Supply and Demand pricing

Supply and Demand pricing

Supply and Demand pricing

There are a handful of factors that can impact “best pricing” when buying a car. Inventory and demand are the two leading factors in determining price. Inventory represents “Supply” and is the leading factor that dictates pricing at any dealership (HaloCar approved or otherwise). “Demand” is judged by how many customers are looking to buy a specific model. If a specific model is in high demand and inventory is running low, dealers will price the remaining available vehicles at a higher price. Conversely, if there are a lot of vehicles available in that particular model, dealers will lower the price to help incentivize the sale. What most buyers don’t know is that dealers can see each other’s new car inventory on a daily basis; seeing the entire supply available for a given brand. For example, there are 16 Ford dealers in the Greater Puget Sound market. Each Ford dealer can see all competitive Ford dealer’s new car inventory.

They also daily see which models and how many are sold. These factors govern how pricing is determined. The HaloCar price is the lowest acceptable price that the dealer will accept at that time.

Another concept that drives pricing is competition. If there is only one Ford dealer in a smaller market then buyers have no other Ford dealers to consider and the dealer can set prices higher. But if you are in an area with many Ford dealers, the buyers can shop for the best price and dealers will become more competitive. They will be willing to take less of a profit because they desperately want to sell all their new inventory. The local Ford dealers are all competing against each other for sales leadership. Thus, the more Ford dealers in a local area creates competition and drives prices down. We are fortunate as there are 16 Ford dealers from Everett to Olympia. The same concept holds true for any new car manufacturer.

On the used car side, there is no new car window sticker or MSRP (Manufacturers Suggested Retail Price). Dealers use several items to value used vehicles such as NADA (National Automobile Dealer Association), Kelly Blue Book, Black Book, or a used car auction that only dealers can participate in, and vehicles for sale on the internet such as Auto Trader. These options guide a dealer as they attempt to place a value on a used vehicle. Once a dealer buys or trades for a vehicle, they have additional costs. Costs may include transporting the vehicle from auction, cleaning, bodywork, repairs, emission testing, etc. The dealer’s goal is to keep the total cost as low as possible. Lower costs when sold translates to a higher profit for the dealer.

Dealers will also be concerned with how long a used car may sit on their lot. Kelly Blue Book and other sources update monthly. Each update usually lowers the value of used vehicles on their lot. Lenders use Kelly Blue Book as a guide to help them determine how much they will lend on that used vehicle. So, dealers want to sell a used vehicle as quickly as possible before the value deteriorates.

Our dealers are transparent about their used car cost and the used car HaloCar price is their lowest acceptable price at that time. The dealer’s goal is to sell that used car quickly.