how much discount from a dealer is average on a used car?

Asked by Jan 11, 2015 at 09:53 PM about the 2008 Lexus LS 460 Base

Question type: Shopping & Pricing

1 Answer

40

Hi Gene, This is a million dollar question. My experience in shopping for used cars tells me that tagging a discount percentage actually gives me the false impression that I am getting a pretty good deal. We need to understand the dealers especially used car dealers make more money by selling used cars than new cars. That tells us that there is a much bigger profit margin in the used car business, unlike that of new cars. To buy the car you are eyeing at, one needs to know how long the car has been left in the lot unsold. Then add the cost of financing the dealer has to pay to the bank to keep the car in the lot, add about $500 to $1,000 on top as their profit. That would be your starting point to bargain. This has been my formula of success. Other factor you have to consider are: rarity of model, colour, options, fair wear and tear, paint job, etc. Some dealers would sell auctioned stocks that may not come with service records. So the upper margin and lower margin for bargaining varies. As you can see the basic percentage discount is very deceiving when you want to analyse the art of purchasing used cars. There are also websites such as Cargurus, Edmunds and such like autos advocate resources would give you a ball park retail value. Again, they can sometimes differ in their own evaluations as well. Basically, you need to do your homework, know your prospective car and its original price when new, its demand and service history and mileage travelled. A common annual depreciation rate for import maker cars ranges from 18% to 22% depending on name brands.

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