Jill Merriam Key Hyundai Blog

Tip #2: How to Know What to Pay for a Used Car

May 13, 2010

I still remember sitting in micro-economics at Lehigh University in the late 1980s and learning about efficient capital markets and the intersection of supply and demand.  The reality is the internet has made the used car market one of the most efficient markets out there.  If you are a used car buyer and  take 10 minutes to research buying a used car, there is no way you can get ripped off on price.  You may still get ripped off on value, but more about that later (in fact, you should be much more worried about that).

So, you may say, why do I feel so strongly about that?  Well, the shift of power away from the dealership and to the buyer started with autotrader.com and cars.com listing cars by price.  With a click of a button, the consumer picks the make and model they are looking for, changes the sort from low-priced to high-priced, changes the distance you’d be willing to drive for the car and viola, you can shop for a car without even leaving your house.  You no longer have to spend a Saturday afternoon driving to every Hyundai dealer in CT to look for a silver, 2008 Hyundai Sonata with around 30,000 miles on it or a white 2010 Hyundai Santa Fe with FWD.    Not only that, but dealers are spending thousands of dollars a month to list cars on Autotrader.com and cars.com.  So, there’s definitely been a huge shift in power from the dealer to the consumer over the past five years.

Then, about a year or two ago, another shift happened to make the used car market even more of a buyer’s market.  A company called vAuto started to market their product to car dealers and we all bought in hook, line and sinker.  This product pulls together all the pricing information in the marketplace on each and every individual car so that we, as the dealer, can price our cars competitively.  So, what effectively is happening is that every dealer is pulling this information before they price a car and then trying to price their car to come up first, second or third on autotrader.com or cars.com.  Think about it for a minute, what this effectively does is lower the overall prices of used cars.  This is particularly the case with a very generic used car that there are tons of, like a Chevrolet Cobalt.

So, if you are in the market for a used car and you know what you want, start by going on autotrader.com or cars.com and see the average price of the car you want and where they are located.  That will tell you around the ballpark price you should be paying.  You should also note, though, with an efficient market, comes less negotiating.  So, don’t be surprised if the dealer who has the near lowest price won’t negotiate much with you.  The dealer’s margin is probably signficantly lower than they would like it to be already.

Once you’ve figured out the price that you want to pay, the most important question is where you want to buy your car.  I would argue that with a used car, where you buy it is way more important than finding the absolute lowest price.   In fact, now that the internet has forced dealers to operate at lower margins, a lot of dealerships are cutting corners and offering you a less than perfect profit for your money.  I am going to talk much more about that tomorrow.

If you need honest information on how to buy a car, feel free to email me at jillcares@keycars.com or visit my website at http://keycars.com  My name is Jill Merriam, I am owner of Key Hyundai in Manchester, CT and Milford, CT and dealer for the people.  You can learn more about me at http://jillforthepeople.com

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