How much profit do car traders make?
I'm having trouble understanding prices when it comes to selling my car. I have a very nice 2019 BMW Convertible, with 20,000 miles on the clock. It is in perfect condition except for the odd scuff on the wheels.
There seems to be a mark up of around £4,000 to £6,000 to buy my exact car from a trader.
Most of the car buying sites are offering around £18,000 but if I want to buy a similar model they are priced at around £24,000 to £26,000.
My second problem with this is that insurance companies go with 'trade price' should they have to write off my car, leaving a huge hole between the price they pay out and the true cost to replace my car.
There seems to be a mark up of around £4,000 to £6,000 to buy my exact car from a trader.
Most of the car buying sites are offering around £18,000 but if I want to buy a similar model they are priced at around £24,000 to £26,000.
My second problem with this is that insurance companies go with 'trade price' should they have to write off my car, leaving a huge hole between the price they pay out and the true cost to replace my car.
Asked on 12 April 2022 by john
Answered by
Andrew Brady
It's not quite as simple as a trader pocketing £4,000 to £6,000 on every car they sell. If, for example, you sell your car to WeBuyAnyCar.com, it'll be sent to auction. WBAC will have factored in making a profit here – so a dealer will probably pay more for the car than you sold it for. The dealer will have to pay 20% on the gross margin (the difference between what they paid for it and what they sold it for) – so the profit instantly shrinks quite significantly.
You might be a very honest seller and your car might be in excellent condition, but a lot of cars sold this way aren't. Factor in cleaning costs, sorting any cosmetic issues and any underlying mechanical faults (as well as, potentially, a service and MoT) – and the car could easily need £1,000 worth of prep before it's ready for sale.
On top of these costs, the dealer will have to provide a warranty. This is usually bought from an external company – so another costly outgoing. And then there's the marketing costs – taking some photos and advertising the car on external websites costs more than you might think. And then you have to factor in the costs of running the dealership – paying for staff, renting the premises, that kind of thing. When it comes down to it, the actual profit in each individual car is much, much smaller than it appears on the face of it.
Of course, you can avoid lining a car dealer's pockets by buying and selling a car privately. You'll probably get more for your money by selling your car to a private individual, and you'll get more car for your money by buying privately. But most buyers these days want things like a warranty, finance and a car that's in showroom condition.
If your car's written off, the insurance company should pay out whatever is required to replace the car like-for-like.
You might be a very honest seller and your car might be in excellent condition, but a lot of cars sold this way aren't. Factor in cleaning costs, sorting any cosmetic issues and any underlying mechanical faults (as well as, potentially, a service and MoT) – and the car could easily need £1,000 worth of prep before it's ready for sale.
On top of these costs, the dealer will have to provide a warranty. This is usually bought from an external company – so another costly outgoing. And then there's the marketing costs – taking some photos and advertising the car on external websites costs more than you might think. And then you have to factor in the costs of running the dealership – paying for staff, renting the premises, that kind of thing. When it comes down to it, the actual profit in each individual car is much, much smaller than it appears on the face of it.
Of course, you can avoid lining a car dealer's pockets by buying and selling a car privately. You'll probably get more for your money by selling your car to a private individual, and you'll get more car for your money by buying privately. But most buyers these days want things like a warranty, finance and a car that's in showroom condition.
If your car's written off, the insurance company should pay out whatever is required to replace the car like-for-like.
Tags:
selling a car
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