Why you’ll always pay more with a dealer

It’s par for the course to be underwhelmed by an offer for your car from a dealer. Be it a trade in or an outright sale, being low-balled is standard operating procedure.

And when you buy a used car you can guarantee you’ll be paying more if you walk onto a car lot.

It can feel like a slap in the face when you’re offered significantly less for your car than what you’re seeing the same model is being sold for, sometimes even in the same car yard, so where does all the money go?

Every single aspect of a dealer’s business attracts costs and these will be passed onto you as surely as night follows day.

Here are the key ways your hard-earned is absorbed by a dealership:

Sales people – Even though they’re almost universally unpopular, part of a portion of every sale a dealer makes goes on the commission to the sales person.

Reconditioning – When a dealer buys a car, they will spend a significant amount on reconditioning a vehicle. This might be as simple as a thorough detail, or it may be more mechanically complicated. You can expect a used-car from a dealer to be spick and span, which isn’t always the case with a private sale.

Depreciation – We all know that cars depreciate as soon as you drive them out of the dealership, but they also cost money to sit on a lot. A combination of depreciation and the cost of the lot itself will be covered by the margin a dealer puts on a used car.

Showroom/lot – The cost of running a bricks-and-mortar business – rent, showroom fit out, electricity, maintenance etc will all add to the price of your car.

Of course, the argument from a dealer is that they offer you convenience of browsing the range of cars at your leisure, being able to test drive them and having some recourse should something go wrong.

These factors may be appealing to some people, but the reality is that the industry has conditioned consumers over decades to accept that this is the cost of doing business.

Online marketplaces have gone some way to challenging the model, but in an age when consumers expect to both transact online and also have a positive experience (which they will they tell their social networks about), you’d have to think the days of these expensive overheads are numbered.

Paul Higgins is director of HelloCars.

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