Car Buying Blues

If you are going car shopping, it is best to know in advance how much vehicles cost.  That way, you will not get caught up in the moment and buy a vehicle that you cannot afford.  You can read the local newspaper classified ads to see sample prices, or you can choose from several buying guides, such as the Kelley Blue Book or Edmunds Car Buying Guide.

I am looking to purchase a 1997 Dodge Pickup Dakota Club Cab in excellent condition with the following equipment:  V8 5.2 Liter, Automatic Trans., 4 Wheel Drive, Air Conditioning, Power Steering, Power Windows, Power Door Locks, Cruise Control, Bed Liner, Towing Pkg, and Alloy Wheels.  The suggested retail price (blue book value) is $22,030.  This is the price that a dealer would charge for this type of used vehicle.  I expect to pay less than this price if I buy a similar truck from an individual.

If you are replacing a vehicle you currently own, you need to sell that vehicle.  The easiest way is to trade it in at the dealer.  How much would the dealer pay you for your used vehicle?  The buying guides listed above, as well as others, can give you those prices.  Typically, the prices range based not only on the equipment, but also the condition of the vehicle.

For instance, if someone was trading in a pickup like the one I am looking for, how much would they get?  The prices range from $14,240 to $17,100 depending on the condition of the vehicle.

A friend of mine is buying a new truck, and has a pickup with most of the options I have listed above.

1. What would be a reasonable price for the truck if he sold it to me, assuming that the truck was in mint condition?
2. If I find a truck at a dealership that costs $23,000, do I assume that the price is too high?
3. What is the amount of money that a dealer would make if they accepted the pickup as a trade-in and then resold it at the suggested price?  (Remember that the dealer has to pay for advertising, prep work, sales help, financing, and warranty work out of this amount.)
4. What is the percentage markup on that truck for the dealer?
5. Based on that percentage, how much would the dealer sell a truck for that was in poor condition?
6. Examine the following deductive reasoning.  Do you agree?  If not, what would you change?

The blue book value of the kind of truck I want is $22,000.
I am going to purchase a truck.


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Therefore, I will pay $22,000 for the truck.