Key takeaways
- Start from the expected selling price, not the highest asking price you can find.
- Holding cost is real: each day on the lot costs interest, depreciation and lot expense.
- Pack and target gross are policy. Set them once so every appraiser uses the same numbers.
- If the math leaves no room, the answer is “no buy” or a wholesale exit, not a smaller gross.
- Round down and keep negotiation room between your offer and your max buy.
What is a max buy?
A max buy is your walk-away number: the highest price at which the car still earns the gross your store needs after every cost of getting it sold. It is different from the offer you make (which sits below it) and from wholesale value (which is what the market would pay dealer-to-dealer). Knowing it before you talk numbers is what lets you negotiate calmly.
How do you find expected retail?
Expected retail is what this car will sell for on your lot, which is usually less than what similar cars are listed for. To find it:
- Match the car. Same year, make, model, trim and drivetrain. Cab and box configuration matter on trucks.
- Match the km, or adjust for the difference. Higher-km comparables understate value; lower-km ones overstate it.
- Stay in your market. Use a radius you actually sell into, then widen only if there aren’t enough comparables.
- Drop outliers. Branded titles, listings with no km and prices far from the rest distort the middle.
- Prefer sold over asking. Recently sold listings are much closer to real transactions. If you only have asking prices, take something off for negotiation.
- Use your pricing position. If you price to be among the cheapest comparable cars so you turn quickly, use that price, not the market middle.
What goes into reconditioning?
Everything needed to make the car retail-ready and sellable in your province: mechanical repairs, brakes, tires, glass, paintless dent repair and paint, keys, detail, and whatever the safety or mechanical fitness inspection will require. Estimate it line by line from your own rates; our recon cost guide covers each category.
What is pack, and why include it?
Pack is a fixed amount a dealership adds to the cost of every unit to cover costs that don’t belong to any one car: lot prep, admin, warranty reserves and the like. Some stores use one amount for every unit; some vary it by price band. Whatever your policy, put it in the formula. Leaving it out makes every appraisal look better than it is.
How do you calculate holding cost?
Every day a car sits costs money: floorplan interest, depreciation, insurance and lot expenses. The simplest way to capture it is a percentage of retail per day multiplied by the number of days you expect the car to take to sell.
For example, at 0.08% of retail per day, a $25,000 car costs $20 a day. If similar cars near you take about 45 days to sell, holding is $900. Use how long comparable cars stay listed in your area as the guide, and expect slow segments and high-priced units to take longer. Appraise uses 0.08% a day as its default holding rate and estimates days to sell from the local listings.
How do you set target gross?
Target gross is the front-end profit your store needs per unit. Many stores set it by price band, with a minimum for cheap units so they still cover the effort of selling them. Set it as policy, not per appraisal: if each appraiser picks their own gross, your max buy depends on who walked out to the car.
Worked example: max buy on a pickup trade
A customer trades in a half-ton pickup. Seven comparable trucks near you (same trim and cab, similar km) point to an expected selling price of $32,900. The example numbers below are illustrations; use your own rates.
| Line | Amount | Notes |
|---|---|---|
| Expected retail | $32,900 | Middle of recently sold comparables, km-adjusted |
| Reconditioning | −$2,375 | Tires $1,100, front brakes $650, three dents by PDR $375, detail $250 |
| Pack | −$600 | Store policy |
| Holding cost | −$1,050 | 0.08% × $32,900 = about $26 a day, × 40 days |
| Transport and fees | $0 | Trade-in, already on your lot |
| Target gross | −$3,500 | Store policy for this price band |
| Max buy | $25,350 | $25,375, rounded down to the nearest $50 |
| Trade-in offer | $24,600 | Max buy less $750 negotiation room |
If the same truck were bought at auction instead, you would also subtract the buy fee and transport, and the max buy would drop accordingly.
What mistakes push dealers over their max buy?
- Using asking prices as retail. The single biggest source of overpaying.
- Ignoring km differences between the trade and the comparables.
- Forgetting the boring recon: tires, a second key, a windshield, an inspection item.
- Leaving out holding on slow-moving units, where it can be larger than the recon.
- “We’ll make it up on the back end.” Sometimes you do. Planning on it means the used car never pays for itself.
- Letting the payment conversation set the trade number. Decide the max buy first, then work the deal.
- Stale numbers. A max buy from last week may not survive a market that moved; re-run it if the deal drags on.
When should you walk away or wholesale it?
When the customer’s number is above your max buy and the car isn’t worth a deliberate over-allowance, walk away or make your best offer and let them think. When the costs plus your gross are more than the car will sell for, there is no positive max buy at all: the honest answer is to pass, or to buy it at a wholesale number and send it to a wholesaler or auction instead of retailing it. Compare your max buy with the wholesale value every time; if wholesale is higher, you have learned something about your costs or your market.
How does Appraise calculate the max buy?
Appraise starts from the expected retail of the wholesale grade you pick (Extra clean, Clean, Average or Rough), then subtracts recon from your scan, photos and manual items, and your own auction fee, transport, pack, holding cost and target gross. Every line can be tapped to see its math, the result is rounded down to $50, and the trade-in offer is the max buy less your negotiation buffer. When the numbers don’t work it says so, instead of quietly lowering your gross. See the wholesale value tool for how the grades are built.
Key facts
- Max buy = expected retail − recon − pack − holding cost − transport and fees − target gross.
- Trade-in offer = max buy − negotiation room.
- Holding cost example: 0.08% of retail per day is $20 a day on a $25,000 car, or $900 over 45 days.
- Recently sold prices are a better guide to expected retail than active asking prices.
- When costs plus target gross exceed what the car will sell for, there is no positive max buy: pass or wholesale it.
Frequently asked questions
What is the difference between max buy and ACV?
Max buy is the most you are willing to pay, worked back from retail with your costs and gross. ACV is what the car is actually worth to your store as a unit. On a well-appraised trade they are close, with the offer sitting a little below both.
How much negotiation room should I leave below the max buy?
Enough to move once or twice without crossing your max buy. Many stores set a fixed amount by price band so appraisers don’t improvise.
Should max buy differ for trades and auction purchases?
Yes. Auction purchases carry a buy fee and transport that a trade doesn’t. A trade, on the other hand, may hide more unknown recon because you can’t choose which cars you are offered.
How often should I recalculate a max buy?
Whenever the deal is more than a few days old or the market has moved. An appraisal is a snapshot of local prices on the day you ran it.