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I'm going to be looking for a used car here from a dealer, and I'd like to be as informed as possible when entering negotiations. A dealer has the car I want, used (looks like it was brought back from a lease), and I'm wondering how to estimate what they have invested in it. Is there a guideline for this, or any insight that can be offered?

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up vote 7 down vote accepted

There's no rule of thumb -- people get ripped all of the time on trade-ins or when they sell cars to the dealer.

I think with used car negotiations, demand for the car is more important than their cost. If you're talking a 2007 Kia, there will be lots of room. If it's a 2009 Honda, they won't even discuss price.

In terms of negotiations, you'll only get the best price if you're willing to walk away at most dealers. I usually pick 2-3 candidate cars at different lots and show up on the last day of the month. If it's busy, look at the wall and find the #1 salesman and be a pain in the butt. Refuse to listen to the 4-square speil and walk away slowly if he doesn't negotiate. When I was in high school, my dad almost ran over a car salesman who literally jumped out in front of the car as we were leaving. My dad got his price and signed the contract right in the car.

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I hate the four square. Last one I saw I turned upside down and said "If I see that again, I'm leaving." Thanks for the advice - I just have no idea how low to go on the cars I'm looking at. – Nic Jan 8 '11 at 5:31
Look around on the net, private sales, dealing listings etc. Figure out what the price range is and go from there. Don't be intimidated -- have fun! – duffbeer703 Jan 8 '11 at 16:05
I love the four square. It lets me quickly communicate how I want to negotiate. Step 1: I put a giant X through monthly payment and say I'm not going to discuss monthly payment. Step 2: I put a giant X through interest rate - Either pay cash or pre-arrange financing elsewhere. Step 3: I usually don't trade in cars, but sell them privately so I put a giant X through trade-in. That leaves 1 square for total price. – Alex B Jan 8 '11 at 16:49
@ Alex B. You didn't mention writing your own terms on it. I enjoy writing all over it and underlining what I've written multiple times as I talk. Even better, stabbing my finger at it and saying, "It says it right there." – gef05 Jan 8 '11 at 21:54

The low end lots generally buy at auction and add $1000 to their cost. Volume is their key. Except for bait cars, the really nice one to get you into the dealership, the longer a car sits the better your options to deal. Trouble is, if the car sits for weeks it probably has something wrong with it. My advice, as a former lower-end dealer, is set your price and buy the best you can afford. If a dealer is a few hundred dollars over, just let him know. If they want to move the car they will meet your price. If not, walk away.

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It's mostly talking about new car purchases, but I think many of the points addressed in this extremely good previous answer may help. The true gem is an article linked in one of the comments.

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Of course, there is no fixed margin – it all will depend upon the condition of car, the model, make, year and all.

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