Used Car - Used Car Pricing

Used Car Pricing

Used car pricing reports typically produce three forms of pricing information.

• Dealer or Retail Price is the price you should expect to pay if buying from a licensed new-car or used-car dealer — retail price.
• Dealer Trade-in Price or wholesale price is the price you should expect to receive from a dealer if you trade in a car. This is also the price that a dealer will typically pay for a car at a dealer wholesale auction.
• Private-Party Price is the price you should expect to pay if you were buying from an individual. A private-party seller is hoping to get more money than they would with a trade-in to a dealer. A private-party buyer is hoping to pay less than the dealer retail price.

The growth of the Internet has fueled the availability of information on the prices of used cars. This information was once only available in trade publications that dealers had access to. There are now numerous sources for used car pricing. Multiple sources of used car pricing means that listed values from different sources may differ. Each pricing guide receives data from different sources and makes different judgments about that data.

Pricing of used cars can be affected by geography. For example, convertibles have a higher demand in warmer climates than in cooler areas. Similarly, pickup trucks may be more in demand in rural than urban settings. The overall condition of the vehicle has a major impact on pricing. Condition is based on appearance, vehicle history, mechanical condition, and mileage. There is much subjectivity in how the condition of a car is evaluated.

There are various theories as to how the market determines the prices of used cars sold by private parties, especially relative to new cars. One theory suggests that new car dealers are able to put more effort into selling a car, and can therefore stimulate stronger demand. Another theory suggests that owners of problematic cars ("lemons") are more likely to want to sell their cars than owners of perfectly functioning vehicles. Therefore, someone buying a used car bears a higher risk of buying a lemon, and the market price tends to adjust downwards to reflect that.