Car Values - Dealer vs Private Party Valuations?

[toincoss]

I must be missing a fairly obvious reason for how used cars are being valued. Maybe someone can enlighten me? KBB and other websites give both dealer pricing and private party pricing on used vehicles. As a seller, it says I should be able to sell my car to a private party for significantly more than if I were to sell to a dealer. Why are private party prices significantly higher than dealer prices? In my estimation, sometimes $1500 - $2000+ more, if sold in a private party transaction.

From the perspective of a buyer, if I know a seller will get $10,000 from a dealer, why would I ever buy the car for more than $10,500? In essence, some nominal amount above dealer prices like $200-$600 more. In the past, there may have been a lack of available information, but now there's an abundant amount of pricing data for used cars on the internet.

Does anyone have a clue why there's such a significant gap between prices for dealer and private party sales? Is it just a lack of knowing this info is available? I doubt it's a low supply, high demand issue. Bidding wars for used cars can't be that frequent.

As an example, here's one data point.

2010 Altima 2.5S, 40K miles, Standard Package with optional sunroof.

KBB - Private Party:

Fair 11,364
Good 11,923
Very Good 12,318
Excellent 12,697

KBB - Dealer:

Fair 9,736
Good 10,253
Very Good 10,618
Excellent 10,698

Spread =

$1628
$1670
$1700
$1999
average = $1750

[TheLazyMan]

Are you sure you're not looking at the trade-in value?

[JLee]

+1

Those are trade-in values, not retail values.

[neo von retorch]

I think OP realizes that, even if it's worded awkwardly, i.e.

if I know a seller will get $10,000 from a dealer, why would I ever buy the car for more than $10,500?

.

In reality, buyers aren't as "powerful" as dealers. The dealer offers up a guaranteed, no-hassle, easy way to offload your car while you step into a new (to you) one, and they take care of the transfer paperwork, plus in some states they can reduce the tax you pay on your new vehicle by the amount of your trade. So people willing sell their cars to dealers for a lot less than they can get if they wait for the "right" buyer. In other words, the dealer is getting a deep discount. If private party buyers tried to hold out for a price just barely more than the dealer's convenience bargain, a lot less people would sell private party. The whole reason to sell that way is that you have to endure a little more hassle, but you can keep the price higher and wait for a buyer willing to pay that amount. The buyer isn't really thinking about "trade-in" cost - in reality they're comparing what the pay the private seller to the higher cost of getting that car from a dealer.

In theory, though, if you keep all of this in mind, you can generally get a good deal by negotiating close to those amounts. For example, knowing the dealer is going to sell your car for $(#)k more than they're offering you in trade, when it needs little or no reconditioning gives you the power to say "you know what, I'm not going to go through with this deal unless you give me a bit more -- I know it's worth it to you."