By on May 3, 2016

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If you’ve read it once on the Internet, you’ve read it a thousand times: Conventional wisdom says the longer a used car sits on a dealer lot, the more likely it is you’ll get a good deal when you go buy it. People who’ve never spent a day in a dealership like to armchair dealer manager behind their computers and write about things like “floorplan” and “holding cost” like they actually know something about how a dealer principal calculates them, and how they affect pricing.

If this conventional wisdom were actually wise, then I wouldn’t be writing this column. Unfortunately, it isn’t, and adhering to it can cause you to waste a good deal of your time and money. Luckily, your friend Bark is here to give you the real scoop on how, why, and when you should buy at a dealership.

Go ahead, click the jizzump.

There is some wisdom in saying that you can get a good deal on aged inventory. Most dealerships typically price their used inventory high (somewhere around 110 percent of market value) for the first 30 days, and then adjust pricing down as time goes on. The problem with this method is that the car almost never sells within that first 30 days, and now the dealer has had to pay 30 days worth of holding cost on the car.

What’s holding cost, you ask? Simple. Holding cost is calculated by taking the total cost of a used car department, including depreciation, opportunity cost, and interest.

Depreciation is the easiest to understand: Simply take the wholesale value of the car when the dealer acquires it and subtract the wholesale value of the car when the dealer sells it. Not rocket science.

Opportunity cost isn’t as easy to calculate, nor is it as tangible, but it’s absolutely real. A dealer can calculate it by figuring out how quickly he can turn (or sell) a car on average, then figure out the net profit he makes on a car. Let’s say the dealer turns his cars six times a year (or every sixty days), and he makes $1,500 a deal. That means each spot on his lot is worth $9,000 a year in profit. Divide that by 365 days, and that means each day that the dealer is holding that car over sixty days is costing him about $24.65 in opportunity.

Regardless of whether you’re using your own money or someone else’s (normally referred to as a floorplan loan) to finance your inventory, owning inventory is costing a dealer money. Many dealers think that they don’t have holding cost because they don’t floorplan their lot — but they couldn’t be more wrong. The capital the dealer has tied up in your inventory could be invested in some other way that could be earning money. The dealer is throwing away that potential revenue to hold cars.

After a dealer has calculated all the expenses of his department, including all the factors above, his holding cost per car, on average, shouldn’t exceed $30 per day. That doesn’t sound too bad, except that when you figure that a dealer is intentionally pricing a car for a month at a number that gives him very little chance of selling it. That means he’s going to subtract a $900 loss from his front-end gross profit on that unit. Considering the average front-end gross profit on a used car is about $1,500-2,000, that’s a significant loss.

By the time a used car has been on a lot for 60 days, it becomes very difficult for a dealer to make any money on it. That’s why efficient dealers have a “hard turn” policy at 60 days: if the car hasn’t sold in that timeframe, it goes to the auction or is sold to another dealer within the group. Smart dealers realize that it’s better to take a small loss than a big one.

So what about those cars that have sat on lots for over 90 days? Wouldn’t the best deals be available on those?

Eh, not necessarily.

If your dealer truly understood the financial aspects of his dealership, that car wouldn’t be there. With the exception of some truly high-end vehicles, there isn’t enough front-end (meaning the difference between the price the dealer paid for the car and the ultimate selling price) profit built into most used cars for the dealer to be able to make any money on a car that’s been on the lot for 90 days or more. So the very existence of that car on a dealership lot means that the dealer likely doesn’t understand how he makes money.

That’s bad news for you. Why? Because it means that dealer is what they call a “gross” dealer. Now, I know what you’re thinking — most dealers are gross. That’s not what I mean. What I mean is that any dealer willing to hold inventory for that long is trying his damnedest to make front-end gross on each and every car, so the longer the car sits there, the more stubborn he’ll be about the price on it.

When I ask a poorly run dealer what his average front-end gross is, I generally get one of two answers:

  • “About $1,500 to $2,500, somewhere in there.”
  • “I don’t know.”

So you’re telling me that there’s a thousand-dollar variance? Or, even worse, that you don’t even know? You might be wondering how a dealer like that even knows if he’s making money. I’ll tell you: he doesn’t. He’s hoping that some dummy like you will come in and give him full pop for his car. It’s the “there’s an ass for every seat” mentality. Good luck getting a good deal from that guy.

Smart dealers understand that the best car to make money on is one you turn quickly so you can reinvest that money in a new unit. They price cars fairly from the get-go, and understand turning a car as fast as possible gives them that opportunity. Dealers like that know exactly how much money they make per car on the front-end, as well as how quickly they turn their inventory. They know that it’s better to take a small loss at 60 days than a huge loss at 120.

Trust your Uncle Bark on this one. Use one of the third-party tools online that tells you how long a car has sat on the dealer’s lot. If you see a dealer that has a lot of inventory that’s aged for 90 days or more, your best bet is to look somewhere else as he’s still hoping to make some gross profit. Find a dealer that’s turning his inventory quickly and efficiently, and look for cars that are about 60 days old — that’s your best bet to pay a fair price.

I realize that’s not what every other car buying article on the Internet says — but they’re wrong.

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104 Comments on “Bark’s Bites: Aged Inventory Doesn’t Automatically Mean a Good Deal...”


  • avatar

    There’s one more big cost for a dealer with stagnant inventory that I can think of. Insurance.

  • avatar
    brettc

    Can someone list the third party tools that can be used to see how long a car is on a lot? Usually I go by the month a new car was inspected here in Maine if I’m there on a Sunday.

    Kind of related – Saw a new 2015 TDI Golf wagon yesterday that was inspected 7/2015. Curious to see if those TDIs will ever be sold period, and if they are, what sort of discount might be applied to them.

  • avatar
    Pch101

    The large dealerships should know something about inventory management and the benefit of dumping aging units.

    The little guys are more likely to operate on gut instinct, i.e. not necessarily do the smart thing.

    • 0 avatar

      You’d think so, wouldn’t you? Not always the case though. Some large groups are the worst offenders, often because they’ve put a hard pack on the car. Then, they sell it to another dealer in the group—who ALSO packs the car. It’s madness.

      • 0 avatar
        TonyJZX

        Surely that dynamic where a car gets passed from dealer to dealer cant go on for very long.

        That would actually be a interesting study. To see orphans get passed around see how they eventually got sold or if they became shop service cars for customers or something like that.

        • 0 avatar

          Again, common sense doesn’t always apply in the car business. I’ve seen the same VIN get listed at at least five different rooftops in the same group—and it got more expensive each time!

          • 0 avatar
            Sjalabais

            But…how does the circus end? A piano drops on out and there will be an insurance payout?

        • 0 avatar
          Kyree S. Williams

          That’s what happened to my old Jetta SportWagen TDI. The dealership to which I sold it was unable to unload it, and so it became a service shuttle car. I see it from time to time.

          • 0 avatar
            laserwizard

            Smart move – cheaper to use that vehicle than to put in a new vehicle that starts at a higher cost – once your used car is used up, put it on the lot a a real cheap price (above what they would think they could get at auction) or sell it to a local used car dealer.

  • avatar
    ajla

    What about with new cars?

    • 0 avatar

      Holding cost is calculated slightly differently on new inventory. The major difference with new, however, is that there’s no auction to take the new inventory to, so your chances on getting a deal on new should get a little better with time, especially at the end/beginning of a model years.

      Keep in mind, most domestic and non-luxury import brands are ready to sell new cars at invoice from day one, provided that you aren’t talking about a rare car.

    • 0 avatar
      Jagboi

      I wondered about that too. Saw a dealer advertising some 2014’s as new cars with delivery miles on them. Price wasn’t much cheaper than it was in 2014.

    • 0 avatar

      Yeah new is different they can only trade to another dealer or sell it. If it’s old they really want to sell it.

  • avatar
    VoGo

    Thoughtful advice. Thanks, Bark.

  • avatar
    eManual

    Bark,

    Best column on TTAC in a while – you even beat your brother sometimes!

  • avatar
    1998redwagon

    makes sense in some respects. if the dealer is willing to hold on to a car beyond 60 days wouldn’t they be willing to deal on it at least as much as they would when it was on their lot at day 40 or 50?

    for unicorns (that brown diesel manual vw wagon we all lust after) i can see both hold it until someone comes adn pays us what we want and shit, we have someone who is actually interested in this thing we need to make a deal.

    my thought is that if the vehicle is not showing any interest in the past 90 days and someone comes along who is interested a rational person would say hey i need to make a deal. or is that the problem? not a rational dealer?

    • 0 avatar

      There’s a saying in the car business: “Every car had a story.” Once the car gets old, some dealers do, indeed, cease to be rational. This is doubly true if it’s a rare or interesting car.

      • 0 avatar
        dwford

        There becomes an emotional aspect to the sale on the part of the dealer that can range from “get rid of it now at any price” to “We have too much invested in it to give it away.” So sometimes that great deal is just a mood swing away.

        • 0 avatar
          Kyree S. Williams

          My mom is pretty skilled at being the “Good Little Christian” and wearing them down to the point that they just want her out of their faces. “Yes, we’ll take *another* $2K off the nine-month-old loaded Sonata that’s been sitting on the lot for 90 days…and we’ll fix the hail damage…and we’ll provide you with a loaner while we do it.”

    • 0 avatar
      slance66

      My own recent experience was that those dealers that bought the car at auction, and were absolutely wholesaling it at 60 days, simply didn’t care to bargain. It wasn’t going to sit longer, they stated their “internet price” and that was that.

      The dealers who had stock via trades, they were willing to move, yet typically started higher.

      I ended up buy new out of frustration that every used car was either poorly maintained (including being literally dirty inside and out while on the lot) or overpriced. I have a hard time believing that you changed the oil, brake pads, and did several other things you claimed and neglected to empty an ashtray full of ashes or vacuum the car.

  • avatar
    an innocent man

    Ha! I knew it! It IS possible to lose money on each individual sale but make it up on volume. GM FTW!

  • avatar

    You’re forgetting another variable – the car you buy for a member of the dealer’s family to use for 60-120 days, then eventually return with 10k more miles and needing another full recon, then wondering why that car lost $500.

    On a serious note, you’re generally correct in that an aged unit over 60 days is mostly less-profitable and harder to sell than a fresher one, but not always the case. Specialty cars sometimes sit but then bring all the money to the right person. Also, I often ‘stock up’ certain cars for certain seasons, ex. I might have convertibles I bought for cheap before season that are ‘aged’ 40-60 days, but they disappear in about two weeks all for a profit.

    I’ve worked for both guys that are virtually all cash/own-your-own-units and 100% floorplan with minimal liquidity and you truly see the entire spectrum by doing so. The cash guy had cars that were on hand for literally 300-500 days; there were a dozen units out of a hundred that were aged 1000 days! He had a truly archaic “they’re still worth $x; I ain’t selling at no loss” mentality and didn’t understand the operational advantage of ‘filling the bag’ with cash, even at a ‘loss’ to get the opportunity to buy fresher inventory to make more cash quicker.

    The guy that had all floorplan and no cash lasted about a year. ’nuff said.

    • 0 avatar

      Specialty cars are a different animal, agreed.

      Yeah, the all cash guys are frequently all cash because they can’t get anybody to floorplan them!

      • 0 avatar
        Nick 2012

        I lusted after an SS for a while, and it was fascinating watching the same units float around from dealer to dealer. I think there are still a few NEW 2014 SSs on lots just waiting for the right buyer.

    • 0 avatar

      There is a guy near me who I’m guessing is an all cash kind of guy stocks 99% 3/4 ton trucks with a few 1/2 tons and SUV’s here and there. He holds them forever so my guess is there not floor planned and he charges a fortune. But he does turn about 1/2 the lot every 4 months or so (there are 3-4 trucks that have been there over a year), so I’m guessing he’s making up for some cost with higher sale prices (waiting for the right buyer) .

      Also the Buy here Pay here guys don’t seem to turn much either again I’m guessing cash. The new dealers have quick turns on used stuff.

  • avatar

    Mods: Is it OK if I ask for some general used-car buying advice in this thread? I have a specific scenario I’d like to bounce off these folks. Alternately I could email if to you if you’re looking for article fodder :)

  • avatar
    gearhead77

    In the days before the internet REALLY changed car buying, I bought a new 04 Mitsubishi Lancer Sportback in ’05 that sat for over a year. It was was listed at 14k, well below its 19k sticker and at least $1000 under invoice if not more. I needed a small wagon and wanted to give Mitsu a chance. Turned out to be a very good car for two and a half years and 73k miles. I was rear-ended and that killed it.

    Our 08 Mazda 5 was a leftover in May of ’09 too, 3000 cash from Mazda but there weren’t any around us. We flew to New York and bought it from a Mazda dealer in the Bronx, drove it home. Essentially bought a Grand Touring for the price of a Sport.

    My last one was my ’10 Altima that I leased new in 2011. It must have been a fleet deal that went bad, because they had a bunch of them and were early 2010 build dates. All S models, white with beige interior and power seat delete. Sign and Drive lease outside the national lease program. Found it in the local paper (yes, we still get the Sunday edition)

    My current lease, a ’16 Cruze Limited didn’t sit long, under a month. But the lease deal, covered here (again in the Sunday paper) for the local volume Chevy store was different than the national program.

    I’m using anecdotal evidence because I’ve had decent luck getting a deal on aged inventory, though I’m certain it’s because what I needed wasn’t in demand. But a deal is a deal.

    • 0 avatar

      New is a different animal. I did the same thing with an ’04 Mazda Rx-8 in May of ’05.

      • 0 avatar
        Pantherlove

        Yeah they are, I watched a 2009 Cobalt SS sedan sit on a lot for over a year on my way to work. I went in to inquire about it when I was ready to buy a new car and they took 6 grand off the MSRP with basically zero resistance.

    • 0 avatar
      threeer

      Still driving my 2004 Lancer Sportback (admittedly, bought used in 2010). But more or less the same deal. Nobody wanted it, as it sat for months alongside trucks and SUVs. I waited for nearly two months before pulling the trigger on it. 172k on it now (I bought it with a shade over 60k on it), and the only real issue is (now) the A/C isn’t working, which is a bummer as summer is creeping up here in Northern Alabama. All in all, been very dependable. Wish they would have made the Sportback with a manual transmission…

      Funny, as we also now own a Cruze Limited (’13 model).

  • avatar
    319583076

    Perhaps I’m stupid, unlucky, or both but nearly all of the businesses I’ve worked for have little to no clue how much money they make (if any) and how or why they make that money. In other words, most businesses make money in spite of what they do rather than because of it (in my experience).

    Nice article, Bark.

    • 0 avatar
      Kyree S. Williams

      “In other words, most businesses make money in spite of what they do rather than because of it (in my experience).”

      This. It’s a similar story for web spending. “Do you know why you spend $2,000 a month on Google AdSense and how many conversions you see from it? No? I’m not surprised.”

    • 0 avatar

      Yeah I know what you mean but I did work for a retailer at one point that knew exactly what everything cost and had thousands of spreadsheets showing it all. Notably he had far and away the largest cash reserves of any place I have ever worked.

  • avatar
    Cactuar

    If I were a dealer strictly in the business of making money I’d price the cars as low as I can so I can get as many people in the F&I office as possible. My primary business would be accessories and insurance. The cars would simply be a pretext to sell high-margin junk.

    I would be known as The King of the Back-End.

    • 0 avatar
      VoGo

      I suppose that’s a better nickname than “Queen of the Back-End”

      • 0 avatar
        Whatnext

        Interesting, thanks Bark. I’m trying to figure out why my local Chrysler dealer still has a loaded 300C Platinum V8 with just 6,700 km on his lot after 3 months?

    • 0 avatar
      dal20402

      I’m so thankful whenever a car dealer is NOT like this.

      The dealer who just leased me my C-Max only tried to sell me one add-on, which was insurance to cover damage at lease end. I had negotiated the lease terms before coming in, and was in and out in an hour. I made sure to tell the finance guy how much I appreciated the simple, efficient, quick approach.

    • 0 avatar
      87 Morgan

      @Cactuar…you mean you would name your Auto store or Group..Hendrick, Sonic, AutoNation, or Larry Miller. A whole host of others as well.

    • 0 avatar
      onyxtape

      I just bought a car last weekend and it was pretty painless. I negotiated the purchase price before going in, and I was in and out in less than 3 hours – which included test drive, going to the bank to pick up the down payment check, negotiating the previously unplanned trade-in, and the F&I shakedown.

      I told the guy I had a meeting to get to and he had to hurry things along (I wasn’t lying). The F&I manager just printed out quotes for the Scotchguard, 3M cover, and extended warranties and sent me on my way. They even told me to bring in my trade-in the next day (I drove to the dealer in my other car) so I can get to my meeting on time.

  • avatar
    deanst

    Opportunity cost is a bit nebulous – if the dealer has excess capacity – i.e. doesn’t completely fill up his lot with cars, then the opportunity cost is essentially zero – the unsold car is not taking up space that would otherwise be productive.

    Similar faulty logic is used by poor investors – they hold on too long to cover their cost base, whereas the most successful investors can quickly recognize when they are wrong and get out before the loss grows even larger. A successful dealer would act similarly.

  • avatar

    The astute dealer in 2016 will try and retail a used vehicle within a 30 day time frame in a major metro market. Perhaps in a 45 day time frame in a secondary market.
    By now everyone knows that its 60 days and out with any used vehicle.
    With the myriad of software that is available every dealer knows that 90 day plus units no longer present a profitable retail opportunity.
    Pricing high in the first 30 days is a strategy used by dealers who generally cater to a “credit challenged” customer base. The higher price provides the opportunity to calibrate the financial package.
    In your opportunity cost you are not considering the cost of the vehicle occupying the space. 1,500 gross on a 25K vehicle in 60 days, compared to 1,500 on a 10K vehicle in 30 days generates different returns.
    The proactive perspective is not to trade vehicles after the fact in a dealer group, but to assign or allocate them as they are appraised.
    Specialty vehicles can still subscribe to “Go find another like this one”

    • 0 avatar

      Do you know what percentage of dealers still price “by gut?” Or based on their “years of experience?” Despite the seeming omnipresence of RedBumper, FirstLook, and the like, there are no shortage of dealers who still use black book pricing—or worse, pay for an inventory pricing tool and then ignore it!

      • 0 avatar

        Its easy to get lost down the rabbit hole of market analytics.

        Market analytics for my area say I should have almost exlusively midsize Hondas, Camries, and CR-Vs because demand is high and they move quick. Yet I purposely avoid these cars because the margins are so thin between back of book wholesale and retail that there’s no fun left. Plus, white middle class white bread people who buy these cars around here wouldn’t buy them from my anyway.

        I could buy a bunch of 25-35k mile 4-door Accord SEs like vAuto tells me to, then kick myself in the a$$ 90 days from now when I sell maybe two for $600 a copy. Or I could do what I’m doing and buy MINIs and Lincolns and Jettas way behind rough, stack ’em deep, sell ’em relatively cheap, and not worry.

        A smaller independent dealership like me HAS to go my experience/gut to be able to move quick.

        • 0 avatar
          Sjalabais

          I like that strategy. So does that earn you a reputation for a market segment?

          Here in Norway, cars like the MINI, Smart and retro Fiats sell well new, but their residual looks like a freefall diagram.

          Toyota, Subaru, Volvo hold their value well.

          • 0 avatar

            Sjalabais, it does. I’m the Jeep Lot, the Impulse Buy (Corvette, convertibles, sports car) Lot, and The Lot Where You Buy Your Kid A Car For $10k And Under.

            I’m also the only guy around here who sells a $2000 car that you can actually drive more than six blocks. My cheapie back-row stuff are 99% trade-ins, so I know they run/drive/shift, etc. I recon them and make them dependable and do as much cosmetics as price allows and I think people have come to see the difference.

            I also do a fair amount of wholesale for a retail operation, so the lot always gets jostled around with transporters coming and going 3-4 times a week, so people think the inventory is a lot fresher than it is. Not a bad thing.

          • 0 avatar
            28-Cars-Later

            West Florida’s finest establishment of autocars, with free speed holes installed on demand.

        • 0 avatar
          Sjalabais

          I know you’re a good seller, too, when you provide such a perfect, enthusiast mintet answer in just the right place for it. Very nice!

      • 0 avatar

        Bark,

        The fact that most if not all used car dealers or departments “Market Price” vehicles to retail them quickly has removed a good portion of the “gut” when appraising or placing a value on a used vehicle.
        Most if not all dealer groups have a pricing tool to “market price” their vehicles.
        Even the small low volume independent dealer will quickly have an idea of the market price for any vehicle in his inventory.
        Once any dealer knows the current market price, its as simple as deducting the gross and reconditioning.
        Dealers might ignore an inventory tool to manage the inventory, but they surely have to market price to retail vehicles.
        Consumers are just as astute in knowing the market price of a vehicle they are trading in or considering to acquire.
        Big data rules used cars and markets, the faster any dealer can curate the big data for the specific vehicle he is considering, the easier it is. Especially that the customer can also access big data in a slower fashion (without the curating software).
        From a buyers perspective the vehicle that has been sitting on a lot for 90+ days is not a deal, and its preferable to have the dealer keep on sitting on it.

        • 0 avatar

          I wish this were true. It isn’t. I have visited over 1000 dealers in the last twelve months. The vast majority of them live in pricing fantasyland.

          • 0 avatar

            The major dealer groups in the US have increased their used car sales in the first quarter of 2016. They all retail vehicles in a 30 day time frame.
            If the pricing is in fantasyland as you say, the buyers are also in fantasyland to acquire the cars at such prices.

          • 0 avatar

            Improved over 2015, maybe. That’s not saying much on the used side, is it?

      • 0 avatar
        cgjeep

        Some dealers just throw 4k above and beyond what they have in it and that’s the asking price.

  • avatar
    slance66

    Bark,

    I’d be interested in your take on pricing. I’ve seen some dealers price based on their cost. That results in some cars being a deal and others a lousy deal, simply based on what the dealer paid. I’ve seen other dealers pricing at market+, irrespective of their cost, likely making big profit on some cars and little on others.

    My experience lately is that used prices on auction sourced cars are lousy.

  • avatar
    Robert.Walter

    End of the model year is not the only time to get good new car deals. There’s also opportunity at the end of the month and end of the quarter, where OEMs heap incentives on dealers to help them have good numbers to report to the press. If a dealer is stretching to meet a target, and you are in the right place with the right brand or model, and a bit of luck, these can accrue to you.

    In the comment section of one of Bark’s previous fine articles, I wrote a detailed report on how we recently bought a 2016 Honda fit EXL and saved about $1500 on the purchase, and this was due to one dealer quoting $500 below all other dealers because they were madly hunting incentives for meeting an OEM quota.

    Enablers to getting that quote were extensive shopping throughout the region prior to negotiating (i.e. Tracking EXL inventory by spreadsheet –for about 5 months because the EXL was so slow to arrive in decent quantities–, watching how long EX and EXL cars stayed on the lot (some EXLs took 8w+ to move, where EX trim moved much quicker), doing an initial quote round with dealers having less desirable colors in stock, negotiating with the final cut of dealers by taking the best quote and running it by the other dealers again. Most didn’t change and tried to cast FUD on both the vehicle and the offer which was 500$ below the 2 next closest, but “her” car came from a dealer with a color sis wanted, so the quote was related to the deal, not the specific car then on his lot. (Ironically, the car she bought, was a dealer transfer from her local dealer, who was 600$ more expensive than the larger dealer 40 miles away from which we bought. More oddly, I separately negotiated all the accessories and had a 32% savings from an online Honda dealer, which was met by the local dealer’s parts counter, but refused by the bigger dealer’s parts boss.)

    As I’m overseas, I exclusively did my research online and negotiations via Skype toll free. (She also got a bundle of frequent flier miles as we paid the entire amount on her credit card.)

    You can look for the details in that other comment section; if I had time I’d try to add a link but I don’t.

    (My sister loves her car except for the missing CarPlay integration and calls me almost daily to tell me this, and how much she loves me for helping her.)

    • 0 avatar
      Kyree S. Williams

      That’s an excellent story. Your sister sounds very grateful that you helped her out. That said, I’m surprised the dealer let her pay for the whole car with a credit card, principally because of (a) merchant fees and (b) the way consumers are allowed to dispute a credit transaction.

      • 0 avatar
        70Cougar

        I made a $10,000 down payment on a new Honda with a credit card with no pushback from the dealer. I had a six-months no interest offer on the card, which gave me plenty of time to unload my previous car via private sale.

      • 0 avatar
        Sigivald

        Well, on b), it’s not like they can’t get the car back* and recoup almost everything if not everything.

        I think a) is the real reason – a couple of percent on a new car is just brutal for your margins.

        Disputes where you have a signed receipt and delivered the car at the time of the charge are … not likely to work out for the disputer; VISA etc. predicate chargebacks on fraud or charging before delivery, basically.

      • 0 avatar
        Robert.Walter

        The normal card transaction perks are expressly excluded in the AMEX cardholder agreement. I was prepared with this info in case it was used as a reason to decline full price acceptance; it didn’t come up though.

        The only reason that a dealer will, or should, balk at the use of a card for the whole payment is the fee. But with a well timed presentation of the card and some creative ideas it is possible; she came with a 18k$ credit union cashier’s cheque (for the price minus the 3k$ deposit she would have put on the card, but the cheque never saw the light of day.)

        The credit union transferred the 18k$ into her checking account and she then paid off the charge a few days after the sale.

  • avatar
    OzCop

    I looked for a specific car for 3 months locally in the DFW metroplex. I found one the first week I was looking. I called the dealer and inquired about the car, and more importantly, was he firm on the price as listed on the internet. Indeed, the 15K price was firm. I never went to look at the car since it was 45 miles from my location through traffic patterns that no human should ever have to traverse.
    I continued to search for this specific car, and indeed found examples that were close, but most of them had the panoramic sunroof option. Most were priced a couple thousand less than the dealer who had the exact car I wanted, but were not a complete package.
    The car I was looking for was the 09 through 13 Mini Cooper with John Cooper Works package. I could not justify paying 15 grand plus for a car with 70K plus on the odo, when I knew there had to be better deals out there.
    Two months passed and I called the first dealer with the car mentioned above and asked if he would take 12K for the car and he laughed out loud…no way he said, 15K was still the selling price.
    I found the exact car from a private seller, with 8K less miles, for 5K less price after doing a nationwide search. I sent the dealer a pic of the car and told him I was still willing to pay him 12K rather than drive to Chattanooga and haul this one back. Nope, 15K was still the price.
    Bottom line, it has been nearly 120 days since I first inquired about the original car and the dealer still has it, no price drop. On the other hand, I have the same car, except my is red with black top, and the dealer car is red with white top. And even counting the the cost of travel to pick up my JCW jewel, I have 4500 in my pocket that I would not have had if I had made the purchase locally…

  • avatar
    SCE to AUX

    Excellent, timely article, since I (my son, actually) will likely be buying a used car this month.

    Does this story play out for cars that are ~13 years old? We’re in the mid- to low-price market: 03 Camry, etc., shopping at places that only sell used cars.

    • 0 avatar

      Absolutely. In fact, there’s likely going to be less profit in those cars from the jump, since they’re priced lower. Sub-$10k inventory always turns quickly in comparison, too, so if you see a cheap car that’s aged 90 days or more, buyer beware.

  • avatar
    PrincipalDan

    Local Buick GMC Dealer has had a BMW 6 series coupe on the lot, it has been there for several months. I know that they likely picked it up at an auction in Phoenix but god knows how they expect to sell it here (in Gallup NM). I wonder what it is costing them.

    • 0 avatar

      I can already tell you what that dealer would say if you advised him to drop the price—“I can’t get another one!”

      The question is, why would you WANT another one?

    • 0 avatar
      87 Morgan

      I would doubt seriously they bought it at an auction, I would go with 95% likely was a trade in.

      • 0 avatar
        PrincipalDan

        @87 Morgan

        In the most impoverished county in the United States?

        We do have many millionaires (made money in Indian Jewelry, uranium mining, oil, cattle, pawn, payday loan, etc…) but most of them either drive highly optioned 4×4 crew cabs or they might have an understated Jaguar, Lexus, or Mercedes. And they trade in said vehicles at the same dealers in Albuquerque, Santa Fe, or Phoenix that they purchased them.

        I’d be highly surprised if it was a trade. (FYI it is in really nice physical condition and this is at a dealer that does very little reconditioning of cars.)

  • avatar
    r129

    Much depends on how many cars of the type you’re looking for are on the market, and how desirable they are. My nightmare scenario, which happens all too frequently, is when someone comes to me looking for advice when buying a late-model used Subaru. There aren’t many examples, they are all priced uncomfortably close to the cost of a new one, and people will still buy them anyway.

    On the other hand, when I was searching for my W-body Impala, I felt like the world was my oyster. I had a hundred or so to choose from, the market was flooded with former rentals, and poor resale value was my friend. Of course I was looking for a victory red Impala with a bench seat that wasn’t a former rental, which was like looking for a needle in a haystack, but the dealer didn’t realize that once I finally found one. It had just hit the lot the day before, but market conditions were such that I was able to get a good deal.

    • 0 avatar
      dal20402

      My experience, at least in this Subaru-loving market, is that anyone contemplating buying a Subaru that’s less than three years old would be better served waiting for incentives to show up and then buying a new one.

      I recently sold my three-year-old Forester XT *to a dealer*, with 28k miles on it, for only about $5000 less than I paid for it new.

      • 0 avatar
        r129

        I go down that road every time. It usually goes something like, “You can get this brand new Mazda for $1,000 less than that 2 year old Subaru with 30,000 miles, or you can get a brand new Subaru for $2,000 more.” Inevitably, the person buys the used Subaru anyway.

      • 0 avatar
        Sjalabais

        That is an amazing deal. And…how can a market perform so irrational? It’s not like there are actual waiting times for Subarus, despite having a market-leading new car turnover?

        • 0 avatar
          dal20402

          I really don’t know. To me, given the prices of used Outbacks or Foresters, buying a new one is a no-brainer. I think some buyers must have just had “new = wasteful” drilled too deeply into their brains.

  • avatar
    Chan

    So the TL;DR summary is:

    A smart dealer on top of his numbers will deal on stale inventory.

    A less-smart dealer may or may not.

    Make an offer anyway.

    • 0 avatar

      Sure, if you have unlimited time and/or patience.

    • 0 avatar
      28-Cars-Later

      I would add, depending on their cash flow situation. A dealer with good cash flow can better afford to sit on a stale unit which has high margin than one who is in a slump and needs to free up cash for new inventory, payroll, taxes etc and is more willing to deal.

      • 0 avatar

        My guess is my current car XC70 was cheap due to cash flow. The dealer mentioned paying off the floor plan to get me a title and it was a good 40% below market for the car. (small used car only dealer)

      • 0 avatar
        JohnTaurus_3.0_AX4N

        @28, youre right. Just after high school, I walked on to a pot lot (what we call a low-end car dealer) to browse. I found a Civic, an old one (first gen that had a sedan bodystyle, which is what this one was), but it ran well, was rust free, and it only needed an alternator. The mechanic told me the owner was in a bind and needed cash today to pay an overdue bill. I offered $500 if he fixed the alternator. Well, they swapped it with one from a wrecked one, but it still wasnt charging, so I got the car for $250, including two good batteries so I was assured it would make it home. The owner grumbled about having given $800 for it on trade.

        I ended up getting the oppertunity to move across country a week later. I sold the car to an import specialist junkyard/service center/used car lot for $600, still with the charging issue. He couldnt wait to buy it. I told him it seemed like a damn good car other than the charging issue, his reply: “nahh, its worth more dead than alive”.

  • avatar
    SunnyvaleCA

    In 2009, some Porsche dealers were sitting on 2008 Caymans. The 2009 had the DFI engine and a slight cosmetic bump (inside and out), making the 2008 model a tough sell. A bunch of people picked up brand new 2008 Cayman S vehicles for $48k. The one I bought was listed at $66k. Still an expensive car, but with a $18k discount, who could argue?

    One thing that was odd was that no dealer (to my knowledge) sold one for less than $48k. I’m not sure if Porsche AG enforced some price floor or something.

  • avatar
    Sjalabais

    “Smart dealers understand that the best car to make money on is one you turn quickly so you can reinvest that money in a new unit.”

    Which also translates to few rare cars on the lot, as most people just want a Camry anyway?

    Btw, I just came across some numbers that fit as well here as anywhere: Of all the Audi A6 sold in Norway last year, 93.2% were wagons, and very close to that share were 4wd. For the BMW 5, 74.4% were wagons, 94.8% had 4wd. Now you know that, eh?

  • avatar
    olddavid

    When I retired, I knew many who espoused these philosophical tenets. Unfortunately, most of them were 20 year men – one year twenty times over. As for the numbers? Please see Clemens, Samuel, and his commentary on statistical significance.

  • avatar
    Xeranar

    This is pretty normal with ‘through sellers’ like car dealerships. They don’t really care about the inventory, they’re not like a grocery store or a department store. This is about getting an unit off your lot to get the next unit on.

    It’s actually quite interesting to look at inventory space a representative return on investment though it’s confusing and a bit misleading to refer to the throughput on a car as ‘investment cost’ when it’s more capital cost, you’re not going to invest in a different car to get a different rate of return, you’re looking to grab a product and sell it. I see what you mean when you refer to it as a ‘investment’ and passing it along at auction for a small profit/loss to re-try with a new product but it isn’t costing you the same as piece of stock would.

  • avatar
    ToddAtlasF1

    This is a strong article because it effectively explains the behavior of dealers when they’re being irrational. Why did Mossy group dealers have cars they should have sold at least a year earlier last time I looked at their inventory? Now I know. I suspect that the only reason such places can stay in business is because there are plenty of people in segments of the population that isolate them from any economic realities of survival. Most of them work for the government, or universities fattened by government-gifted student ‘loans.’

  • avatar

    Carfax and internet research showed my most recent used buy was on lot for 90 plus days. This helped as the price went down about 2k over the time period.

    The fact it was an RWD only car made it lot poison.

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