Why would a dealer sell a car below its Kelley blue book?

Question

I am looking to buy a used car soon. I am trying to decide between a 02' Jeep Wrangler and a 05' Toyota Tacoma. I looked up both their values on Kelley Blue Book and found that the two dealers are pricing the cars below the suggested retail value according to the Kelley Blue Book website. I thought that normally they would try to price it higher. Why is this?

Answer 1

Good Lord!

Holdback? Rebate?

These are two used cars!

KBB is suggested value, MPG rules.

Just be sure to test drive and get your financing in order.

The financing is where the dealer will try to make the money.

Answer 2

First the person who said dealer invoices are a scam is dumber then a rock as a deler will not take a chance on losing delership for a fake invoice.  Only 25% of car sales are dealer profit as service and body work account for 75%.  Second why would a dealer sell a car for more then a suggested retail price?  They would not sell a car. they buy at KBB , trade in value fair condition, sometimes more sometimes less at auction then have to service ect.  The KBB and all trade in sites are based on auction reports done weekly. dealers do not try and kill you or rip you off except buy here pay here dealers who get cars dealers do not want.  people will be ignorant and sy anything to put down a dealer but where do those people go to buy new cars?  A dealer.  I do not know about you but if Dealers were ripping everybody off with fake invoices ect.I would not buy a car from them.  Everyone who can though does buy new cars.  It is people who do not pay their bills whether their fault or not that cannot buy from a dealer that write these stupid comments. Another person who does this is someone under 18 who can't buy a car and heard without any investigating and wants to agree with the "crowd".  read consumer reports or KBB. who are independant  and have no loyalties to any car for information or a salesmnwho has been in business for 10 years or more as they would not be working if they did not get repeat business and that means they are trusted and have taken care of customers.Sorry to vent but i hate when people say these things with no back up what so ever and make no sense.

Answer 3

KBB does not  write checks for cars but is to be used as a guideline. All 3 values are inflated. If you are looking at trucks, take bottom of the 3 trade in values and dealer can purchase at auction for 10-20% lower currently. They are discounting trucks because they are not selling and many are refusing as trade in's even.

Fuel effiecient cars in my neck of the woods, are being sold at premiums ( sometimes higher than KBB) as the value of used cars is increasing. Supply and demand economics.

Answer 4

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Answer 5

What is Dealer Holdback?

Dealer holdback is a percentage of the MSRP or Invoice of a new vehicle that is paid to the dealer directly by the manufacturer to assist with the dealership's profit margin. The internet has "let the cat out of the bag" so to speak with regards to giving the consumer access to previously unknown dealer secrets and tricks. By knowing about the holdback, you can use it as a negotiating tool in many cases.

The total invoice cost of the car is due to the manufacturer, payable by the dealership, when the vehicle is ordered, not when it is sold. Since car dealerships must have an inventory on hand so you can browse and select a vehicle, they must borrow money from the bank to pay for that inventory (called "flooring"). The manufacturer pays for financing and maintenance for the first 90 days the vehicle is on the lot, in the form of a quarterly check called a holdback. After the first 90 days, the dealership dips into its own pocket, and into its own profit, to finance the car. However, we all know that most cars don't stay on the lot for three months especially Toyota's, Honda's and your more popular vehicles of today.

This amount is unknown to you - until now. If the car sells within 90 days of the dealer taking delivery, he is guaranteed a profit even if the vehicle is sold to you at cost. Because of the holdback, the dealer can advertise a car at $1 over invoice and still make hundreds if not thousands of dollars on the sale.

However, the true "profit" of holdback money depends on how long the car has been on the lot. If our hypothetical Chevrolet had been sitting there for 45 days before you bought it, the dealer's holdback profit is only half of what it could have been, or only $300, cutting total profit on the deal to $840. At the 90-day mark, holdback profit has disappeared.

Dealer holdback allows dealers to advertise big sales. Often, ads promise that your new car will cost you just "$1 over/under invoice!" In addition the dealer stands to reap further benefits if there is some sort of dealer incentive or customer rebate on the car. Generally, sale prices stipulate that all rebates and incentives go to the dealer. Using the example above, let's see what happens when there is a rebate.

Suppose the car described above has a $1,000 rebate in effect. You need to subtract that $1,000 rebate (remember, the dealer is keeping the rebate) from the dealer invoice of $18,000, which results in a new dealer invoice of just $17,000. Now, you must calculate a fair price.. In this example, TMV (the market value) measures 3 percent of dealer invoice at $17,510, which means that the price you should try to buy the car for is $510 over invoice, plus destination, advertising, taxes, and fees. The dealer is still making as much as $1,110 and you're paying $2,490 less than the MSRP. Remember, the longer the car has been in the dealer's inventory, the less money the dealer is making.

Almost all dealerships consider holdback money sacred, and are almost always unwilling to share any of it with the consumer. Your best strategy is to avoid mentioning that you know the holdback amount and what it is during negotiations. Mention holdback only if the dealer gives you a hard time about not making any money when you know that isn't true.

So how can you benefit from the dealer holdback information? If the dealership doesn't have that special shade of blue you're interested in, and they can't find it at another dealership in the area, they have to order it directly from the manufacturer. If that's the case, make sure that they know that you know about the holdback. If a vehicle is special-ordered, holdback money is pure profit, and you will need to consider this when well into negotiations.

Answer 6

Have you read the fine print with the dealer prices? They might be just waiting to s***w you over with a ridiculously high APR rate and outrageous monthly payments.

If this is not the case, then you have just found yourself some good deals.

Our economy is in horrible shape right now, and dealerships nationwide are struggling to sell cars. ESPECIALLY pickup trucks, as they tend to burn a lot more gas than other vehicles. So it is not surprising if a dealer prices their vehicles a bit low right now, in order to get some sales.

The other bit of advice I have is, if it is a small used car dealer, then you might want to take the vehicle on a test drive and have someone who knows alot about cars take a look at it before you make a purchase, as the dealer might be selling you a bad vehicle, hoping to lure you in with the low price point.

Just be careful, and don't let yourself get ripped off.

Answer 7

kelley blue book is just the "suggested" retail value. i find that often that values is inflated over what you can actually buy the car for. many factors determine what the final price will be. where you are in the country, local demand for that type of vehicle. also the latest cost of gas going up has affected it. you are talking about two gas guzzling trucks. not the worst offenders, but not cheap to drive. so now that gas is expensive, dealers are having trouble getting rid of them. for a more accurate value, see what they are selling for in the paper, e-bay, autotrader, and other sites like that.

Answer 8

Because the dealer receives a factory REBATE on every car they sell.  So the dealer invoice is also a scam.

Long time ago, the invoice the real price they paid.  Not any more. The factory is in on scamming their customers.

They can easily sell a car at invoice, look at you in the eye and say you are getting it at invoice, make you think you got the rock bottom price, and still make a huge profit.

Good Luck...

Answer 9

People aren't buying those vehicles these days because of gas prices. Dealers are letting them go below kbb for that reason.

Answer 10

it could also be to sell them.  Especially with gas prices the way they are, they're just trying to sell what they can.