Used Car Prices: How They Work

You're looking at buying a new car, but are unsure about how the pricing works. You may be confused as you look at different listings, and see seemingly similar cars priced quite differently. You'd like to go for the lowest price out there, but you're suspicious that something might be wrong with it. You look at the most expensive one, thinking it might work better, but what if you're just getting ripped off?

If you've asked yourself these questions, then you've definitely experienced used car pricing confusion. Unfortunately, you'll never be able to get this down to an exact science, but by keeping a few tips in mind, you'll at least be able to get same idea of what you're looking at pricewise.

First, you'll need an anchor. This anchor, in the used car world, is known as Kelly Blue Book value. You can look up this number for free online. This number takes into account several factors about a car (model, model year, mileage, condition, etc.) to arrive at a basic valuation for the car. Find this number for every car you're looking at, and always have it in mind when looking for a car.

For the most parts, used cars tend to sell at a price below the expected blue book value. If you see a car selling above the expected blue book value, be sure to ask the seller what his reasoning for the price was. Oftentimes, it will be because of ignorance of the blue book value. You can use this number to bargain him down.

There are a lot of intangibles that can effect the pricing of a car. The biggest one of these is the ever dreaded unknown mechanical problem. If a seller is claiming some sort of mechanical problem without giving you its exact nature (which you could use to factor the repair cost into the pricing), you should expect a massive discount. Don't ever pay anywhere near blue book for these sort of issues.

On the flip side, pricing can be affected by upgrades added to the car. This is quite common with sports cars. Sometimes the owners of these cars will demand ridiculously high markups, claiming that the value of the upgrades will justify the price bump. Don't fall for this, as the car is not worth the sum of its upgrades.

Knowing the blue book value of the car is key to understanding how these used cars are priced, but of course, your local markets will vary. Never be afraid to call out a car seller based on price. The worse that can happen is you hear a "no." Keep shopping, stand firm on the price, and you'll be able to get a great deal on a used car.