Mistake #5 - Not comparison shopping or negotiating the price.

Most people who buy a used car just want a good vehicle at a fair price. For peace of mind, they want to know they are not being taken advantage of.

Most of us face a common problem: we only buy a few used cars in our lifetime. Each time you jump into the used car market, you discover that not only have vehicles changed, but how you shop for and purchase them is changing as quickly as technology advances. These days, that’s pretty quick.

The good news is that with so many automotive purchase tools available online, it’s easy to find a fair price for the vehicle you want to buy.

There are two methods of pricing the vehicle you want to purchase to make sure that you are paying a fair price:

1. Appraisal Method. Kelley Blue Book (KBB.com ) is the industry standard for pricing vehicles. Other websites do this as well. Input basic vehicle information—year, make, model, miles, major features, and general condition. KBB will calculate the price you should pay in your geographical location if you purchase privately or from a dealer.
2. Sales Comparison Method. Compare the vehicle you want with the selling prices of similar vehicles on a host of websites. Be sure to discriminate between private sellers and dealers—dealers should offer more value to justify a higher price.

Try to find at least three comparable vehicles. Use common sense to arrive at a price range for the vehicle you are hoping to buy—considering differing mileage, condition, features, and model years.

The best websites to compare prices can vary depending on your geographical location. To get started, try the following list. Be sure to toggle “private seller” or “dealer”:

• CarGurus.com 
• AutoTrader.com 
• Cars.com 
• Craigslist.org
• Do a Google search for local dealers to view their used vehicle inventory. If you want to buy a used Honda Civic, search for local Honda dealers and review their used car inventory. Check to see if they have CPO models available.

INSIDER INFORMATION:Use both the Appraisal and Sales Comparison methods to get a more accurate price range for the vehicle you want to purchase.

Negotiating 101

Negotiating price is the least favorite part of buying a car for most people. Yet being a “lay down” and not negotiating price can cost you hundreds, even thousands of dollars more than necessary.

The good news is if you have appraised the vehicle you want to purchase using the two methods listed above, you have already completed most of the work needed to be in a strong negotiating position.

You have KBB’s appraisal of the vehicle, and you have compared the vehicle you want to buy to others that are offered for sale locally. Now, it’s just a matter of using that information to help get the best price.

Start by comparing the selling price of the car you want to buy against the others you found locally. If the seller is on the high end of that list, let them know how their price compares. If their price is high, ask why—have them justify the higher price. The miles on their car may be lower than the other cars for sale. Maybe their car has more options and features. Maybe not. Be curious and find out what is fair and reasonable.

Asking Price vs Selling Price

There is a difference between the asking price and what a vehicle sells for. After determining if the asking price is fair when compared to similar cars for sale locally, use the KBB appraisal to determine what the car should actually sell for. KBB gives a range allowing for differing miles, condition, features, and availability.

Use common sense. If it’s a seller’s market because there are few of the model you want, you will probably settle on a price at the high end of the scale. However, if this car has scratches, dents, or even body damage, or four tires that need replacing, you will want to at least be on the low end.

Be practical. State your case and make the best, most logical argument based on the appraisal work already completed. You don’t need to make it complicated. If you can’t come to a reasonable agreement on price, you can tell the seller:

• Based on your research, their price is too high compared to other, similar vehicles for sale and you will not pay above market price.
• if they won’t reduce their price to make the deal work for you, you are walking away.

Walking away is the only way you’ll truly know if the seller is serious about holding onto their price. Remember, you need to balance price with how badly you want or need the car and the available local supply.

As a sales professional, I can’t tell you the number of times I’ve seen clients walk out to their car to drive home or to another dealer, only to have a salesperson run out and continue discussions until they come back into the showroom and close the deal.

Dealers are loath to let a legitimate buyer walk away.

INSIDER INFORMATION:It’s easy to discover the invoice cost on a new vehicle online. However, there is never a way to know what a dealer’s actual cost is for a used vehicle. There are too many variables. What did they pay for the car? How much was the shop bill to refurbish the vehicle and fix any deficiencies?

A dealer can sell a used vehicle for the average market price and be making a few thousand dollars or more, or even losing a few thousand dollars or more—there is no way to know if they are making money or losing money on any deal. 

Don’t negotiate from a position of assuming the dealer is making a lot of money on this one sale.

Make your best case for the price you want and walk away if you’re not satisfied.

Price is Just One Factor

Price is important, but it’s just one factor to consider when looking for a vehicle.

For example:

• If you have a long commute, a car with lower miles has greater value than one with higher miles.
• If you taxi your kids back and forth, a roomier wagon, minivan, or SUV will be important. However, getting one with newer high-tech safety features, such as collision warning and automatic emergency braking (AEB), may be lifesaving and therefore have more value for you.
• If you frequently park downtown in tight parking spaces, having a vehicle with automatic self-parking can save tons of stress and holds more value. It will not only alert you when you pass an open parking space, but many self-parking systems will park the car parallel or at an angle, automatically.

Here are other features and benefits to consider in negotiating:

• condition of the vehicle (and therefore lower or higher service costs in the future)
• added factory options or after-market accessories (but only if YOU value them)
• remaining original factory warranty, or the cost of an extended warranty
• whether it is a certified pre-owned (CPO) vehicle (having its own extended warranty saves you the cost of buying one)

Price is important, but it is not the only factor to consider.

INSIDER INFORMATION: Each pre-owned vehicle is “one-of-a-kind.” It is your job to decide which combination of features, benefits, and price holds the most value for you.

The above article is an excerpt from "The 7 Biggest Mistakes Used Car Buyers Make and How to Avoid Them." Available on Amazon.