ACV facts & figures
Wholesaling cars is a must for dealers, but the process can be confusing. There are many different pricing guides out there, making it tough to keep track of what’s what. You need to know the car wholesale value, but how do you find the right number in a sea of advice? Meeting your bottom line and making a profit is not a one-step process.
What about the cars you bought that just don’t sell? What do you do with a car that isn’t hot in your market? These are just a couple of questions you should be asking yourself, as you have to get them off the lot before they lose value.
Follow these tips to price your wholesale cars, and you’ll quickly be on your way to wholesale car auction success while maximizing profits.
1. Buy Low, Sell High: What's the Wholesale Value of My Car?
We’ve all heard this advice before. To make money on a deal you need to buy low and sell high. The real question is, how do we accomplish this?
When it comes to your car’s wholesale value, the suggestion about always buying 20% below retail gets thrown around a lot. But is that realistic? We know it can be difficult to find great inventory. There is no one size fits all approach to pricing your used cars.
There are a few ways to get a ballpark number of a car’s price. These methods can help you develop a starting point for your car’s wholesale value:
Check used car pricing guides:
Not all used vehicle pricing guides are created equal. Some are for the public trying to understand terms like MSRP. Still, there are a few guides created specifically for car dealers. We recommend checking out some of the following used car pricing guides:
- Kelley Blue Book - People often question whether Kelley Blue Book (KBB) is retail or wholesale? Really, it’s a little bit of both. KBB gives consumers an idea of what their car is worth at retail to a private party. It’s also a baseline for the trade-in value which can help determine wholesale value.
- Black Book - This is similar to KBB, but you need a subscription. It’s made for dealers to estimate car wholesale prices. It allows you to input variables like mileage and condition, and adjust for the car’s history. Ultimately, you can get a range for the wholesale and trade-in value. This guide is a good way to get a jumping-off point for wholesaling.
- NADAguides - NADA stands for the National Automobile Dealers Association. NADA is a trusted authority in the automotive industry. NADAguides were originally designed for car dealers and are considered an old standby. NADA prices assume a very clean or clean trade-in. So if you use this guide, you may need to adjust your estimate down if the car is in fair or poor condition.
ACV Auctions Market Reports:
You can use a guide to get a basic price, but what about the specifics? Registered dealers at ACV Auctions have access to data-driven used vehicle reports. These reports include every car sold on our auction site. You get real-time data on car pricing locally and nationally. You can even explore details like condition, damage, mileage, trim, and more.
With these powerful tools at your fingertips, you can find the average price a car sells for at auction. You’re one step closer to setting the reserve price and auctioning your car.
Don’t forget, when you sell cars with ACV Auctions, we send qualified vehicle evaluation experts to you. This gives you the exact condition of your vehicles as buyers will see them.
2. Leave a Margin for Market Price
With so many price points, what do you focus on? Let’s narrow this down. You need to know what people will pay for a new or used car. Start here before your dealership decides on wholesale prices.
- New cars: We recommend using the Manufacturer’s Suggested Retail Price (MSRP). This will be the high end of the pricing scale for wholesale on new cars. This is also sometimes called the sticker price of the vehicle. This is the number customers will expect to pay for a new car. This doesn’t mean you’ll need to offer it at this rate. Knowing customer expectations will let you better estimate what you can pay. Then before the auction, you still have room for adjustment.
- Used Cars: Here we would recommend keeping the KBB number in mind. Due to the guide's popularity, this is a number customers will expect to see at a dealership. Again, this might not be your asking price, but understanding expectations is important.
Knowing the average amount you think your customer will pay gives you the power when you sell a car at auction. This sets a realistic range for where negotiations might end for a buyer. Knowing what the customer will want to pay, dealerships start with a higher asking price. This will influence what car buyers will pay at auction. If you aren’t far enough under the MSRP or KBB numbers, other dealerships can’t profit.
Of course, there are lots of other factors. To decide the asking price, you need to know a few more things. Consider the popularity of the car, the specific car model, location, and your expenses. Keeping this number in mind helps to set a reserve price that other dealerships can make a margin on.
3. Cover Your Costs
To turn a profit when wholesaling cars, covering any cost you put in is key. There are expectations we will cover below, but as a rule, it’s best to try to profit from every car. We recommend keeping these costs in mind for successful buying and wholesaling for your dealership:
Inventory can be sourced from all over. That can include trade-ins, private sellers, public auctions, or wholesale auctions. No matter what, your base cost is what you first paid for the car. This is the absolute bottom price you want to sell your car for.
If you're buying a car to wholesale right away, make sure you pay below market value to increase profits. When it comes to auctions, you have options if there is a discrepancy between the reserve price and the final top bid. Negotiations are possible, especially with ACV Deal Makers who exist to help mediate on any deal that might need to be hammered out. As you know, the lower you can get your base cost, the more room you have to sell at wholesale for a higher price.
Many wholesalers buy cars that need work. Dealerships with mechanics and auto-body shops can fix used cars and give them some TLC. If you fix a car efficiently, you can increase desirability and your asking price at auction.
That said, it does raise your cost. Keep careful track of parts, paint, and labor costs. Make sure your overhead is reflected in the wholesale value of the car.
Time is the trickiest factor and yes, it’s a cost! Keep these factors in mind when considering time:
- Selling is seasonal - For example, dealers need cars to sell during “tax season.” This busy time of year for car dealers means people have cash in hand for down payments. Knowing when retail dealers need cars can increase your margins if you sell at the right time of year.
- Depreciation - Time can affect vehicle prices. Every car has sunk cost–i.e. the total amount invested in a vehicle. Remember, your car can lose value if it doesn’t sell. This is true when the model ages or the car market shifts.
- Increased costs - Fees stack up over time. Extra costs can include dealer floor plan fees, on-lot damage, and new mechanical problems.
- Your time! - Don’t forget there is also the time you spend purchasing and selling the car. Your time is precious and it’s also worth money.
Keep a detailed list of all costs you put into the car. This will come in handy when pricing for wholesale auctions. Selling “at cost” will generally be the base price and the costs you put into the car after purchase. To make a profit, you will need to leave enough margin between this number and your reserve price.
It’s not all spreadsheets and math though. Knowing what people want and having an area of expertise can make a huge difference in your success.
4. Buy Cars You Know
Buying cars you know seems like easy advice, but it can be much harder than it sounds. So what do people really mean when they say to buy what you know?
- Buy cars you stock: There is a good chance you stock a specific type of car for a specific customer. This is your sweet spot. You handle these used cars every day. You know their price range, when people buy them, and why. Buying these cars will help you sell them at your dealership or wholesale auction. You will have more specific knowledge. You’re the cost expert here.
- Buy models you know how to fix: Cost and parts can eat up your budget in ways you didn’t expect. This means fixed replacement costs, work time, and fewer variables on overhead. If you buy an upscale model you don’t know, costs or parts could end up being way out of budget and cut into your profit.
- Buy cars you’ve bought or sold: You might have experience outside your current dealership stock. If you have knowledge of models you don’t sell yet, you can branch out here. As long as these cars fit your market, your knowledge can play a powerful role in driving new business. Make sure you know these vehicles well before investing.
- Get expert advice: When you're in unknown territory, get help. If you want to branch out into different vehicle types, your friends are your best bet. They can give you the do’s and don'ts for each new vehicle type you want to buy. Doing this can help you keep costs low on new ventures.
Buy cars where you can estimate your expenses and you’ll be golden. It’s all about knowing as much as you can and setting a clear wholesaling price so you profit. No matter how you sell, staying in your wheelhouse will keep costs low and profits high.
5. Know When to Cut Your Losses
It can be easy to get in over your head on a car. Don’t worry! This happens to every dealer at some point. Luckily, wholesaling can be a great way to cut your losses, especially if you can’t move a car with sunk costs.
So how do you price a car you just can’t sell? You’ll still need to consider the above, but this is where you might want to cut your losses. Cars that stay on your lot too long can be a liability. That car you thought was perfect for your customers and didn’t sell? Don’t hold onto it while you drown floor plan fees.
What about all that money you put in? The total sunk cost may not be what a buyer will pay at wholesale. But, if the car stays on your lot, in the end, it won’t matter. It’s better to wholesale it at a loss than risk losing even more money.
You will need to pick a price that won’t scare off buyers, even if you lose some money. The longer you have the car, the more fees you pay. So wholesaling it is the smart choice, even if you need to take a loss in the long run.
Once You Determine Wholesale Car Value, It’s Time to Get Selling!
While there is no easy one-stop answer to determining wholesale value, it all comes down to what you know. By incorporating these tips, you’ll know your margins and be in a better position to make a profit at wholesale–all while setting prices car dealers will find attractive.
Now that you know more about vehicle pricing for your dealership, you are poised for success and ready to get selling! Want to learn more about wholesaling or vehicle pricing strategies? Check out our Ultimate Guide to Wholesaling for Dealers or Wholesale Vehicle Pricing Strategies for Today's World to get ACV Auctions pricing expert Mario Mancini’s advice.
Mar 31, 2023