How do retail values relate to wholesale values?

The primary factor driving wholesale pricing is what consumers are willing to pay retail for specific vehicles, the price point at which consumers are willing to purchase this vehicle rather than some other vehicle or at least consider them as equals in terms of value.  Wholesale values are then a result of the relationship between what consumers are willing to pay and the profit parameters – that is, what dealers determine they need to earn in order to sustain a business – of individual dealers. You can imagine that dealers are competitive. If consumers are generally willing to pay around $14,000 for a 2003 Honda Accord EX V6 4door with 60K and $14,000 for a Ford Five Hundred SEL with 25K, you will find that those vehicles will have very similar wholesale values even though they differ by 3 years and 35,000 miles.

Dealers did not decide that those two vehicles are worth similar money, consumers did. The relationship to wholesale values occurs because dealers have to make around $1500 profit on a vehicle such as that to sustain a viable business and therefore have to purchase those vehicles for around $12,000 for a well-reconditioned vehicle (leaving room for transportation, auction fees, clean-up, etc.) or trade one for around $11,000 (allowing for expenses to reconditioning it and prepare it for sale). If all of a sudden consumers decided that the Honda was only worth $13,000 retail, you would soon see a similar $1,000 adjustment in the wholesale value and the Honda would be worth about that much less than the Ford.  If another dealer decides he wants to make $3,000 per vehicle after expenses rather than $1500, he is either going to have to sell those vehicles for $15,500 instead of $14,000 or purchase them for $10,500 rather than $12,000. He will quickly find out the market won’t allow either of those things to happen.

How much do dealers make on a retail sale?

That’s very hard to say. In general, the lower the price range of the vehicle, the less a dealer has to spend reconditioning a vehicle, and the lower his expense structure the less profit he can afford to make. Typically a dealer can sell a lot more $10,000 vehicles than $30,000 vehicles (there being many more consumers looking for used vehicles in the $10,000 range than the $30,000 range) and a dealer selling $10,000 vehicles typically has a more modest expense structure than one selling $30,000 vehicles and can therefore sustain his business with less profit per car. It is also typically much more expensive to recondition a $30,000 vehicle out of warranty than a $10,000 vehicle. These are the primary factors determining profit structure. It is a highly competitive business and shopping around will almost always lead you to dealers with competitive pricing and profit margins.