You’re looking to buy a Car. You find one at a nearby dealership, and you know how much the dealership is offering to sell it for — its “listing price.”
You’d like your auto broker to help you figure out what that car is “really worth” — what a fair price would be for that particular car. So you ask your auto broker to research what similar cars have sold for recently within your area.
Suppose your broker came back and said, “Here is a list of comparable cars, and what their listing prices were.” “Well,” you respond, “That is mildly interesting, but what I need to know is what they sold for. Most likely none of those dealerships got their asking price. Only if I know the actual transaction prices for the other cars will I have some idea of what a fair price is for the car I want.”
This concept may seem self-evident. But if it is, why do consumers forget all about it when they go shopping for a used car? Here is what frequently happens.