Can someone explain how car wholesales work?

Here's the situation; 2005 Subaru Baja at the local Subaru dealership. When it was taken in on trade, the tech that looked at it was worried about the head gasket, so the sales manager decided it would be best to get it to the wholesaler and be done with it. My husband and I have looked it over extremely well and driven it, the CEL light is not on, and there is no mixing of coolant and oil, so as far as we can tell, it's in good shape mechanically.

Here is where I am confused; the only reason the wholesaler isn't on his way to get it is because I wanted to look at it and we have dealt with the same salesman for 4 years, and he knows we can fix Subarus (and don't really mind doing it). The sales manager is not pleased with the thought of us buying it, as it is technically not for sale. If it goes to the wholesaler, he will only pay the dealership $8-9k for it, and they said they would sell it to us for 10k (the wholesaler's price was told to me off the record).

So this is my question, say the wholesaler agrees to pay 8500 for it, is that 8500 out the door, or does he have to pay all of the BS taxes that go along with buying a car from a dealership? Just trying to gain some insight before I decide to start haggling and securing financing.

Sorry if this is disjointed and rambling, and thanks in advance for any insight.

The wholesaler is not paying taxes because they are reselling the vehicle. The end user pays the taxes.

Usually a wholesaler does not pay taxes on a car that is intended for resale. The end user gets all of that fun stuff. However states can be different and YMMV.

Having said that, I have also wondered about the thought process in this situation ("I'm taking a pain-in-the ass car off your hands"); I have worked at dealerships and (myself or a co-worker) would spot the occasional distressed piece of E36 M3 (high milage, mechanical issue, slight crash damage, fugly interior, etc.,) and would inquire about it, only to either get blown off or get The Stall ("Oh, I think I gotta wholesale buyer for it, see me Friday", etc.) Then the silly thing sits for four months, everybody loses interest, and it ends up going to the auction a few times ( this of course costs the dealership how much per trip?)until somebody buys it. Usually for far below what would have been fair.

One of my co-workers wanted a VW Golf (This is in 1989 and we worked at a VW dealership). He got the runaround until he drove in with a new 1990 Golf...with the plate frame from the next town's VW dealer on it.

One reason your price might be higher than wholesale tranaction on the same car is that there are likely consumer protection laws and some liability that will be attached when the car is sold to you at retail. I don't know much about it, but that is one reason the dealer might be willing to sell for less on a wholesale deal than what they might accept from you on the car.

The wholesaler is a guy (or company) who buys just about anything the dealership send his way. The wholesaler does not give the dealership much money but he does not ask any questions and he does not try to return anything to the dealer.

The dealer takes less but also does not have to invest anything into the car. If the dealership puts the car out on the lot they will often invest into the car like putting new tires on the car.

If the wholesaler gets the car he will then take the car to auction and sell it to another car lot. Most typically it will get sold to just an average used car lot. You know, the kind that does not sell new cars, just used. It is often then up to the Used Car Lot guy to decide how much to invest in the car for such things like new tires, detail wax and buff, etc. From there, the used car lot will set his own price to retail the car for. This retail price will be a combination of what he paid at auction, what he invested and a some for profit.
Do not pay more for the car than the wholesaler unless you can prove that the dealership has added some value to the car.

Why do they think the car needs a head gasket?

Thanks for the input, that clears up my thought process quite a bit.

In reply to jrw1621: I have no idea what led them to believe that there is a head gasket problem, the SOHC EJ25 is not known for that. Going to call and find out, though.

Morbid wrote: ...My husband and I have looked it over extremely well and driven it, the CEL light is not on, and there is no mixing of coolant and oil... ...I have no idea what led them to believe that there is a head gasket problem, the SOHC EJ25 is not known for that. Going to call and find out, though...

They are not known for INTERNAL headgasket issues (that doesn't mean it isn't as possible as any other car), but more likely, if it has a leak, it is an EXTERNAL one where coolant simply drips out between the mating surfaces of the block and head and ends up on the ground. You won't see mixing of oil/coolant or even have any drivability/longevity issues so long as you keep good tabs on how much coolant is in the system and keep it topped-up. The tech may have seen a drip on the floor of the garage or parking lot or smelled coolant after a drive. Subaru sells a "conditioner" that will usually take care of small leaks like this so that it really becomes a non-issue.

carzan wrote:

Morbid wrote: ...My husband and I have looked it over extremely well and driven it, the CEL light is not on, and there is no mixing of coolant and oil... ...I have no idea what led them to believe that there is a head gasket problem, the SOHC EJ25 is not known for that. Going to call and find out, though...

They are not known for INTERNAL headgasket issues (that doesn't mean it isn't as possible as any other car), but more likely, if it has a leak, it is an EXTERNAL one where coolant simply drips out between the mating surfaces of the block and head and ends up on the ground. You won't see mixing of oil/coolant or even have any drivability/longevity issues so long as you keep good tabs on how much coolant is in the system and keep it topped-up. The tech may have seen a drip on the floor of the garage or parking lot or smelled coolant after a drive. Subaru sells a "conditioner" that will usually take care of small leaks like this so that it really becomes a non-issue.

I wasn't insinuating that head gasket problems were impossible, I know anything can go wrong with any car :)

I just got off the phone with the service manager, and it seems that the above description is exactly what is going on. There was coolant residue around the head gasket, so they made the decision to unload it rather than deal with it.

Thanks!

Morbid wrote: I wasn't insinuating that head gasket problems were impossible, I know anything can go wrong with any car :)

No, that was just me covering my butt in case it did turn out to be an internal leak.

carzan wrote:

Morbid wrote: I wasn't insinuating that head gasket problems were impossible, I know anything can go wrong with any car :)

No, that was just me covering my butt in case it did turn out to be an internal leak.

Got it, and that was me covering my butt in case someone thought I thought that it was impossible to have an uncommon problem with a car

It's actually not uncommon at all, it's VERY, VERY common for a '99 or '00 SOHC EJ25 to have a head gasket leak. They usually deteriorate in the lower inside corner first, and cause a drip of coolant onto the belly pan or ground. The conditioner is ok, but usually just a temporary fix. They redesigned the head gaskets in '01 or '02 (IIRC) and rarely had that problem after that. I actually just changed a set on a friend's '99 Forester this weekend. BTW, if you end up getting it and it needs head gaskets, message me. I know some tricks that will speed the process up quite a bit. Book time is 11 hours for the job, I did the Forester on Saturday in a little over 6.

Back to the original question. There are a lot of used car lot chains that buy trade-ins in bulk, without really looking over them, for a discount, and often times take the good with the bad. J.D. Buyrider is a perfect example (if you have those where you are). The shop that I work for does probably three engine or transmission jobs a week for the local one, and another local dealer that I'm friends with wholesales them 20-30 cars a week. They don't complain or try to return them. If you sold 30 cars a week to the general public on an as-is basis, probably half of the people would try to bring them back when they found out all the problems the cars have, regardless of the agreement before hand. It's really just a way to get rid of them without any hassle at all.