One of the first things you will hear when negotiating a price from the seller is "the Blue Book value" or the "NADA value". This is not some secret value, but a moving price that takes into account the current market conditions for just about every car or truck available in the USA. Please realize this value is not a hard and fast rule. It's meant to be used as a guide, not a law. It can get confusing as each company uses their own terminology which I will explain below. The first table contains the three classes that Kelley Blue Book provides.
Private Party: This is what you would expect to pay when buying it off of Craigslist, the local paper or your neighbor down the block who has it on ebay.
Suggested Retail: This is the price you would expect to see at an average dealership. Tip: no one likes to pay retail, so your goal, if dealing with a dealership is to pay less than this. Of course the dealer paid less! Much less.
Certified Pre-Owned: This vehicle is one that the dealer has painstakingly gone over and is in such great condition that they can stand behind it as being certified. Of course, you pay the highest price for this vehicle because it has their stamp of approval.
In contrast to the KBB values above, another respected guide is the NADA. Their categories are different, very different which makes this process difficult but as you'll see, the values are in line with the above numbers pretty closely. HOWEVER, the first three values in the table below are the trade-in values that one could expect to see a dealer pay when buying your car.
Rough Trade-In is just that. The car or truck is rough, not clean and shiny.
Average Trade-In is what the average person would bring in. Probably parked outside most of the time, not washed and waxed every Sunday and actually used for its intended purpose.
Clean Trade-In is a car or truck that is kept in a garage and is what most would call "spotless". It's kept clean all the time, meaning the kids don't have happy meals in it, the dog doesn't shed in it and they likely don't smoke. This is the kind of car you should strive to buy.
Clean Retail is the same as Suggested Retail in the above table. This is what you would expect to pay the dealer.
If you are buying from a private party, the first three values below should be used to help gauge the asking price. If you see pictures of a truck that looks pretty well used, has tires that are near the end of their life, isn't clean inside, you should be looking at the rough value or less. Remember, these prices are nothing more than a guide to help you valuate and negotiate. They are not law and nothing says you have to pay them.
As you can see, the dealer pays you the least for the trade-in and charges the most for the vehicle on the retail side; herein lies the spread and it gives you an idea of how much you can negotiate. You as a consumer can pretty much rest assured that the dealer paid less than or the wholesale price. You need not be armed with much more here as a basis for your negotiations. In the above example, if the dealer paid 21k for the truck, the subsequently made it sparkle using the in-house detailing crew, he could put that up as clean retail giving him a 7,000 spread or potential profit. This gives you a lot of room to negotiate.
HOWEVER, the options in the car, its repair and collision history and the mileage of the vehicle will affect the price either positively or negatively. Luckily for you, there are companies out there like Vinaudit which is the cheapest vin reporting company with no strings attached, usually $9.99.
In the last few years, information on car and truck values has become more accessible making it easier to determine what a good deal looks like. What tools you ask? A Vinaudit report details the vehicles history, from purchase to registration dates, to whether or not it was in an accident. Worse, was it a rental car before this? We all know what happens with rental cars... This report could save you thousands as the accident history alone is worth the price of a report.
Regardless of where you purchase a vehicle history report, be sure to look it over BEFORE PUTTING MONEY DOWN on the car. These reports detail where the car has been, whether it has been registered by a dealer, car rental company or private party. It details major recalls, the number of owners, last reported odometer reading, the mileage at each registration renewal or emissions test, whether it was used as a TAXI!, police car, livery or driver's ed car. Can you imagine purchasing a car that was used as a driver's education training car? Was the car ever stolen, on fire, repossessed, flooded?? These are really important questions that spending a few dollars obtaining a report can answer in minutes!
What should you do if the report turns up some suspicious events? Let's say the car was in an accident 9 months ago. The very first thing I do is ask the seller how long they've owned the car. If they say three years, your first question should be "Has the car been in an accident?" If they answer no, hang up and move on. You don't owe them another second of your time and if they lie to you about something as serious as an accident repair, you know the rest of the story is worthless. If they are forthright and you still want the car, you can ask for a copy of the accident report and what was damaged. This is really important because you are buying the car based on the knowledge that it was in an accident. If the repairs weren't done correctly you could be left holding the bag. Frankly, if it was a serious accident, find another car. As much as you might want it, there is always another one.
Sites like cars.com which will allow you to search for new and used cars sorting them by just about anything: price, distance from your home, mileage, etc. Then you've got ebay where you can research recently closed auctions to see the final sale price on a given truck or car. Craigslist.com is a great tool as well for the cast of cars is always changing. Beware of ads that don't have an email link, but contain just an email in the body of the ad itself. Chances are, they are fake and will do their best to steal your hard earned cash. The question is, how do you know a good value?. Many feel that if they pay book or less, they got a good deal. What doesn't play into book value is local economy. If you live in an area that has been hit hard - such as Detroit - chances are great that you can negotiate a steal.
WHEN DEALING WITH PRIVATE SELLERS: Here's something I have been using with great success and I've never seen it written before- Ask the seller what he or she really needs to get out of the car. They always have a figure in their head or in the cases I have found with classic cars- a dollar amount they need for something. Sadly, many people sell classic cars when they need money. Here's an example: I saw an ad for a 1968 Oldsmobile 442 Convertible for $15k. After looking the car over, I knew it wasn't worth $15,000 and rather than throwing an offer out, asked what he really needed to get. The answer? $8500! I waited about 15 seconds in silence and put my hand out to shake on it. With this in mind, try calling a few ads, talk to the people and after hearing the answers you need on the car itself, ask what they really need to get out of it in cash. Now, if you don't have cash, you're kind of at a disadvantage, so just ask the question without using the cash portion. I bet you'll be surprised at the answers! I have been quite a few times.. A savvy seller will ask what your offer is and this will weed him out right away. Chances are slim that you will strike a super deal if he responds with that question, so be prepared. Your answer? How could I make an offer without physically seeing the car or truck? If you like it, make an appointment to see it. If he plays hardball and the price isn't a deal, move onto the next one.
For example: If you have looked through local papers and found that a particular car is worth $5000, you do not want to pay more than that unless the car is in exceptional condition. If the asking price of the vehicle you are looking at is $5000, your offer on the vehicle should be at least $500-$750 less than that. If the person does not accept, they will usually counter offer with a price in between the asking price and your offer. Experienced sellers usually advertise the asking price of the vehicle a few hundred dollars higher than what they are willing to accept for the vehicle, to leave room for negotiating with educated consumers. If you, the consumer, are not aware of the fact that negotiating is a option, you will be paying too much for your new or used vehicle. This is called leaving money on the table. Essentially, by failing to make an offer, you have left money on the table. That money is now in the seller's pocket!
LOW BALL OFFERS and DEALERS: We've all been offended by low-ball offers before and really we shouldn't be. Someone will always try to take advantage of the situation and when dealing with used car dealers specifically, I see no reason not to. If the car is priced at $10,500, you know he paid a few thousand less, so why not offer $8000, cash, right now. Take it or leave it. Believe me, the dealer has made low ball offers so he will likely take it in stride and try to meet you somewhere in the middle. If you know what you are willing to pay, be ready for his counter-offer. You can hold fast at your offer, or move toward middle ground. Depends on how much you want the car. There is always another car. Let me repeat that: There is always another car!
Before making your final purchase, there is a word to the wise: check out what the insurance rates on that new car or truck will be. I cannot tell you how many times a person would call saying:"I'd like an insurance quote on a mustang gt convertible AFTER they had already signed the purchase agreement only to find out that it was triple what they thought. Seriously folks, did you think that buying an Mini-Cooper S Turbo was going to provide you with the same rate as your Ford Taurus wagon? It's way higher. Now Go Get 'Em!