Wholesaling cars is a must for dealers, but the process can be confusing. There are many different pricing guides out there, making it tough to keep track of what’s what. You need to know the car wholesale value, but how do you find the right number in a sea of advice? Meeting your bottom line and making a profit is not a one-step process.
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What about the cars you bought that just don’t sell? What do you do with a car that isn’t hot in your market? These are just a couple of questions you should be asking yourself, as you have to get them off the lot before they lose value.
Follow these tips to price your wholesale cars, and you’ll quickly be on your way to wholesale car auction success while maximizing profits.
We’ve all heard this advice before. To make money on a deal you need to buy low and sell high. The real question is, how do we accomplish this?
When it comes to your car’s wholesale value, the suggestion about always buying 20% below retail gets thrown around a lot. But is that realistic? We know it can be difficult to find great inventory. There is no one size fits all approach to pricing your used cars.
There are a few ways to get a ballpark number of a car’s price. These methods can help you develop a starting point for your car’s wholesale value:
Not all used vehicle pricing guides are created equal. Some are for the public trying to understand terms like MSRP. Still, there are a few guides created specifically for car dealers. We recommend checking out some of the following used car pricing guides:
You can use a guide to get a basic price, but what about the specifics? Registered dealers at ACV Auctions have access to data-driven used vehicle reports. These reports include every car sold on our auction site. You get real-time data on car pricing locally and nationally. You can even explore details like condition, damage, mileage, trim, and more.
With these powerful tools at your fingertips, you can find the average price a car sells for at auction. You’re one step closer to setting the reserve price and auctioning your car.
Don’t forget, when you sell cars with ACV Auctions, we send qualified vehicle evaluation experts to you. This gives you the exact condition of your vehicles as buyers will see them.
With so many price points, what do you focus on? Let’s narrow this down. You need to know what people will pay for a new or used car. Start here before your dealership decides on wholesale prices.
Knowing the average amount you think your customer will pay gives you the power when you sell a car at auction. This sets a realistic range for where negotiations might end for a buyer. Knowing what the customer will want to pay, dealerships start with a higher asking price. This will influence what car buyers will pay at auction. If you aren’t far enough under the MSRP or KBB numbers, other dealerships can’t profit.
Of course, there are lots of other factors. To decide the asking price, you need to know a few more things. Consider the popularity of the car, the specific car model, location, and your expenses. Keeping this number in mind helps to set a reserve price that other dealerships can make a margin on.
To turn a profit when wholesaling cars, covering any cost you put in is key. There are expectations we will cover below, but as a rule, it’s best to try to profit from every car. We recommend keeping these costs in mind for successful buying and wholesaling for your dealership:
Inventory can be sourced from all over. That can include trade-ins, private sellers, public auctions, or wholesale auctions. No matter what, your base cost is what you first paid for the car. This is the absolute bottom price you want to sell your car for.
If you're buying a car to wholesale right away, make sure you pay below market value to increase profits. When it comes to auctions, you have options if there is a discrepancy between the reserve price and the final top bid. Negotiations are possible, especially with ACV Deal Makers who exist to help mediate on any deal that might need to be hammered out. As you know, the lower you can get your base cost, the more room you have to sell at wholesale for a higher price.
Many wholesalers buy cars that need work. Dealerships with mechanics and auto-body shops can fix used cars and give them some TLC. If you fix a car efficiently, you can increase desirability and your asking price at auction.
That said, it does raise your cost. Keep careful track of parts, paint, and labor costs. Make sure your overhead is reflected in the wholesale value of the car.
Time is the trickiest factor and yes, it’s a cost! Keep these factors in mind when considering time:
Keep a detailed list of all costs you put into the car. This will come in handy when pricing for wholesale auctions. Selling “at cost” will generally be the base price and the costs you put into the car after purchase. To make a profit, you will need to leave enough margin between this number and your reserve price.
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It’s not all spreadsheets and math though. Knowing what people want and having an area of expertise can make a huge difference in your success.
Buying cars you know seems like easy advice, but it can be much harder than it sounds. So what do people really mean when they say to buy what you know?
Buy cars where you can estimate your expenses and you’ll be golden. It’s all about knowing as much as you can and setting a clear wholesaling price so you profit. No matter how you sell, staying in your wheelhouse will keep costs low and profits high.
It can be easy to get in over your head on a car. Don’t worry! This happens to every dealer at some point. Luckily, wholesaling can be a great way to cut your losses, especially if you can’t move a car with sunk costs.
So how do you price a car you just can’t sell? You’ll still need to consider the above, but this is where you might want to cut your losses. Cars that stay on your lot too long can be a liability. That car you thought was perfect for your customers and didn’t sell? Don’t hold onto it while you drown floor plan fees.
What about all that money you put in? The total sunk cost may not be what a buyer will pay at wholesale. But, if the car stays on your lot, in the end, it won’t matter. It’s better to wholesale it at a loss than risk losing even more money.
You will need to pick a price that won’t scare off buyers, even if you lose some money. The longer you have the car, the more fees you pay. So wholesaling it is the smart choice, even if you need to take a loss in the long run.
While there is no easy one-stop answer to determining wholesale value, it all comes down to what you know. By incorporating these tips, you’ll know your margins and be in a better position to make a profit at wholesale–all while setting prices car dealers will find attractive.
Now that you know more about vehicle pricing for your dealership, you are poised for success and ready to get selling! Want to learn more about wholesaling or vehicle pricing strategies? Check out our Ultimate Guide to Wholesaling for Dealers or Wholesale Vehicle Pricing Strategies for Today's World to get ACV Auctions pricing expert Mario Mancini’s advice.
I am a graduate student trying to buy decent car for around $ (reliability is the most important thing for me). Unfortunately I am in a tiny city and not too many people are selling decent used cars on craigslist. There is a “used car overstock” place close to where I live which, every month, turns over vehicles to wholesalers, although they do sell some of them retail.
If I found a car at this place (or others like it), would a pre-sale inspection and a trip to a body shop give me enough information to know whether the car was in good condition? Or would I be taking a big risk?
If it was in good condition it would have been kept by the trade-in dealer and would now be for sale on their lot.
Most trade-ins and repos that go to wholesale do so because of the potential of needing more work than the vehicle could recover at sale.
Sometimes it’s simply a numbers game, sometimes it’s a bad omen.
Since you’re not buying the car to resell it is now simply a matter of the bottom line of purchase price+repairs+future potential. If you see a vehicle that has a basic good feeling about it , have it checked over and you might just get something good enough in the end.
But watch out, it would not be my first choice. ( 30 year Ford dealer parts man )
Check first for it being mechanically sound. You may choose to live with some of the cosmetics that would have raised the price for a dealer sale prep like dents, scratches, fading paint, no radio, iffy tires etc but the major drive train components could break you later.
In the price range you give, you are either going to get an older model car with low mileage or a newer one with high mileage. Many of the cars that go to wholesale are high mileage cars. If you put 30 to 35K miles on a car per year then you have a 2 to 3 year old car with 70 to 100K miles.
I drove company cars over 30K miles per year for about 25 years. Since the company paid for all the maintenance I kept my cars in good shape. Not all company high mileage drivers are like me, but some are. Don’t be too put off by high miles as many are highway miles that don’t take too much out of a car. If complete service records are available, I always kept mine, and you have the car inspected you can get a good car.
I’d check out the cars on the lot you mentioned. It can’t hurt to look. If you find one you like in your price range, have the inspections done and perhaps you’ll find your car.
In this case, a higher mileage car would be a good thing. That is, high mileage for the year of manufacture. Dealers will sell cars to the overstock business that they don’t think they can sell easily. That includes higher mileage. It could be that high mileage is the only thing wrong with it. But you need to check the car first. If they let your mechanic look at it, then consider it. Otherwise, it could be more of a risk than you amy want to take.
One reason that new car dealers wholesale an older car is that after a certain age, an older car doesn’t have loan value. The purchaser must arrange his/her own financing. Back in my Dad had a nice Cutlass S. I had a Ford Maverick Grabber (sporty model with bucket seats, vinyl seats, etc.) My Dad was trading for a Buick. I thought about trading cars with him because I really liked his Cutlass. The dealer offered a good trade-in for the new Buick for the Cutlass, but he wouldn’t give a very good allowance for the Maverick. The difference between the dealer’s offer for the Cutlass and the Maverick didn’t make trading cars with my Dad worthwhile. The manager showed me the reason–the Cutlass had one more year of loan value and he coud finance the car. The Maverick had no loan value even though it was in excellent condition. I don’t know what the cut-off point is today, but this is one reason why cars that are good transportation values go to the auction. After a car reaches a certain point, if a major repair is necessary, the owner may just walk away from the car and the loan.
There are used car dealers that buy up cars from the auction for resale. They carry the financing and have ways we won’t go into to collect from the purchaser. Stay away from these places.
As a graduate student, you may want to check bulletin boards on campus. There are often professsors going on leave who are trying to sell a car, or a graduate student who needs to sell a car. Check around.
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