car retail price Vs valuation (£3k difference!) can anyone explain please?

Station_83

I would love someone to explain to me the difference between the retail price and the valuation price of a used car model I am looking at please. I understand retailers overhead costs and salaries etc are factored in but it seems a huge jump between the valuation price and retail price.  Though this could apply to lots of models. I’m  new to buying on the used car market. A few cars I’ve seen on online car retailers I’ve gone and done a valuation on the Reg number on We Buy Any Car (who I might sell mine to rather than the part exchange with retailer of new used car I’m wanting to buy) and the valuation with We Buy Any Car has put the car down by £3k. I also know it’s likely that we buy any car will knock the price of valuation off my car I want to trade in by 10/20 per cent as I’ve heard about this too. Does that literally mean that I could purchase the car from retailer and then if I went to sell it the next day back to retailer or webuyanycar it would lose £3k in value ? All the online retailers and also used approved dealerships I’ve spoken to have priced the model and Make I like with similar spec roughly the same. Be great to get an insight into how things work as like I say I am totally new to this. Thanks 

facade

Station_83 said:

I would love someone to explain to me the difference between the retail price and the valuation price of a used car model I am looking at please.

It is how a business works.  Buy cheap, sell dear.

The difference between the two values, once they deduct all the running costs of the business, will yield a miniscule profit that they have to pay tax on.

chrisw

Don't forget, you have 2 lots of profit margins to consider, the buyer and seller. We Buy Any Car might knock off 10% of the actual value and the retailer might add 10% on.

So in your example, yes you may lose £3k as you're paying for both the dealers and buyers overheads and profits.

Car_54

Even if your car is perfect and needs no preparation, the dealer has to make provision for any faults which may manifest themselves in the months after he sells the car.

He has to finance the purchase of your car, which may sit in the showroom for weeks or months, costing him interest.

Finally, he has all the normal running costs of a business. Rent, rates, wages, pensions, insurance, heat, light, etc.

neilmcl

Have you heard of thing called profit, it's generally why businesses exist.

The valuation on WBAC is based on the value to trade, slightly lower because most cars they buy end up at auction so they have to make some profit. Clearly, dealerships have higher overheads and bigger profit margins so a their retail price is inevitably much higher than their trade value to give them a bit of profit at the end of it. For each individual car it isn't as much as you might think either, they rely on volume.

Station_83

chrisw said:

Don't forget, you have 2 lots of profit margins to consider, the buyer and seller. We Buy Any Car might knock off 10% of the actual value and the retailer might add 10% on.

So in your example, yes you may lose £3k as you're paying for both the dealers and buyers overheads and profits.

Thank you  

Station_83

Car_54 said:

Even if your car is perfect and needs no preparation, the dealer has to make provision for any faults which may manifest themselves in the months after he sells the car.

He has to finance the purchase of your car, which may sit in the showroom for weeks or months, costing him interest.

Finally, he has all the normal running costs of a business. Rent, rates, wages, pensions, insurance, heat, light, etc.

Thanks for the explanation, it’s made it clearer for how the process works 

caprikid1

Am I missing something ? I cannot see the value of car ?
If you can buy a 1 year old X5 off the forecourt and put it into WBAC with a 3K drop you are doing well.
If you are looking at paying £4K for a 20 year old standard golf..

caprikid1

ultimately buying from a dealer you are buying a car under a different legal framework with different obligations to a private sale.
As has been said the dealers has costs and obligations and wants a profit.
Obviously if you pay the extra 3K you still have to be prepared to pay to enforce those obligations if they fail to uphold them.

Flight3287462

Take the WBAC cycle.

You sell your carto WBAC for £10k, they will be building lets say 10% profit on that (probably less), they will then send the car to auction (although same company they will be different cost centres) so a sellers fee will be chargeable say £300.  A dealer buys the car at auction for £11.3k he has buyers fees to pay so it will cost him around £12k all in (inc transport).

Dealer then gets a good look at the car and decides what needs done to retail that could be just a wash and polish.  The car is still fairly new so it will need to be tip top and he will be expected to offer some sort of warranty so he has to build in some margin for any pre-existing faults.  So by the time it hits his forecourt it will be retailed at somewhere between £14k-£15 (if he is very lucky).

rhino_horn

These are the costs we have to factor in to each deal from when we purchase a car:
Sourcing fee / auction fee
Collection or delivery costs
PDI and MOT - at the absolute minimum - usually there will be a few dents and/or paintwork, a tyre or two maybe, a new service. Repaint / recon the alloys
If the PDI has picked up something wrong then we have to fix it (we prep our cars properly)
Full wetvac, detail, valet
Warranty
Then we have our overheads - staff, building etc etc
And then, after all that...we have to pay VAT marginal on the profit.