Used Car Dealership FAQs

  • Introduction

    With the average price of a brand-new vehicle topping $40,000, the used car market can be an appealing alternative for many consumers on a budget. A car is considered used if it's had at least one former owner, regardless of the vehicle's age. Savvy shoppers can take advantage of this to buy a like-new model for thousands of dollars off MSRP. For buyers of classic and collectible models, the pre-owned market also offers the chance to score the car of their dreams.

    Aside from the cost savings, there are many smart reasons to consider buying used. Cars bought through a certified preowned program are reconditioned and usually come with a warranty and a detailed vehicle history report. Older cars depreciate less, and insurance rates for them are typically lower, too. If you can forgo that new car smell, buying preowned might be the best option for you.
  • Do used car lots do trade-ins?

    Many used car lots take trade-ins, and it's an easy way to get rid of a car without the hassle of selling it on your own. Depending on the dealer, however, not every vehicle will be accepted. Your car's trade-in value is largely based on its mileage, so if your car is high-mileage, you'll be offered less.

  • How many miles is a lot for a used car?

    In general, many people consider 100,000 miles to be a lot for a used car, even though modern vehicles can run for 200,000 miles or more. When buying used, compare the car's mileage with its age. The average car is driven 10,000 to 15,000 miles per year, so a five-year-old car with over 100,000 miles may have more problems than the odometer suggests.

  • How long do dealerships keep used cars on the lot?

    This varies by the dealership, but most keep used cars on the lot for 60 days or fewer. A car that sits on the lot for too long is taking up valuable space, so dealers are motivated to sell as quickly as possible. If a car has been on the lot for over 90 days, many dealers are usually willing to reduce the price.

  • What are some things to check when buying a used car?

    Even if a car comes with a warranty, it's important to inspect the vehicle inside and out before you purchase it. A few things to check for include:

    • Scratches, dents, and other body damage
    • Seat tears, odors, and cushion condition
    • Operational windows and doors
    • Air conditioner and heater
    • Tire tread
    • Interior and exterior lights
    • Belts, fluids, and other parts under the hood

  • What happens to used cars at a dealership that don’t sell?

    Cars that sit on the lot for too long, even after multiple price drops, are usually sold to auction houses. The auction house then sells the vehicle to the highest bidder in “as-is” condition. Cars in poor condition might instead be sold to scrap yards.

  • Is there a lemon law for used cars?

    Lemon laws are designed to protect buyers if a seller misrepresents the title, has tampered with the odometer, or fails to accurately disclose the car's history. All 50 states have a lemon law for brand-new cars. The only states that have a lemon law for used cars are New York, New Jersey, Rhode Island, Minnesota, Massachusetts, and Hawaii.

  • Why are used cars from rental fleets considered worse than privately owned used cars?

    Used cars from rental fleets have had multiple drivers, so it's usually impossible to tell if the car was driven roughly or mistreated. These cars also often have very high mileage, and they might not come with a warranty.

  • What are the advantages and disadvantages of buying a used car from a dealership rather than a used car lot?

    Dealerships are usually more reliable than used car lots because they're held accountable for their sales practices. Dealerships also offer certified pre-owned cars that are backed by a warranty, and repairs are handled in-house. Used car lots generally have lower prices, however, and may stock a better variety to choose from.

  • How does trading in a car work?

    Trading in a car is a fairly simple process. After test driving the car and assessing its value, the dealer will make you an offer. If you accept, the money goes toward the new car you're buying. Dealers take care of all the paperwork and pay off your preexisting loan, if applicable.

  • What is ‘title jumping’?

    Title jumping refers to the act of buying a vehicle then selling it without putting the title in your name. The practice, also called a floated title, was once used by dealers to avoid paying taxes on the vehicles they sold. Title jumping is illegal and considered a felony in all 50 states.

  • How do I start a used car lot business?

    You'll need to register the business with your state, choose a location, and build an inventory of vehicles before opening your doors. You will also need a dealer's license, which lets you sell an unlimited number of cars per year. Other requirements include comprehensive insurance and surety bonding, which protects your business from contract defaults with vehicle suppliers and other vendors.

  • What is the average markup on a used car by the dealer?

    Markups can vary greatly depending on the car and the dealer selling it. On average, used cars are marked up 10% to 45%. The markup is based on how much the dealer paid for the car, overhead costs, and how much profit the dealer expects to make.

  • How is sales tax calculated on a used car sale, when the buyer is also trading in a vehicle?

    Sales tax calculation laws vary by state. Many have a trade-in tax exemption, which lowers the amount of tax the buyer pays for their new car. The seven states that don't have this exemption are Hawaii, Kentucky, Michigan, Montana, California, Maryland, and Virginia.

  • How do used car lots prey on people with bad credit?

    Some used car lots, called “Buy Here, Pay Here” properties, take advantage of customers with poor credit. They do this by charging high prices and interest rates on their cars. Regular dealerships use an outside lender, such as a bank, for financing. Buy Here, Pay Here lots make their own financing with terms that greatly favor themselves over the buyer.

  • Why do car salesmen use techniques like disappearing to talk to their manager five times during a car sale?

    In some cases, salespeople disappear to talk to their manager to negotiate a car's price and other terms. This can also be a tactic to wear the customer down, which makes them feel as if they've spent too much time at the dealership to back out of the sale.

  • Is trading in a car profitable for a used car lot?

    Purchasing a car as a trade-in is almost always profitable for used car lots. Dealers appraise a car's value based on age, mileage, cosmetic damage, and mechanical condition, then offer the customer a rate that's less than the vehicle is worth. Even so, the price is often attractive to buyers who are eager to get rid of the car and buy a new one.

  • Should a used car lot offer warranties?

    Offering a warranty on a used car gives buyers peace of mind, but lots aren't obligated to do so. They are, however, required by law to inform the buyer if the car comes with a warranty or is being sold “as-is.” Even if a lot doesn't offer a written warranty, state laws can hold dealers responsible for selling vehicles that don't meet basic quality standards.

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