What is a fair price?

What is a fair price for a used car?

Have you ever wondered what a fair price for a car is? How did they come up with this price?

Car dealers use several factors in determining what is a fair price. In fact you could say it is blend between science and art!

For the most part, a fair price for a car is determined by two main categories of factors: 1: Condition of the car, and 2: Location of the car. While there are other factors, and every car is different, these two areas of consideration have a big impact what is considered to be a fair price of the car.

First to be considered are the physical characteristics of the car itself. Things like mileage, age, condition and equipment. For more information on factors and condition of the car, see our other article titled "How are used cars priced?"

The second major factor is the area where the car is located. For instance, a car in Minnesota, where the winters are harsher and the roads are covered with salt, or a small town where the population is less, will be different than a car in the south with no road salt, or a big city where there are more cars for sale. A fair price for a car in a large metropolitan area, and a fair price for a car in a small town, are both affected by the laws of supply and demand. You may find the car you want for a really low price, but it's across the country, buried in snow, where there are very few buyers. So for that reason, the seller has priced it low. It simply cannot be compared to a car that is close to you. Or, the car you want may be just up the street! And in a larger metropolitan area, there is more competition so the dealers tend to price their cars a little lower to try and capture more business. And because it's located in a larger area with more population, perhaps there are 47 other cars just like it! However…it may be the perfect used car! It may be in the best condition for it's mileage and age when compared to all the other cars, so for that reason the car is priced 10% to 20% more than other similar cars. Just like everything else nicer things tend to cost a little more, and a used car is no exception. Based on the location, mileage, age, and condition, a fair price for that used car is going to more than another used car just like it. 

Finally you have to consider who is selling the car. A dealership tries to keep a lot of used cars in stock. It makes it easier for the consumer to be able to go to only one place and find the right car for them as opposed to having to drive to 15 different places and possibly dealing with a dishonest individual selling a car and meeting you in a park somewhere to do so. In that respect a used car dealership offers a convenience, and a service for the consumer. But having a lot of cars, paying for a building and a parking lot, paying sales people and mechanics, all cost more than just a person selling the car from their house. It is fair for the dealer to charge a bit higher price for the same car than a private party who doesn't have the same expenses that are related to being able to offer those conveniences to the shopper.

Having a fair price for a used car is something we try very hard to do at Max Auto Sales. We guarantee all of our prices, when considering all the factors, are very fair. In fact you might find our prices are the best around when considering our competition, the way we clean them, and the mechanical repairs we do to them. We are happy to talk to you about any car, and what you consider to be a fair price. Give us a call, or visit us in person. You'll be glad you did.

KBB, Edmunds, and NADA and other 3rd party sites

People often come to us with questions about pricing from 3rd party sites; sites that give out information about both new and used cars for sale. We are talking about sites like CarGurus, Edmunds, Kelley Blue Book, NADA, and Cars.com. These sites often have car reviews and real life test reports, user experiences and car ratings, and pricing data, or recommended pricing, on used cars and new cars for both trade ins, private party sales, and dealership sales. Sites such as these get their used car pricing information from various sources. Some use information from cars for sale, some from cars that have actually sold. Some use the pricing data from auctions, some from the state registrations. And once that is gathered there has to be some sort of adjustment made to figure out the sale price from the wholesale price, the trade in price, and auction value. After that, don't forget that the different trim levels of the car, plus the cars actual condition which can vary greatly from one car to the next and therefore affect the value. With that, we uncover the problem and disdain most auto dealers have with these 3rd party car sites: they don't actually sell cars. They don't have parking lots full of inventory. They have not actually seen the car for sale, sat in it, touched it, and driven the cars they are reporting on. Hence, the information they provide, and the pricing history, is not always applicable in determining the fair price on a different used car even though it might be the same year, make, and model. What really matters to a car dealership that is actually selling the car, is how much did the car cost them to get it, how much overhead and bills do they have to pay in order to make the car ready for sale and keep up the dealership, the building, and pay the sales people. The information that 3rd party sites provide can sometimes be helpful, but it doesn't necessarily apply to every car and every car sale. 

In addition to the obvious differences that can exist from one car to the next and how challenging it can be to determine what is a fair price for a car without being able to physically look at the car itself, add to that the different information 3rd party car sites used in arriving at what they consider to be a fair price. 

It is our understanding that Kelly Blue Book (KBB) uses asking price from the best cars from used car dealerships, based on year, make, and model, as their base input; as their starting point. From there they then reduce that number by some computed method to determine the private party sale value for the used car. So that means it's possible their prices may be high on both retail price and private party used car pricing. 

Edmunds is another car site people reference when researching their next used car. Edmunds states that they use actual sale prices from the state's registration records. So, ALL car sales are included. This means that even if used car sales price shows it was really low because the dealership sold a car to the brother of the owner, that sales price is factored into their averages on what a fair price is for the used car you are looking at. So all cars sold to friends and family may skew the figures. In that way, it's possible for Edmunds to show what they consider to be a fair price to be biased on the low side. 

What about NADA? Lots of people reference the NADA when looking at the prices of used cars for sale. It is our understanding that the NADA uses the actual sales price and actual trade-in prices from what the dealerships are reporting. In a way, this makes their pricing data a bit more fair and legitimate though it still may include those "super" deals to friends and family.  This is the reason that banks and credit unions sometimes use NADA car values when making loan decisions. However, the bank  or credit agency may still offer only the "auction" value of the car because this is what can get for the car if you stop paying the bill and they have to send it to an auction to recover their money. This is why often times the bank or credit union will only loan an amount that is less than the asking price. It doesn't mean the asking price of the car is too high.

So as you can see these 3rd party sites can offer valuable information on cars for sale; things like reviews and real life experiences, and repair and total ownership costs. And sometimes this information is more reliable for used cars because the new cars and new model years don't have enough information behind them yet; there is not enough history on the new models yet. When it comes to pricing information however it is harder to make the information apply to that actual car for sale that you are looking at. We've seen two cars, the same model from the same year, with the same mileage, be vastly different in price just based on the condition of the car. One may have been kept in a garage, with 1 owner, who was single and meticulously clean. The other may have been a family of 4 plus a dog, and they never had time for maintenance or cleaning the car. The kids may have spilled soft drinks and melted crayons in the carpet. It would be hard to take these two cars and apply the same value based on sales history of 10 other cars like it that are 100 miles away. The car for sale in real life doesn't always match up to the car for sale on paper or a third party website.

Where is the best place to buy a used car? 

Should I buy my next car from a used car dealership, or from a private party?

We hear these questions all the time. The answer can depend on many things. The simple answer is to say that you should buy your next used car from a reputable used car dealership. 

Used car dealerships can offer many advantages over buying a car from an individual private party seller.  But not just any dealership: instead, you should choose a legitimate, established, well-reviewed used car dealership, for many reasons.

1. A used car dealership has an interest in treating you fair and honestly. If they want to stay in business then it is in their best interest to develop a good reputation for treating people fairly and honestly. Otherwise customers who are treated poorly will tell other potential customers, and soon the dealership will lose all of it's business. Treating customers fairly leads to repeat business, and word of mouth referrals, which every used car dealership would be proud to have. It can be very hard to discover the reputation of a private party seller. 

2. Buying your next used car from a used car dealership offers you variety: they can have a much larger selection of used cars for sale so you are more likely to find what you are looking for.

3. Used car dealerships can offer you service after the sale. A large dealership typically has the facilities to handle any issues that arise after you've purchased your car. 

4. Similar to the above, used car dealerships typically also have the facilities to repair most issues with used cars before they sell them. So, not only do you get a bigger selection, but you also get cars that are typically in very good condition (assuming you are dealing with a reputable dealership).

5. Buying your next used car from an established used car dealer means that you have the opportunity to research the dealership when deciding which car dealer to visit. You can check out their reviews online on Facebook, on Google, and with the Better Business Bureau. It's very hard to do that with a private party seller. 

6. Financing can be an issue when buying a used car. Sometimes it can be hard to find a bank who is willing to loan you the money to buy a used car. And to do so you have to go spend some time at the bank and complete a loan application. If they turn you down, then you have to go to another bank and repeat the process, and all the paperwork. However, when you visit a good used car dealership, they'll often have several used car financing options available, from lenders that specialize in used car sales. It can be a one stop process where you can get both the financing and a good used car, all at once. 

7. Paperwork; lots of paperwork. Buying a used car with an established dealership means that they will also handle all the paperwork for filing sales taxes, and documentation with the state for applying for a license plate and registration. 

Again, finding a great used car for sale can often be made easier by visiting a reputable, established used car dealership. It can be easier in terms of selection, financing, and convenience. Plus you can get the peace of mind that comes from dealing with an established, reviewed business. Did you k now that Max Auto Sales is the longest running, A+ rated Better Business Bureau accredited dealership in Lafayette, Louisiana?  

Looking for a great used car for sale in Lafayette Louisiana, or anywhere in Acadiana? At MAX AUTO Sales, it's all we do.