How to get the best deal on a used car
(MoneyWatch) Used car prices will decline in coming months, forecasters say. And new technology can help bargain-hunters know how much they should pay for a vehicle.
A service with the whimsical name of MyVinny.com lets you download an application and scan the Vehicle Identification Number (VIN) of any car you are considering. MyVinny will tell you the average wholesale price for that model and thus how to shoot for a good deal.
During the recession that followed the housing crash, used car prices rose because of shrinking supply, as fewer people bought new cars and traded in used ones. But now, because of a combination of more used car trade-ins and lease returns plus rebates and discounting from competing new cars, used prices are likely to decline. "Wholesale values are likely to moderate in coming months due to increased supply," said Tom Webb, chief economist for used car auction business Manheim.
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Buying a used car saves money by avoiding the depreciation inevitable with a new car. But, as a shopper, you have a tougher time finding out an appropriate target price. With a new car you can find out what the dealer paid by looking up the invoice price for that model on websites such as Kelley Blue Book and Edmunds.com. But with a used car, you typically have little idea of the wholesale price of that model as it changed hands at auctions. By collecting auction data, MyVinny.com gives you that price.
The wholesale price data is valuable especially if you are buying from a new or used car dealer. You can get a cheaper price on a similar car from a private seller. But you will get no warranty in the deal and probably have no recourse if something goes wrong with the car.
So if you are heading out to shop for a used car, take these steps:
- Find out the average retail price for sale by dealers by checking Kelley Blue Book and Edmunds.com. Then look up ads by dealers in your area on a site such as AutoTrader.com.
- Get the average trade-in value on the pricing sites. If you are shopping at a new car dealership, the car may have been taken in trade on a new model. In that case, the acquisition price usually is even lower than the wholesale auction price.
- Get the wholesale price. Having downloaded the free Vinny app from the Apple Store or Google Play, scan the VIN number on a car you are considering (usually on a plaque either on the dashboard on the driver's side or on the door post visible when the door is open.) Within a few seconds, you will get back the wholesale price.
In talking to the dealer salesperson, try to find out if the car is a trade-in. He or she might tell you it was traded in while trying to convince you the car is in good condition. If it was traded in, the dealership's cost basis was likely lower than the wholesale price.
Take the case of a top-selling midsize sedan, a 2011 Toyota Camry SE. Assuming it has 30,000 miles and typical options, Edmunds lists the dealer retail price at $17,038. The MyVinny average wholesale price for 2011 Camrys is $14,765. And the trade-in value is $14,258. So the dealer stands to make around $2,780 if the car is a trade-in and $2,273 on an auction car.
Alternatively, let's say you are looking at an auction car. Set your aim at getting the Camry for $1,000 over the wholesale price while letting the salesperson know you are aware of that wholesale number. But start out bidding $500 over the wholesale price, with a goal of ending up at $1,000 over, or $15,765. That is still 8 percent profit for the dealer.
If the dealership won't meet your target, you have to decide how badly you want the car. But don't go much above $16,000 -- or about $1,000 off the original asking price. Especially with a popular car like the Camry, there is always another dealer to offer a competing price.
As with buying new cars, doing your research means saving money while still getting a used car you want.
