KEY POINTS:
A good deal is not when you feel like it’s good- it’s when data says it’s good
Used car values are decided by transactions on the wholesale level (auctions)
Book values (KBB, NADA, etc) are just a guide, but often unreliable
Tricks and tips on how anyone can see if a deal is good or not
I heard this from a dealer once and nearly slapped the guy:
“A good deal is when the customer thinks they got a deal.”
That’s yucky, isn’t it? Sleazy, criminal, and just plain shady sounding. But if you think about… kind of true, no?
I’ve seen people happy about bad deals and upset about good deals. The problem that I see is that we don’t actually know what the numbers are so we base it on logic-less emotion.
THE MOST RELIABLE PRICING STRUCTURE
The used car industry is powered by its wholesale auctions. The biggest one, Manheim, transacts on approximately 7-8 million cars per year (more than half of the total amount of auction transactions).
Those 7-8 million transactions, due to their immense size, ultimately gets to decide market values for most consumer cars.
The kicker is that Manheim access is reserved for dealers. But there are plenty of ways to receive Manheim transaction info through dealer friends (if you don’t have, go and make some).
WHAT ABOUT KBB? NADA? JD POWER? EDMUNDS?
These are what we call “book values.” Book Values are only as good as the book is basing it on transactional data.
Without going too deep into it, we rarely see a book value that lines up with the numbers that show up at the auctions and in the retail market.
These books become a basis to use and even a shared language between buyers and sellers. Ultimately, book values are still useful. But do they decide the market values? No.
USING CARMAX/CARVANA DATA
The good news is that it’s easier than ever to receive a “direct cash offer” from the multitude of online dealers like Carvana, Carmax, and the like.
In order to see if you’re getting a good deal, simply go to their websites, input the car’s info, answer a few questions, and- VOILA- you receive an instant cash offer. The closer your purchase price is to this number, you win.
Ultimately, Carmax/Carvana “direct cash offers” are not the same as auction data. But it’s a good basis to go by, since most people know that they can use these resources to sell cars to.
GO THE EXTRA STEP
If you want to go the extra step, we offer personal consult to give you target entry and exit prices on specific cars you’re looking at. We would use actual auction transaction data.
A simple consult has helped save our customers an average of $1700.
