It's finally time to buy a car. You're looking for the perfect car in your budget and you've been doing your research. Looking at dealership used cars, you noticed that they are more expensive than cars sold by individual owners. Why is that?
Dealership cars are consistently 15-20% more expensive than the ones you see being sold in private party, even when the cars seem identical.
There are a number of reasons, some that add value and some that don't. Let us break them down for you:
The Positive: Value-added Benefits for Buyers
- Average Dealership Cost: $300 - $500 1
- Average Retail Mark-up: $600 - $950
Ever notice that dealership cars shine just a bit more? That's because they've been "reconditioned". Dealers employ people to wash the cars weekly, fix the small dings and dents, and they take the car through the mechanic's shop to do an inspection on the car. Those that don't pass the inspection get sold to wholesalers and auctions. Those that do pass inspection may have small issues fixed, and then the cars get put "on the front lines" for sale.
II. Certified Pre-Owned
- Average Dealership Cost: $500 + $500 (reconditioning cost)
- Average Retail Mark-up: $900 - $1,200 2
It is similar to reconditioning, but Certified Pre-Owned vehicles go through more stringent and thorough inspections backed by the actual manufacturer. For a car to qualify for a Certified Pre-Owned program, the car has to be within a specific year and mileage range. If the car fits and passes the inspection (or get repaired up to standard), a dealer can pay to have the car "certified". The certification extends the manufacturer's warranty and can provide you as a buyer with some real value.