Dealer gets a line of credit secured by the inventory (unsold cars on the lot). Line of credit is interest only payable monthly, with maybe some loan to value restrictions (ie. he can't use the line to buy just anything, he buys a certain range of cars for resale).

So he offers lets say $25,000 on a trade for the Viggen against a new CLK. He borrows $25,000 on his line and uses it to settle the new car purchase. Assume his line of credit costs him interest only at 9%. Thus it costs him $187.50 per month ($25,000 * .09 divided by 12) to wait for a buyer to pay a $7,000 markup ($32,000 - $25,000) on that car. That is 37 months of waiting time.

In reality he needs to move cars to pay other bills and make paydowns on the line, but time is on his side. He can wait until his price comes to him. You might do better by asking for a lower interest loan or a free warranty or free extension of the warranty as that is $1,000 to you if you paid for it, but it costs him $500. He could also wholesale the car at something above $25,000 but less than $32,000 and be free of any future obligation to a buyer; that would happen if the realizes he bought in the wrong car and he will take too long to sell it.

Any car dealers out there that care to comment?

posted by 208.212.2...

• Found a Viggen for sale..., redducati748, Tue, 11 Mar 2003 14:20:15
  • Re: Found a Viggen for sale..., redducati748, Wed, 12 Mar 2003 19:09:33
  • Good Miles. Low Mileage Viggen verts don't..., b.flippo, Wed, 12 Mar 2003 18:08:51
  • 30-33k sounds about right. Keep in mind, Winder, Wed, 12 Mar 2003 13:52:07
  • Too much...., NE-Viggen, Wed, 12 Mar 2003 13:42:16
  • theres a 2000 3dr around here, nickR, Tue, 11 Mar 2003 20:01:35
  • I figure the used car business this way........, pursang, Tue, 11 Mar 2003 15:36:41 <-- Viewing This Message
  • Viggen, VP, Tue, 11 Mar 2003 15:05:03

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