What’s in a price

I recently wrote a piece about the Holy Grail of leasing, unfortunately unobtainable. This made me think of used cars and then, as sometimes happens, my mind wandered and I ended-up on the Image courtesy of artur84 at FreeDigitalPhotos.netsubject of price. What do we mean by it? We glibly talk of a used car price but which one? Is there just one, or are there lots? The truth is, of course, that there are several and here are some of the more obvious ones, starting from the bottom:

  1. Today’s Trade Price. The price that a trader will pay for a car ‘as seen’, in cash now. He may be a local sole trader, a local dealer, a buyer for a dealer, or used car supermarket, it doesn’t matter, it’s the cash price now taking full account of age, mileage, body and mechanical condition. It can vary day-by-day depending on local supply and demand conditions. The fact that you know a certain model was sold in the trade for in a certain town for a certain price, last week, doesn’t, necessarily, mean that is a good indication of the price, next week, in a different part of the country.
  2. Guide Price. The man in the street will probably be aware of Glass’s Guide – the book that, in the old days, the rogue trader would secretly look at before making a derisively low offer for his car in part-exchange. Nowadays, we have computers, websites and mobile phone apps. Most countries have their own guides, in the UK there are Glass’s, CAP and Parkers, Germany has Schwacke, France L’Argus, Italy Quattroruote, etc. Mainly, but not exclusively, the Guides are intended for trade use (Parkers is an exception in the UK); they research trade prices from a variety of sources and, as their name suggests, provide indicative values that even out geographic and other local distortions.
  1. Auction Price. Auctions were originally set-up as a convenient way to sell cars to the trade. Increasingly, however, retail buyers have found their way in, in order to pick-up a ‘bargain’. Beware, though, you buy on trade terms. By definition, auction prices will be close to Trade Price but there will be variations, particularly for nice, or sought after, cars where the competition of an auction can drive-up the price. One of the sources that the guides commonly use.
  2. Part Exchange Value. The price offered by a dealer when negotiating the purchase of either a new, or used, car. This is usually higher than the trade price because the dealer will use part of his profit to make the deal look more attractive (an ‘over allowance’).
  3. Private Sale. A private individual may sell his car to a friend, relative, or, next door neighbour. As a fleet operator, you may offer cars to employees at a price somewhere in the middle, not as low as a trader would offer but less than a dealer would sell it, properly prepared and with a full warranty.
  4. Retail Price. The price at which a dealer will sell a car, without any part exchange. This will depend, to a certain extent, on your negotiating skills!
  5. Forecourt Price. Some people call this the ‘sticker price’. The price that will allow the dealer to maintain his yacht on the Mediterranean but the savvy buyer will never reckon to pay, he uses it as the starting point to negotiate on and get the best possible deal.
  6. Advertised Price. Previously the domain of newspapers and magazines but now, in the internet age, websites are taking over. This is the, sometimes rather fanciful, price that a private seller asks for his pride and joy. Like the forecourt price, it is usually seen as the price to start haggling at. You may ask it but you probably won’t get it.

 

As always, condition is everything. The better the condition, the more complete the service history, etc. the better the price.

 

So, when someone asks “What’s the price?” you can reply “What do you want it to be? Please be more precise.”

 

 

 

Image courtesy of artur84 at FreeDigitalPhotos.net

 

Written by Tim Lewis

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Tim Lewis

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