Be aware.
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Old 05-31-2001, 06:28 AM   #15
paul42
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It is very simple to apply for a car loan over the internet, and there are some good rates out there. A good place to start on the internet BEFORE buying a new car is
www.carbuyingtips.com

This site has a lot of very good information.
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Old 05-31-2001, 07:57 AM   #16
dedfish
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First off. Wow, Thanks for all the replies! Keep them comming.

I took my car to a dealership that sells the same brand and asked them about buying it. At first they gave me an extremely low figure but as I thanked the guy and started walking out another guy came out and offered me a bit more. The bad news is that the bit more is actually lowerer than what I originally thought. I may be about $2000 in the hole on my current car if I trade it in.



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Old 05-31-2001, 08:55 AM   #17
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Being upside down on a car is ALWAYS bad in a dealing situation. Whether you are up-front to the dealer about it or not. No dealer is going to go on the hook for your misfortune.

You are better off selling such a car on your own. If CarMax is in your area, they will probably give you cash what your vehicle's KBB trade-in value. Which is probably more than the dealer will offer you (It always ticks me off when a dealer says so-and-so is always high. Where do they think they get those numbers - they make them up? Most people do look at retail instead of trade-in, though, and are sorely disappointed.) At any rate, if you are upside down, selling it yourself will minimize losses.

You can be honest with dealers - I walked into my dealer, told them what car I wanted, they told me a price, I wrote a check.

Also, you might get a better deal financing through the dealer - there are some awesome deals available, and the dealership makes some money on financing, so they might actually work with you a little better if you say you'll finance with them.
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Old 05-31-2001, 09:08 AM   #18
makua11b
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Take it to a couple more on brand dealers and come up with an average, then tell your new car dealer what that average is. Hopefully the new car dealer will take the trade on that information alone.
But the new car dealer may not want to get stuck with a car that's not appropriate for his/ her used car lot in which case you can tell your new car dealer what on brand places you went to and what amount they said they would buy it for.
If the new car dealer wants to sell you a new car then they may most likely need to act as the middle man in the transaction of you selling your car to the on brand dealer. Also, because you are dealing with some negative equity it may be necessary for the new car dealer to act as the middle man anyway, after all you can't sell a car directly to the on brand dealer if a lien is on it unless the lien gets paid off.

$2,000 should be very workable from a dealers point of view. You have to decide if you want to "roll over" any or all negative equity. That is do you want to tack on any amount of your negative equity into the financing of the new car. Rolling over the full $2,000 will increase your payment by about $40.00 over a 60 month loan @ 8% interest.
If your monthly payment is more important then over all expense then consider leasing the new car.


ON LINE LENDERS: Our parent dealership has issued a directive to all of it's dealers NOT to do any business with a company called e-loans. They, e-loans, have had an unreasonable amount of hoops that the dealers had to jump through and have not paid the dealers at all on three cars over the last year and a half. The dealers had to, unfortunately, re-posses one of the cars and the other two had to scramble to get different financing. The dealers get screwed and so do the customers. Be aware.

[This message has been edited by makua11b (edited May 31, 2001).]
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Old 05-31-2001, 09:51 AM   #19
ba_feitl
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Since we have a salesperson liberal with advice I thought I might chime in twice ...

Here goes, I am currently 21 of 36 months into a lease and need to get out of it because my job is moving from 5 miles away to 35 miles away and the gas milage is very bad. According to my contract I can give the dealer back the car and pay the following... remainder of principal payments less security deposit less surplus (wholesale value less residual).

So now my question... can I go and sell the car either to another On Brand dealer or other dealer/person who may pay above wholesale and then use that money to cover the remaining principal payments plus the residual value ??? Thereby (hopefully) pocketing the difference or rolling it in as equity into another car ...

If you have question please let me know hopefully I didn't confuse you ...

Oh and also, how willing are you as a salesperson/dealer to get into this type of situation and help out to work through the hassles, if any ...

Thanks a lot,

Brad
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Old 05-31-2001, 10:48 AM   #20
makua11b
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ba_feitl
I may not be understanding your question properly but let me give it a shot.
A dealer maybe marginally more interested in getting involved than a private individual. The chances of any sort of equity in a lease situation are usually pretty slim. However, if that is the case then as long as the lease company gets their payoff then you can sell it to whom ever you want. I see a couple of problems though.
1) Most lease companies retain the titles to the cars they own. Legally, you can't sell a car you don't own the title to. That by it self will eliminate 99% of private buyers who don't want to give you money for a car you don't have the title to.
2) Lack of equity. I've been selling cars for four years and sold close to a thousand cars and I've never met a leasee, including myself, who has had anything close to positive equity in their leased car. That doesn't mean it is impossible, but I've never seen it.

Suggestion: It sounds like you'll still be needing a car. If that's the case then try working things out a dealership.

From my experience there's no magic bullet that is going to allow you to get out of your lease early without sacrificing some cash.
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Old 05-31-2001, 10:51 AM   #21
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Be prepared for an insult when the dealer tells you what they'll allow for your trade-in!!
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Old 05-31-2001, 11:02 AM   #22
makua11b
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Clue: A car is only worth what somebody is willing to pay.
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Old 05-31-2001, 11:40 AM   #23
pengajim
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This question is for makua11b.

I am a new member and this is my first post. Since I'm interested in a WRX wagon I have been reading as much as I can about the car and what the great people in this forum have to say. Anyway, I was just curious as to makua11b's comments concerning Edmunds pricing numbers. I'm quoting from memory so forgive me if I'm wrong, but you say the the prices are off by as much as $5000. Compared to what? What are you using to determine how off Edmunds (and others)pricing is? NADA numbers? What are the right numbers?

Just curious.

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Old 05-31-2001, 11:41 AM   #24
ba_feitl
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makua -- I pm'd you with some 411 on my situation
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Old 05-31-2001, 01:20 PM   #25
makua11b
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pengajim
Good question. Sorry I didn't put that into context. The target that I'm referring to is the actual cash wholesale value or what we, the dealership, can find a wholesaler or other dealer to buy it for. The dealership that I work at is small, our used car lot usually has less then 15 cars on it. We will wholesale about 95% of the cars we take in on trade at no cost to the customer. That means if the wholesaler says he'll buy it for $10,000 then that's what we give the customer for their trade.
Example: Customer Joe has a 1995 Blue Goose 4dr with 70,000 miles on it and he wants to trade it in. I'll look at his car quickly to get a description, VIN etc. then I give the Boss, the sales manager, my appraisal worksheet and the keys to Joes car. Boss takes the car car a five minute drive, comes back and calls half a dozen wholesalers and two or three on brand dealers. He paints them a very clear picture of the highs and lows of the car and which ever wholesaler or dealer wants is the most is who's value we give to Joe. In the wholesaler/dealer community their word is their honor and they will pay the amount they that they said they would or they don't last very long in the business.

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