How professional dealers calculate the right purchase price for a used car

Start with the right market, not the highest advertisement

Compare the exact generation and derivative, then powertrain, drivetrain, transmission, age, mileage, equipment, condition and region. Remove duplicate adverts and price outliers. Dealer asking prices reflect advertised intentions. They are not evidence of realised sales. ChatAuto ranks and weights current comparable listings and shows their sources; the expected transaction price subtracts the dealer’s explicit negotiation assumption.

Build a complete acquisition and preparation cost sheet

Include transport, auction buyer fees, documentation, bodywork, paint, mechanical repairs, tyres, brakes, servicing, detailing and inspection. Add ADAS, EV and battery work when relevant. Use actual invoices or quotes where available; label provisional amounts Estimated. Review unknown items instead of treating them as zero. Warranty and comeback reserves remain planning allowances until costs arise. Do not duplicate repairs already included elsewhere.

Solve the purchase ceiling backwards

Start with the estimated resale after negotiation and the selected VAT treatment. Deduct direct costs, reserves, financing and any overhead you entered. Find the highest purchase price that meets every required gross-profit, contribution, gross-margin and ROI target. This is the maximum and walk-away price. Repeat using the lower market quartile and higher estimated costs for the recommended buy price. If no positive price works, the tool reports no feasible acquisition.

Measure stock risk without inventing sale times

An attractive advertised margin can disappear while capital sits in stock. A useful liquidity forecast needs inventory, demand, listing history and sale observations. Public asking-price search alone cannot establish these. ChatAuto therefore leaves liquidity unavailable and uses your holding-period assumption for financing. The conservative, base and strong-market scenarios show sensitivity to market prices; they are not forecasts with assigned probabilities.

Keep gross profit, contribution and ROI distinct

Gross profit is vehicle revenue excluding vehicle VAT minus purchase excluding recoverable VAT. Contribution deducts acquisition and preparation costs, warranty/comeback and market-risk reserves, and financing. Only explicitly entered overhead is deducted next. Gross margin divides gross profit by revenue; contribution margin divides the remaining contribution by revenue. ROI divides contribution after entered overhead by purchase plus direct costs, excluding recoverable VAT. It is a transaction return, not an annual yield or net profit.

Treat VAT and cash exposure consistently

Vehicle prices are entered as gross cash amounts; cost amounts exclude recoverable VAT. Under the selected standard VAT model, resale is reduced by output VAT and purchase only by VAT you confirm is recoverable. Under the selected margin scheme, VAT is calculated on a positive vehicle sale/purchase margin; preparation costs do not reduce that vehicle margin in this model. Eligibility and the applicable rate must be confirmed with your accountant. The ROI capital base excludes temporary VAT funding, reserves and corporate capital needs.

Why fixed-percentage buying rules fail

Two cars with the same retail asking price can have different repair bills, warranty exposure, auction fees and financing periods. The same margin percentage also means a different cash profit at different price points. A dealer should negotiate against a vehicle-specific cost sheet and both conservative and base limits, then verify condition and quotes before buying. ChatAuto supports that decision; it does not guarantee the sale price or replace an inspection.

Valuation confidence

Derived reserve = weighted interquartile asking-price range × (1 − valuation confidence / 100). This transparent planning allowance is not an observed repair cost or a statistically calibrated expected loss.

Target factors score 70 when your target is met and rise with headroom. Confidence and condition use valuation evidence; price risk compares the buy price with the two limits; capital exposure tests the conservative loss. Unavailable factors are excluded and weights rescaled. Unknown liquidity caps the score at 75; confidence below 60 caps it at 55; loss, no feasible buy price or exceeding the maximum caps it at 39. This is a policy score, not a probability.

Scenarios

Conservative uses the lower weighted market quartile and the selected uplift on estimated costs. Base uses the median; Strong Market uses the upper quartile. These are planning scenarios, not probabilities or guaranteed outcomes.