Tricky car math and weasley car dealers


#1

I want to relate an incident that happened to my mother at a car dealership today. She owns a 2009 Nissan Cube SL with 9250 miles that she bought new for $19,500 – so new, in fact, that it had to be ordered from a different state, as we didn’t have any in our area yet. She took her car to the dealership for an oil change, and while waiting for them to finish, she was browsing the lot and found a car she liked. Out of nowhere, POOF, appeared a car dealer with keys in hand. Having mentioned that her car was on the lot getting the oil changed, the dealer said that he would get a trade in value for her. The number he brought back was $12,500…a number they were unsatisfied with, so they left. Upon returning home they visited KBB.com (Kelly Blue Book being the same reference the dealer claimed to have used to come to his number) and got a trade in value of $16,300. Now, upon seeing this number, my brain began to itch, as it seemed, to make a profit on the vehicle with a $16,300 trade in, the dealership would have to sell it for nearly the price they my mother bought it new. So, for giggles, I went to KBB myself and looked up the expected retail value of her car to see what the Dealership could expect to sell it for. The number I get was $19,755. $255 MORE than she had bought it brand new. Now…I am not a smart man, but one thing I think I do understand is that car values are supposed to depreciate. A 2 year old used car should be cheaper than a new car, yes? Could someone with superior math abilities (say for example, the MIT type) please explain this situation to me as I’m afraid I just don’t understand.


#2

It doesn’t take an MIT type. A car saleman saw a lady to whom he thought he might be able to sell a new car to and give a much-too-low tradein to for her car. So he went for it. She apparently was less gullable than he thought she was and walked away.

Hopefully there are more like your mom.

Loved your description, by the way: “Out of nowhere POOF appeared a car dealer with keys in hand”. It’s a classic.

God bless.


#3

Yeah I understand that part. The part that I really can’t seem to understand is how the Blue Book expected retail value of her car now, is higher than what she paid for it new 2 years and 9300 miles ago. The part about the car dealer…really just back story.


#4

the $255 ‘bump’ from the new price 2 years ago, likely reflects 1) inflation and 2) expected (or real) INCREASED demand for high MPG vehicles when gasoline prices peaked. (there is a slight delay before ‘market prices’ at a given moment are compiled and published.)

there was a time when used Priuses sold for as much, sometimes more, than what new ones stickered for. attributable to the then long wait list for new ones.


#5

I considered both of these options, and while I’m willing to accept them as a possible solution although I’m not perfectly sold for the following reasons:

  1. Inflation is an inevitable reality every year, and if inflation were responsible then it seems like all vehicles would appreciate as long as they were kept in good care. My understanding, and of course this is a generalization, is that a new car should depreciate a certain percentage the day you drive it off the lot.

  2. I’ve considered the Prius example as well, but this is not nearly what I would consider a high mileage car, especially compared to a hybrid. We’re talking 28/31 in town/hwy mpg’s at best. It’s also not nearly as trendy as the hybrids are/were.


#6

Believe it or not salesmen can make more money on used cars than new cars, go from there.


#7

We have a short-term shortage of cars because of the tsunami, that probably has a lot to do with it.


#8

not to mention the long term shortage from cash for clunkers


#9

Car sales is nothing but smoke and mirrors math so a customer should expect this kind of thing without getting mad or feeling ripped off.

What I will add is the bit about a 9250 mile oil change. I hope this is not the first oil change on this vehicle after 2 years of use.
If so, trading it off because of a potential oil sludging problem might be a good idea no matter what’s offered.


#10

The tsunami and the cash for clunkers program are two things I didn’t consider…but do make sense!

Remember that the numbers the dealer gave her have nothing to do with the question…the everything to do with the dealership/dealer etc. was just back story. The question is about the price that was paid new and the price that it’s worth now.

As for oil changes…it’s cared for better than most small children.


#11

You also have to consider that KBB, or any other website offering “values” for vehicles are based on averages, estimates, and a lot of guesswork.

It does not mean your vehicle, in your area, will match the numbers on the website. Your vehicle may be worth more, or less, than these estimates.

Regardless, selling cars is a numbers game, and their objective is to get as much of your money as possible. I had a brief stint as a car salesman in a former life, and it was a real eye opener.

Don’t put too much faith in the KBB numbers, or any other numbers you can find. They’re good information to have, but they’re certainly not guaranteed.


#12

Due to the fears of rising gas prices, compact, utilitarian fuel misers (ESPECIALLY if it wears a Japanese nameplate) like the Cube are in high demand now. This drives their value in the used car market up, sometimes to seemingly ridiculous levels. As far as inflation goes, one of the talking heads on a news network (Fox News I believe) stated recently that America does not need to fear inflation because, if inflation were happening, wages would be going up and they are not. Just the price of everything, with no corresponding increase in the average rate of pay for the working American. Apparently, inflation is not a concern and we have nothing to worry about since our wages aren’t going up with the price of food and fuel.


#13

All these numbers are just guesses. When it comes right down to it you have to know the price for the new one minus the price for the old one and see what the difference is. The easiest is just to look at the cost per mile driven and see if its reasonable or not. If you can trade for 10 cents a mile or so not bad. Likely though the value on the old one has held up but the cost of the new one would be a little higher so you are only looking at one side of the equation. Buying new though instead of used, does not have to end up costing a lot more money in the long run though as some people think.


#14

Also remember that what a dealer may pay for a car is determined with many layers of smoke and mirrors. What you see on the sticker is meaningless.

What I have been doing and has worked for me is:

Pick out three or four dealers, with at least one of them out of town. Tell each of them the exact same thing:

" I am shopping for the Jasper 634 (or what ever car you want) and I am going to buy it from whoever will give me the best price. I am inviting you to give me your best price. I and going to do the same thing with other dealers and the one offering me the best price will get my business. I will not tell them what deal you offered nor will I tell you what another dealer may offer."

Stick to your plan.

Note: You are just buying a car. You are not selling your current car or trading it in, that will be a separate transaction. Ideally you should park you are a couple of blocks away and walk in. (that keeps them from trapping you by the old “we want to test drive your old car so we can offer you a great trade-in” scam.

Remember. Do one transaction at a time. Mixing trade-in and new car in the same deal is just a way to confuse things for you. Stick to one transaction at a time.

My last car was a surprise. After using this method, and waiting for the paper work, (listening to the trash the sales me were using) I was called back to sign the paperwork, the final number as $500 less than what I had agreed to. I never figured that one out. Maybe it was a bonus for not telling the other customers that they were being manipulated.

Good Luck


#15

If your mother paid cash for the car, she may have also gotten a great deal on it. This is a great way to save a lot of money when buying a car. I know a guy who bought a brand new, loaded Chevy Tahoe about ten years ago. After spending fifteen minutes or so allowing the salesman to think he was stringing him along, he finally told the guy he intended to pay cash for the car. The salesman’s jaw dropped, and he ended up paying $28k for a truck the salesman was asking $36k for initially.


#16

one method salesmen make money on is the interest rate at the backend of that deal. It also might actually be cheaper to finance the car(they’re making money on the backend and allowing a little lower price), but pay it all down when you go to sign the paper work.


#17

“If your mother paid cash for the car, she may have also gotten a great deal on it.”

We’ve been buying all our vehicles with Cash for the past 20+ years…There really isn’t any savings. What’s the difference with a certified check that’s withdrawn from your savings or a certified check that’s withdrawn from a loan??? The dealership doesn’t care where the money came from.


#18

The savings used to come when the dealership was handling the loan and getting a cut of the loan interest (or financing the deal themselves, therefore getting ALL of the loan interest). They’d be more willing to drop the up front price if they knew they were going to make a lot more than that off of loan interest over the next 4 years. These days dealerships often farm out their loans to a bank or credit union. And to their credit, they often match or beat what I can get through my (very good) federal CU.

If the loan isn’t through the dealership, then they don’t care if you take out a loan or have the money up front - they get all the money right away in either case.