Chapter 6 – The PME (Profit Margin Estimator) Tactic In-Depth

Before negotiating a deal, you need to know the value of the car that you’re looking at.

You need to know all of the values. Dealer and Retail and what you can list it at, that will also make it look attractive in price.
You will be using my method using the Kelley Blue Book as your (
Profit Margin Estimator PME).

You can use the online version or the book, or both.
We will use the Suzuki Vitara above as an example for this PME.
2007 Suzuki Grand Vitara
Now, when looking at the Suzuki in the Blue Book, make sure that you are in the correct year (2007) and you have the correct model: Grand Vitara V6 (non-4wd), the basic model.

This deal was done in early 2014 and I want to show you how to bid with lower mileage cars.
The (PME) values shown here are from the Sept. 2013 KBB Values.

First, I want you to look at the Dealer Trade-In Value.

This is the price that you can expect a dealer to buy your car for.
Sometimes for more or less. It depends on each individual car which will take into consideration the vehicle’s mileage and overall condition.

So as of Sept. 2013:
Dealer Trade-In Good Condition is $5,675
Very Good is $6,075
Private Party Good Condition is $7,525
Retail (what you can expect a dealer to sell for) is: $9,775
Now, all this does is give you a BALLPARK number to work with.

It’s not set in stone.
If you have a car that’s in exceptional condition or has very low mileage like my Suzuki, then you can bring up your prices like I did.
I said that the retail was $10,800. You ask where I got that number? I simply just added about $1,000 to what the book’s listed retail was because of my low miles.

Dealer Trade-In Values 
Remember, just adjust accordingly if you have a newer Blue Book (Red Book or Black Book, if outside of the USA).
This information is truly timeless and can be applied 5, 10, even 15 years from now. Nothing changes but the numbers and if you have a current Blue Book or are checking online, then you’re perfectly fine.

Good Condition and Very Good Value – over on the left says $5,675 and $6,075 in my 1-year old Blue Book. It will probably be lower if you actually look this up now.
Your goals is to buy in this price range or as low as possible. I bought this car in 2013.
This is the best method that I created for myself from my early days.

You want to buy at the Trade-In Good value or lower. You might want to pay a little higher if the car is in excellent condition with low miles.
This Trade-In value is what a dealer might pay you if you were to trade your car in for a new car at the dealership.
I said this is what they “might pay”, not “will pay”.

Of course, they would like to pay you as less as possible. I have never traded in a car so I can’t give you an experienced answer on this one but I have heard stories from people that dealers don’t give you too much for trade-ins.

Next, you’ll want to look in the Blue Book (physical or online) where it says
Private Party Value Good Condition.
As of September 2013, it says $7,525. This is what everybody sees if they ever look up the car’s value on or in the consumer Blue Book.

The same Blue Book that you’re using to get your PME.
I like to sell cars below the Private Party Value Excellent Condition and you can see these prices online or the image on the side here as an example.

I will ask a higher price if the vehicle is an excellent car with low miles!…usually in between the Private Party Very Good and Retail Excellent Value to test the market. If you get many calls, then sell it. If not, then gradually lower your price until you blow it out.

Depending on how quickly I want to sell, I’ll lower the price of my ad every 3 days to a week by a few hundred dollars.
This way you really have a competitive advantage for blowing the car out as quickly as possible.

Other people may be asking $5,000-$4,800 for the car and you come up and put it in for $4,250 OBO while applying a sense of urgency in your ad.
That will really get your phone ringing off the hook.

Depending on the vehicle’s condition, you can price it below or above the private party values, just do a little market research and see what other similar cars are going for and you’ll want to try and compete by giving a better deal.

Yes, there are slow weeks and great weeks.
Do not be discouraged if you’re sitting on a car for more than two to three weeks. If you have the budget, you should be sitting on 2 cars at all times anyway, to give yourself a better chance to sell one in rotation.

I saw this 2005 Toyota Corolla S in mid-2012, priced at $5,800. It had about 85,000 miles on it.

I knew it was an immediate deal, I knew that if I even gave them the full $5,800 that they were asking without any negotiating, I could probably still make an instant $1,500-$2,000 on it. The more I bargain lower than $5,800, the more profit in my pocket!
So getting it for $5,200 was not a bad deal!

You may be asking, “Tony, HOW did you get it so cheap?”
Well, it did need a front fender and a headlight. Basically, $400 in parts and material. So with that, I was able to negotiate and lower the price an additional $600 bucks.
I ordered the parts online and it literally took me a half day to paint the fender and install both the light and fender.

If you’re not auto body and paint savvy, then you could have easily bought the fender and took it to your local auto body shop. Of course, you’d want to find a place with the best deal and get pretty good work quality. You’ll have to spend a few hundred more to get it fixed, but still, you would make a profit in the thousands.

In fact, there are a LOT of guys who just do this. They buy cars with light to medium body or mechanical damage, get them repaired at cheaper Korean or Asian body shops and
still make a killing.

They forge and build a good relationship with these shops and keep going back to them. It’s a win-win.
Again if you have an interest and want to do your own auto body and paint work on your cars, check out my other popular course on auto body here:

Anyway, I made a cool $2,000 on that Toyota deal rather quickly. And like I say, if you want to sit on your cars longer and make more money, you can.
I know that if I sat on that Toyota for a few more weeks, I would have probably made an additional $800 bucks. I know it.

But I would rather get rid of it quick, make the buyer super happy and move on to the next. It’s your choice on how you want to do this.
My father does it the opposite way from what I do.

He would be firm on his prices, sit on the cars longer and make more money on each sale.
Once he sat on a classic car for 6 months, then one day out of the blue, a lady was walking by his apartment complex and seen the car and fell in love with it.

She offered to buy it for his full asking price on the spot! I think he sold it for $17,000 cash.
He had a For Sale sign on it and she took it without negotiation. She said it was for her husband and he had that car when he was a kid. I think it was a 1954-1955 Chevy.

When negotiating with somebody in person and when looking at a car, you never want to rush anything. Stay calm, just like a in poker game, you need to keep your bluff.

Even if you’re serious, and you LOVE the car, and have the cash in your pocket –
never look too excited.
Always feel the seller out. I always ask,
“What is your best price if I gave you cash right now?” 
Then, they usually come down a couple of hundred bucks instantly or they’ll ask you for an offer.
This is when you need to ask extra questions like…

“Have you done any maintenance work to it?”…“Are there any problems with it?” 
Double check everything, ask the same questions twice. Not right after the same question but later in the conversation…  Make them prove to you that they are honest.

“Is the title clear?”
Of course, you’d want to have already done this on the phone before seeing the car because you don’t want to waste your time looking at a Salvaged car.

Point out small fixes that you would like to do if you decide to buy it.
“Oh, it looks like it needs a ____________” or “This dent over here, I know my wife won’t like”
Use other people like your wife or brother, sister, etc. for stories.

“I am buying this car for my sister, she’ll be in town next week and I know she will want this painted, etc.”
From there, I take it down starting from a lower offer.
Not too low to insult the seller but just enough to create a deal between us, a win-win situation. Check the PME.
Depending on how bad they need to get rid of it, you can make an instant deal.

Find out their story for selling and ask why they are selling.
So for the Toyota that I wrote about above, in the ad it said they were asking $5,800 and told me that they would take $5,600 cash when I had asked them in person for their best price.

Already, that’s an extra $200 in my pocket.
After hearing them say they’ll take $5,600…I made a smirk on my face and kept looking at the car, showing that I wasn’t happy with the price.

By inspecting it and taking my time walking around the car, letting them think that maybe $5,600 was still too high and letting them question themselves if the $5,600 was the right price or not.

You need to let them think too! Take your time, peak under the hood, ask more questions, even if you know you’re already getting a deal. Stay calm because every hundred that you can take off the top is all extra gravy in your pocket.

This is the art of negotiation. Hey, I know people who do this with Real Estate, chopping off a whopping $30,000- $40,000 and more off of a single deal.
That extra $200 or $300 you take off can be a night out with friends or family to dinner. Think of it that way.

So I said,
“Look, I like the car. I’m getting it for my wife. Money is tight for us right now. I’ll give you $5,200 cash right now!” And held my breath…..
Great thing they said,
“Ahhh…OK!” because I couldn’t hold my breath any longer.

You need to take chances!
Sometimes you need to make the offer and walk away. You might not want to walk away but doing so makes you much more stronger and confident.

Sometimes you’ll get the seller calling you back while you’re walking away or when you’re already in your car 5 minutes away, only finding out that the seller wants to sell the car to you.
Then you go back and get your deal!

This has happened to me quite a few times.

When you make an offer in person, always tell them that you’ll give them $X,XXX amount.
Don’t say,
“Will you take $X,XXX (amount)?”
Why do you think I’m saying this?
You don’t want to give them a chance to say NO.

If you ask them,
“Will you take $X,XXX (amount)?”…You give the seller more of a chance to say NO.
But if you say
“Look, I’ll give you $X,XXX (amount).” You’ll be in charge of the offer and you’ll have a better chance of getting it on your terms.

Here is another example of the (PME) Tactic: 
2008 Nissan Sentra GXE
Look in your Kelley Blue Book under Nissan, you will see the year at the top of the book.
Once you get to the 2008 Nissan Sentra standard model.

1st. You want to look at the Trade-In Good Value. It should say $7,150 if you’re using the late Sept. 2013 Blue Book like I’m using right now as an example.
Remember, the prices are not important right now. It’s where to get the prices so you can get an average of what the vehicle is worth. 

So if you’re using a newer book or an older one, you’ll probably see different prices from what I see right now. You can also do this online at

2nd. Look to the right and view the Retail Excellent Value which is $11,300 in my book.
This is what the Dealer would ask for the car if it were in Excellent condition. You never want to sell at this price unless you don’t want to sell the car.

Just use it to market your vehicle and I show you how to do that in the ads.

3rd. Take a look at the Private Party Good Value. It’s $8,950.
Now you know the most important part, Your Price Points.
80% of the time, I list my cars for sale BELOW the Private Party Good Value using the RETAIL price to compare it with, to make it look like a great deal and way lower than retail pricing.

PME Example: 
Let’s say you’re looking to purchase a 2004 Toyota Rav 4 – 2WD.

Say you look at it and see that it needs the hood painted and a detail. You’re looking at about a $400- $500 investment.

The sellers are asking $7,500 for it.
Here are the PME numbers:
Trade-In Good: $6,250
Private Party Good: $8,150
Retail: $10,550
What is a good price for you to buy it for to make $1,500 on it?

Say you listed the ad like this when it was ready to sell:
04 Toyota Rav 4 Runs Excellent yada yada yada…(This is an example ok so bear with me here).
You have your ad content here:

Must sell!
Retail $10,550
Asking Only $8,900 obo
Call me at 888-8888

So if you plan to sell it for around $8,500, list it higher like I did to give your buyer some room for negotiation.

Plus, if he got you down to $8,500, you got what you anticipated anyway. This is what you need to do every time. You need to already have sold it in your mind.
Your bottom line price is in your head.

Mine was $8,500. Not too high, not too low, a good price.
Now this couple is asking $7,500 for it, right? And it could use a $500 investment.
So, I know that retail is $10,550.

Private Party Good is $8,150 if it’s in better condition. You can raise it up an extra $500 or more.
And you know that this car which is in good condition (which you will be sure that it is) can sell for $8,500 without a problem.

Now it’s a matter of getting the car for less than $7,500, right?
I would start the game at $6,000. But first, I’ll see what they will lower it down to.
Say something like,

“I like the car, it needs some TLC, some paint, and I do have another one to look at later
today. What’s the best you can do if I paid cash right now?”
They may shoot out the gate with $7,000. And if they do play the game more…
Give them a big SIGHhhh…

“Well, listen I really want the car and I only have $6,300 on me right now.”
…Then you wait. And be prepared to walk away at that point. See their reaction. They may grab it, they may not.

If you really want it, I would make the “phone call” – call your friend or somebody and talk to them about it for a bit.
Or head over to your ride if somebody went with you to look at the car and ask them to give you the extra $200 to get the deal.
Most likely this was your money (that you gave to your buddy before you planned to look at the car) anyway.

You can always come back and say,
“Look, my bother said he would give me an extra $200. I have $6,500. Let’s close the deal right now.”
Then you either hit or miss at that point. Don’t feel bad if they don’t budge.

You’ll get a better deal on the next one. It’s always like that. Seriously, you may be bummed out that you didn’t get it, but keep looking for a better deal to arise. They always do.

Say they did say yes and you got the Rav 4 for $6,500 which is still a little high in my opinion, but you can still make money on it.
Total invested for $7,000 with your $500 in repairs.

When you go to list it, you can even start high just to test the market!
Start your ad at:
Retail $10,550
Asking $9,700 or best offer!
Remember, nothing is set in stone. You may surprise yourself one way and get a buyer who wants it for $9,500 then, what have you made? A cool $2,500!
I’ve done this many times and made $4,000 profit on a weekend.

It all comes down to how low you get the car for.
Exercise this and buy and sell 5-10 cars in the local private party market. Once you do this, I think you’ll have a good feel for buying and selling in general and you’ll know how to use the PME.

The goal is to make money at this point.
Then once you feel comfortable at this, hit the auctions. If you know how to buy, you can really get the deals there.
Go where it takes you. You may want to get big and get a Dealer’s License. But be prepared, once you do that, THEY will keep more of an eye on you. I prefer to stay small.

All cars and all deals will be different. These are just a few examples to get your mind working and to see how you can estimate your profit margin before you actually invest your time and money in each vehicle.

Your local market might be different. As long as you scan the papers and Internet for deals, you will know what cars go for what prices and you will start to learn the market prices on cars.

PME Review – Never Lose Money! 

By using the PME when buying and pricing to sell your cars, you will never lose money.
Use this method as your guide in buying and selling. Remember, I like to sell my cars below Retail Excellent Value always! And you should too.

Price them between Private Party Good and below if you have the margin.
If you have an Excellent car with low miles, try to sell it between the Retail Excellent Condition Value and the Private Party Good or Excellent Value.

If the car that you have is in good condition, try to sell below the Private Party Good value. This will make sure you sell the car fast.
Or you can do like others do and ask higher prices and sit on the deal a little longer.

Like I said, the choice here is yours.
Be sure to buy low to give yourself enough room to profit when selling at or below the Private Party Excellent value. If you sell your vehicle near or at the ‘private party’ value ranges, you know that you’ll make money, Guaranteed.
You can also start and ask higher prices like I did in the Toyota example above.

You can always drop your prices. Start high to test the market then drop your prices every three days and see if your phone calls start to come in.
Even if you make a quick $500-$1,000, take it and roll it into the next car to make more money.

Time is money. Save 50% of all your profits to invest in other money-making vehicles.
Once you see what types of cars sell best at a specific price range, you’ll know the market and become even more confident in buying and selling and soon, you will master it.

It’s like anything else, the more you do this, the more it will become natural for you. Remember to take action and just do it. If you listen to how I teach you to buy, you should not lose any money.

Good luck and start cranking! By now, you have more information that you need to get started! But let’s continue to add more strategies and knowledge under your belt!