Wholesaling a car is the process of a licensed dealer selling a vehicle to another licensed dealer, typically at a discounted price, before it reaches the general public. This transaction usually occurs through dealer-only auctions or direct trades. The primary goal is for the selling dealer to quickly turn over inventory, often because the car doesn't fit their retail customer profile, needs reconditioning beyond what they want to invest, or they need to free up capital. The buying dealer then aims to acquire the car for a low enough price that they can recondition it and sell it at a retail profit.
This is a business-to-business (B2B) activity, and a crucial point is that you must have a valid dealer license to participate. It is illegal for individuals without a license to act as a "middleman" or "car flipper" in these transactions, a practice often called "curbstoning."
The economics rely heavily on volume and speed. A dealer might make a smaller profit per car at wholesale compared to a retail sale, but by moving multiple units quickly, they maintain cash flow. The price is influenced by several factors, including the vehicle's condition (often described using a condition grade like 1-5), current market demand, and auction dynamics.
Here is a simplified example of how wholesale pricing might compare to retail values for a common sedan:
| Vehicle Example | Average Wholesale Price | Average Retail Listing Price | Typical Reconditioning Cost | Potential Dealer Profit Margin |
|---|
| 2020 Toyota Camry SE | $19,500 | $23,900 | $1,200 | $3,200 |
| 2019 Honda CR-V EX | $21,800 | $26,500 | $1,500 | $3,200 |
| 2021 Ford F-150 XLT | $32,000 | $38,000 | $1,800 | $4,200 |
For the average consumer, understanding wholesaling explains why you might see the same car at different lots or why a dealer might be less willing to negotiate on a vehicle they just acquired at auction versus one they took on trade directly.
