5 ms·

If the dealer is buying at 80% and selling at 110% of some number then surely that means that number is not actually fair market value?

travisjungroth 7y ago
That’s the spread and it exists in all dealer transactions. Also called “markup”.
lotsofpulp 7y ago
I am disputing the existence of that number. If two parties enter into an agreement to exchange X for Y, and no one has a gun to their head, then the market value of X is Y at that time for that party, and the market value of Y is X at that time for that party.
- mikeash 7y ago
  If there isn’t really such a number then surely the scare quotes are completely appropriate?
- danaris 7y ago
  Many guns are not physical or tangible. "I could literally survive the next 10 minutes without buying this" is not the same thing as "if I don't buy this soon, my life will not be significantly worse off." Poverty's not known for opening up options for people.
- deleted 7y ago
  [deleted]
dragontamer 7y ago
Even the stock-market has a bid-ask spread. A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies. As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks. Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread. ------------ "Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters. By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.
- mikeash 7y ago
  So, by definition, 110% of “fair market value” is fair if someone buys at that price? Doesn’t that mean the scare-quoted “fair market value” isn’t?
  - dragontamer 7y ago
    In my eyes, "fair market value" is roughly (bid_price + ask_price) / 2. In effect, "fair market value" is a survey-result, based on how much buyers are bidding and how much sellers are asking. 80% to 110% isn't a perfect split between the buyer and seller, but its "within expectations".
bluedino 7y ago
80% isn't enough margin to pay for the dealership and the repoing and all the other stuff You're doing fairly well if you can get a car dealer to buy your car for 80% of what they sell it for

travisjungroth 7y ago

That’s the spread and it exists in all dealer transactions. Also called “markup”.

lotsofpulp 7y ago

I am disputing the existence of that number. If two parties enter into an agreement to exchange X for Y, and no one has a gun to their head, then the market value of X is Y at that time for that party, and the market value of Y is X at that time for that party.

mikeash 7y ago
If there isn’t really such a number then surely the scare quotes are completely appropriate?
danaris 7y ago
Many guns are not physical or tangible. "I could literally survive the next 10 minutes without buying this" is not the same thing as "if I don't buy this soon, my life will not be significantly worse off." Poverty's not known for opening up options for people.
deleted 7y ago
[deleted]

dragontamer 7y ago

Even the stock-market has a bid-ask spread. A perfectly efficient market will push the bids higher and the asks lower. Stocks for example only have a spread of a couple of pennies. As the markets get less and less efficient, you become more reliant on middle-men to perform transactions. In the dark ages, people would pay 1-pound of gold for 1-pound of salt. In the case of modern society: bonds (and other derivatives) are less efficient to trade and therefore have higher bid/ask spreads than stocks. Go away from financial instruments, and a 30% spread on bid/ask is actually reasonable. Play Magic: The Gathering? Buying/selling used video games? You're going to pay a pretty large spread. ------------ "Fair Market Value" is an estimation of the bid/ask spread. There really are two fair prices: the value the buyer is willing to pay, and the value the seller is willing to sell at. These two numbers are all that matters. By definition, these two prices are fair. Because if they weren't fair, then the buyer (and seller) would reject the deal and the trade will fail.

mikeash 7y ago
So, by definition, 110% of “fair market value” is fair if someone buys at that price? Doesn’t that mean the scare-quoted “fair market value” isn’t?
- dragontamer 7y ago
  In my eyes, "fair market value" is roughly (bid_price + ask_price) / 2. In effect, "fair market value" is a survey-result, based on how much buyers are bidding and how much sellers are asking. 80% to 110% isn't a perfect split between the buyer and seller, but its "within expectations".

bluedino 7y ago

80% isn't enough margin to pay for the dealership and the repoing and all the other stuff You're doing fairly well if you can get a car dealer to buy your car for 80% of what they sell it for