2nd Hand Car Values – who's making all the money?

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  • 2nd Hand Car Values – who's making all the money?
  • Premier Icon cb
    Subscriber

    I don’t have the cash to buy one but I’m bored and was curious to know prices for a used Volvo XC90. Drive the Deal had some big discounts off new ones of these last year and there is a new model on the way…

    Using the official Volvo website, it provides a very useful comparison tool to compare the XC90 against its rivals. The default settings included an Audi, A Beemer and a Merc. Odd that it would be so readily available on the Volvo site but of course the other three pretty much destroyed the Volvo! This is particularly true for residual value – the Volvo was predicted to be worth around £12k after 60k miles and three years (£39k new price).

    This got my interest. Then checking the official Volvo used car page, it was displaying similar models but perhaps even older for about 6-8k more than its own predicted residual price!!

    Now, are Volvo and other traders really making 6-8k per vehicle or are the predictions just plain wrong?

    Premier Icon matt_outandabout
    Subscriber

    Main stealer dealer vs private / real world price?

    I bought a VW Passat Tdi Sport estate, original purchase receipt was there for £24k or so (every item on options list was there give or take): 3 years and 100k later I paid £6k…..

    Moses
    Member

    Dealers make more money on 2nd-hand cars than on new, or so I’m told.

    Premier Icon CHB
    Subscriber

    Three year old xc90’s sell for more than 12k.
    Great cars, we have a 54 plate one and its ace!
    The drive the deal price was only for a couple of years or so…2009-2010.
    New prices are higher again, but then maybe the dealers have more haggle room?
    To say the xc90 has been around for more than a decade, with only minor tweaks and upgrades tells you how right Volvo got it first time round. No the most agile of cars, but for 2.5tonnes of warm leather safety with a crackin stereo its hard to beat.

    shotsaway
    Member

    and there is a new model on the way

    This will have an impact on future residual values of the outgoing model

    the Volvo was predicted to be worth around £12k after 60k miles and three years

    Again the outgoing model but the residuals are always set conservatively and they normal quote a figure which is around 85% of the predicted future value. So in theory the true trade value is 3 years is more likely to be £14k ish.

    This got my interest. Then checking the official Volvo used car page, it was displaying similar models but perhaps even older for about 6-8k more than its own predicted residual price!!

    I suspect that the current model has a trade value today of somewhere between £16K and £18k. The dealer would advertise the vehicle for around £2000 more than the trade price. If they then sold the car for the advertised price, they would have to pay VAT of £400, the vehicle preparation costs could be around £500 (servicing, removing dents, etc). The buyers will also expect more for their part exchange than it is really worth (Called an over allowance), and this could be another £500 deducted from the profit. So although the dealer might start with £2000, they then have to deduct the above and they could be left with say £600 profit. And that is before the Sales person is paid any commission.

    The other thing to consider is that some of the vehicles that are £8k more than the predicted residual you mention, could also have a couple of thousand pounds worth of extras and the dealer will try and sell these vehicles for more because of the extras.

    Dealers make more money on 2nd-hand cars than on new, or so I’m told.

    True. Dealers make very little if anything from new sales as they are chasing manufacturer targets etc. In fact one of the reasons they may use the likes of drive the deal is just to get volume and then hope that they hit their quarterly or annual target. Risky as if they fail to hit that target, they may not get any bonuses and they may already have sold the vehicles at a loss. If it wasn’t for used car sales, i suspect many businesses would go out of business fairly quickly.

    I know some small businesses can make money buy buying a new car then selling it to the businees owner at book value which is a lot less than real value. The owner is then able to sell it at real value later on an make a small. I wonder if there is some large scale way in which folks might capitalise on this.

    Premier Icon cb
    Subscriber

    CHB – I’m not trying to say that the price is 12k – quite the opposite. Just confused as to why the Volvo website would suggest that it is. There are still BIG discounts on these to be had at Drive the Deal btw – in fact Volvo is offering (very subtly) 4k off a new one (with 0% APR as well).

    I think shotsaway makes some interesting points. Setting a low residual perhaps to cover themselves for the increasing number of buyers on personal contract hire schemes that trade in every three years.

    Just intrigued as I’d be quite keen if they really were 12k!!

    b r
    Member

    I always take any prediction of future valve with a large pinch of salt. +99% of all cars lose money every single day they are owned and the only way to ‘save’ is to buy a car once its lost the greater percentage of its new cost.

    My last car had lost £40k of its original purchase price (in 80k) when I bought it, my current £33k (in 78k).

    b r
    Member

    3.2 petrol…, they’ll be lucky to get that much – no value in big engined petol cars

    deepreddave
    Member

    I’ve been looking at DTD prices on new polos and fiestas and they’re pretty good! I’ve got one dealer to match but ordinarily I’d be buying 1-3 yrs old to avoid the initial deprcn however the 2nd hand prices make the new car decent value. Maybe cos I’m looking at frugal little cars, do I need to man up and buy a chelsea gas guzzler for the school run 😉

    3.2 petrol…, they’ll be lucky to get that much – no value in big engined petol cars

    Unless you don’t drive many miles and happen to be buying one! 🙂
    Unfortunately I’m neither.

    andypaul99
    Member

    [quotethe vehicle preparation costs could be around £500 (servicing, removing dents, etc).[/quote]

    And the rest we spend £500 prepping a polo. Main agents will / have to spend a mint preparing used cars, as used car customers generally expect new car condition and mechanical prep can also be colossal esp if it needs a major service and tyres etc. If you put 3k across a used car you may end up with £700 after VAT, factor in advertising costs and overheads and you get a lot less. This is the reason that dealers have such high targets. Low volume = no profits.

    andypaul99
    Member

    Jota- forget parkers guide, nobody in the trade uses it. You would get a more realistic price from we buy any car. Com

    Premier Icon footflaps
    Subscriber

    Dealers make more money on 2nd-hand cars than on new, or I’m told.

    Yep, margin on new car is about 1%.

    Rich_s
    Member

    I had a share tip on Pendragon – sounds like I shouldn’t bother!

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