Buy a Car Like a Dealer

Most people buy a car from a dealer, paying for a markup in return for various services. Dealers act as middlemen between the consumer and wholesale distributors. Many wholesale distributors sell vehicles in dealer-only auctions for prices far lower than the general public can find at any location. In this article we'll look at the basic steps to take in order to purchase a car at or near wholesale cost.

Steps

  1. Know the difference between a dealer-only wholesale auction and a public, repossession or other retail auction.
    • A dealer-only auction requires a car dealer license in all 50 states and is the main way dealerships rotate excess inventory. Unlike public auctions dealer-only auctions tend to offer close to new cars, new cars, recent trade-ins or just off-lease vehicles. In addition, many vehicles are detailed, have existing warranties and are carefully rated as to condition.
    • Public car auctions are open to anybody, including savvy dealers, so the prices may not be as low as the hype suggests. You see these advertised all over the place including online and in the backs of newspapers.
  2. Decide which car you want, the options you need, and the condition for which you are willing to settle. Be as flexible as you can as you will be buying at auction.
  3. Use an independent source to determine the wholesale and retail values of your target vehicle. The most frequently used sources for this are, DriverSide, Edmunds, Kelly Blue Book and Nadaguides. NADAguides is owned by the Automobile Dealers Associations so their pricing is always most favorable to the dealer - not the consumer.
  4. Settle on a budget. Do not forget that your final price will include taxes, registration and other fees. Also consider ongoing costs - sites like DriverSide will help you estimate cost of ownership.
  5. Decide that you will not exceed this budget under any circumstances; a key aspect of buying a car like a dealer is not to let emotions cause you to spend more than you decided to.
  6. Get access to wholesale auctions using one of these methods:
    • Locate, research and retain a proxy buyer or proxy dealer who has access to wholesale auctions. A proxy buyer is an individual (sometimes a group) who has a legal dealer license and runs a service where he or she attends wholesale auctions to buy an individual car for you.
    • Acquire a dealer license. This is typically a time-consuming and expensive process that is not practical unless you plan to buy and sell cars as a business. States rely on taxing dealerships for income, so there is little or no incentive for a state to grant a license to an individual who does not plan to operate as a car dealer.
  7. Research local auctions to find out times, locations and get a list of available vehicles. Once you have found one that has the vehicle you want, make arrangements to attend the auction or have your proxy buyer attend the auction.
  8. Make any necessary financial arrangements. Each auto auction will have its own terms; verify these in advance make sure that you have the correct payment options available if you win the car.
  9. Stay in close contact with your proxy buyer while locating the car you want through purchase and delivery.

Tips

  • Check out the CarFax and recall list for that particular car you are searching for.
  • Buying at wholesale often includes an original manufacturers' warranty. It is a good idea to select this option.
  • Follow the same guidelines you would for buying any new or used car.
  • Compare proxy-dealer services carefully, including fees, availability of warranty and any other factors.

Warnings

  • Making a good car buy is always based on being prepared - know the product, know the invoice, the MSRP, or the market's average selling price, etc., and knowing how to make the best deal with the seller. The former is all based on easily conducted research, the latter is based on hard-fought-for experience. Some videos at http://www.easi.info/new-car-buying/ how to get the upper hand on any seller. Be smart and take advantage of the info available on the web.
  • In most states it is a misdemeanor offense to buy or sell too many cars per year without a dealer license. This number varies by state, so be sure to know what your laws are.
  • Beware of traditional car dealers who offer a wholesale or proxy service. Why would they do this? If something is too good to be true, it probably is a ripoff.
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  • Make sure you are working with a reputable proxy dealer who won't disappear after your purchase.

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Sources and Citations

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