The spikes in fuel prices over the last two years and subsequent cataclysmic digger in SUV/Truck values may be a factor in a recent shift of used vehicle sales from traditional dealers (new & used) to private party. The increase in online sales outlets and their usability have also helped many private sellers find new homes for their beloved whips.
A recent study by CNW Marketing Research shows that private sales nearly doubled last year to some 34% of the total used car market, which is roughly the same percentage that new car dealers handle and more than what independent used sellers do. This increase has also had a dramatic effect on the average transaction price, which has increased from about $4,500 to $7,000.
Most people who have ever dealt with a new car dealer have experienced the low-ball trade-in offer, which is invariably accompanied by some nicety like, "Oh, we just aren't selling those very well," or "I can only give you..." In actuality, this is the bread an butter for any dealership worth their, salt(?).
By counting in the fact that nobody wants to deal with the hassles of selling a car on their own, the dealer can get away with offering you less than market value for your car. These same people above make up the group that trades in their vehicle on Friday for $9,000, only to see it advertised on that dealer's used lot on Monday for $14,000. As a matter of fact, the dealership can make money on the used car sales both coming and going, by buying it for below value and then selling it for a premium. It is not at all unheard of for a dealer to make $3,000 or $4,000 on up to $7,000 to $8,000 on a used (premium) car flip.
The playing field may be leveling, however. Not only are there more online outlets that cater to used car sales and relieve several of the hassles, more and more people are open to the idea of either buying or selling through third party sites. Craigslist has seen their used car listings more than double in the last year from 400,000 to over 1 million, roughly 2/3 to 3.4 of which are through private party. The same results are seen by other sites like cars.com, eBay Motors, AutoTrader, and Kelley Blue Book.
When you consider both how reliable vehicles have become and how many trade-ins are "upside down," (the joyous condition where you owe more on your vehicle than it is worth) it is more relevant and important than ever to get as much as you can for your trade. And with more user-friendly services to help you do it privately, you can expect new car dealers stick with the highest margin cars (premium, Certified Pre-owned, etc...) and the independents losing business altogether.
For every new car sale in the US, there are two used cars that change hands (some 44 million in 2005). If you are in-market, you might want to ask yourself how much is that trade-in convenience really worth.
Can you please provide source for statistics provided by CNW Research.
Posted by: cyndi king | March 15, 2008 at 05:39 PM