How To Determine The Wholesale Value Of A Car In 5 Steps

Dealers must wholesale cars, but it can be a confusing process. It’s hard to keep up with all the different pricing guides. How do you know what the wholesale price of a car is? There are so many different guides out there. Making a profit and meeting your bottom line is not an easy process.

What do you do with the cars that don’t sell in your market? What should you do with an automobile that’s not popular in your area? You should ask yourself these questions, because you need to move them before their value drops.

You’ll be well on your way to wholesale auction while maximising profits.

1. What Is The Wholesale Value Of My Car?

This advice has been given to us all before. You need to buy cheap and sell high in order to make money. How do we achieve this?

Many people suggest that you should always buy your car at a 20% discount from the retail price. But is this realistic? We understand that it is difficult to find great inventory . Pricing used cars is not a one-size-fits all process.

You can get an idea of the price by using a few different methods. You can use these methods to get a rough estimate of your car’s wholesale price:

Check out the used car price guides:

All used vehicle price guides are not created equal. Some guides are designed to help the general public understand MSRP. There are also guides that are designed specifically for car dealers. Check out these used car pricing guides.

  • Kelley Blue Book – People wonder if Kelley Blue Book is a retail or wholesale book. It’s actually a bit of both. KBB helps consumers get an idea of how much their car would be worth to a private buyer. This is also a base for the value of a trade-in that can be used to determine wholesale value.
  • Black Book – This is similar to KBB but requires a subscription. This is a tool for car dealers to estimate wholesale prices. You can input variables such as mileage and condition and adjust the history of the car. You can then get an estimate of the wholesale value and trade-in price. This guide can be a great starting point to start wholesale.
  • NADA guides – NADA is the National Automobile Dealers Association. NADA is an authority in the automobile industry. NADA guides are old-fashioned and were designed originally for car dealers. NADA prices are based on a clean or very clean trade-in. If you are using this guide you may have to lower your estimate if the vehicle is in poor or fair condition.

2. Leave A Margin To Market Price

What do you concentrate on with so many different price points? Let’s get specific. You must know how much people are willing to pay for a used or new car. Before your dealership sets wholesale prices, start here.

  • New cars: We recommend that you use the Manufacturer’s Recommended Retail Price (MSRP) for new cars. The wholesale price for new cars will be at the top of this scale. It is sometimes called the sticker cost of the car. Customers will expect to be charged this amount for a brand new vehicle. It doesn’t necessarily mean that you have to sell it at that price. You can better estimate your budget by knowing what customers expect. You still have time to adjust before the auction.
  • Used cars: Here, we recommend that you keep the KBB number on your mind. This is the number that customers expect from a dealer due to its popularity. This might not be the price you are asking for, but it is important to understand what customers expect.

When you are selling a car, knowing the average price you expect your customers to pay will give you an edge. The range of possible negotiations for the buyer is then set. Dealerships will start by asking for a higher price, knowing what customers are willing to pay. This will affect what buyers pay at auction. Other dealerships cannot profit if you’re not far enough below the MSRP or KBB figures.

There are many other factors. You need to consider a few other factors before you can decide on the asking price. Take into account the location, your costs, the model of car and its popularity. This number helps you set a price at which other dealers can profit.

3. Cover Your Costs

In order to make a profit, you must cover all costs. We will discuss some expectations below, but in general, you should try to make a profit on every car. For your dealership to be successful in buying and selling wholesale, we recommend that you keep these costs in mind:

Base Costs

You can find inventory anywhere. This can include private sellers, trade-ins and public auctions or wholesale auctions. Your base cost will always be the price you paid initially for your car. This is the lowest price that you are willing to sell your vehicle for.

To increase your profits, you should pay less than the market price when you buy a car for wholesale. If there’s a difference between the reserve and the top bid, you can still make a profit at auctions. Negotiations can be done, particularly with ACV Deal Makers. They are there to mediate any deal. You know that the lower your base cost is, the more you have room to sell wholesale at a higher price.

Repair costs

Wholesalers often buy cars in need of repair. Used cars can be fixed by dealerships that have auto-body and mechanic shops. You can raise the value of your car and its appeal at auctions if you repair it efficiently.

It does increase your costs. Track your labor, parts, and paint costs. Be sure that your overhead costs are reflected in the wholesale price of the vehicle.

Time cost

The most important factor is time, and it does cost money! When considering time, keep these things in mind:

  • Sales are seasonal – For instance, car dealers will need to sell cars during the “tax season” when people have money for down payments. If you know when car dealers are looking for cars, it can help increase your profit margins.
  • Depreciation – Time can influence vehicle prices. Each car has an sunk cost, i.e. The total amount spent on a car. Your car’s value can drop if you don’t sell it. This happens when a model gets older or the market changes.
  • Increased cost – Fees accumulate over time. dealer-floor plan, damage to the lot, and mechanical problems are all extra costs.
  • Your time! Remember the time spent on buying and selling your car. Time is valuable and worth money.

List all the costs that you have incurred for your car. This information will be useful when determining the price for wholesale auctions. The base price plus the costs that you have put into your car will be what is meant by “selling at cost”. You will need to have a margin of profit between the base price and the reserve price.

But it’s not just about spreadsheets and mathematics. It is important to know what your customers want.

4. Purchase Cars That You Know

It may seem easy to buy cars because you know, but this is not always the case. What do people mean when they tell you to buy what is familiar?

  • Purchase cars that you already stock: There’s a good possibility you have a certain type of vehicle in stock for a particular customer. You’re in your sweet spot. You work with these used cars all day. You are familiar with their prices, the reasons people buy them and when they do. You can sell these cars at wholesale auctions or your dealership if you buy them. You’ll have more knowledge. Here, you’re the expert on costs.
  • Purchase models that you are familiar with: Cost and parts can be a major drain on your budget. This will result in fixed overhead costs and work time. You may not know that the cost of parts or an expensive model could be way over budget, and this will reduce your profits.
  • You can buy cars that you have bought or sold: You may already be familiar with models outside of your dealership stock. You can expand your business if you know models that you do not sell. Your knowledge of these vehicles can be a powerful tool to drive new business, as long as they fit into your market. Be sure to thoroughly research these vehicles before you invest.
  • Ask for help: When you are in unfamiliar territory. Your friends can be a great resource if you’re looking to expand your vehicle collection. You can get advice on the pros and cons of each type of vehicle you are interested in. This can help keep your costs down on new ventures.

You’ll be in the clear if you buy cars that you can estimate. Knowing as much as possible and setting an accurate wholesale price will help you make a profit. Staying within your wheelhouse is the best way to keep costs down and profits up.

5. You Should Always Cut Your Losses When You Can

You can easily get into trouble with a vehicle. Don’t worry! Every dealer has experienced this at one time or another. Wholesaling is a good way to reduce your losses, particularly if you are unable to sell a vehicle with sunk cost.

How do you price an automobile that you can’t seem to sell? This is the point where you may want to take a loss. The cars that remain on your lot for too long may become a liability. You thought that car was perfect for customers, but it didn’t sell. Do not hold on to it as you pay floor plan fees.

What happened to all the money you invested? Total sunk costs may not match what a wholesale buyer pays. It won’t really matter if you keep the car on your lot. Wholesale it and risk even more loss.

Even if it means losing some money, you will still need to choose a price which won’t scare away buyers. The more time you keep the car, you will pay more in fees. Wholesaling is the best option, even if it means you will lose money in the end.

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