Car dealing fastlane potential?

[Chrono4001]

Is there any potential in becoming rich in car dealing, fastlane potential much preferably? I've been reading articles about how car dealers maximize profits by undervaluing a trade in car and overvaluing their own cars. But what I wonder though is there anything that is done for them to increase profits further, where do they buy cars at such a low value where it is profitable when they begin?

 

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[MonTexan]

Gary? Gary Thiem? Is that you??

 

[Chrono4001]

Gary? Gary Thiem? Is that you??

... (Ok so I cant post links yet I basically googled this guy and went to the wickedfire link) Oh

And if you could not understand what I wrote above I was asking where do car dealers buy car at such a low cost where it is profitable to resell them, not how I can rip people off.

 

[Russ H]

KyJoe is a sometime poster on these forums.

I think he owns car dealerships. You may want to ask him.

Given the dodgy state of the car biz right now (and the extremely high cost per item), I don't see this as very fastlane.

Better to come up w/something that someone buys a few times a year, every year, and MILLIONS of people all want (and few people sell). Figure out a way to automate and scale the sales of *that* type of product, and you've got a fastlane business.

-Russ H.

 

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[kurtyordy]

used cars, buy here pay here sites have huge fastlane potential. You can even start small and build up.

I have a buddy who buys used cars very cheap, details them a bit, and resells them for a down plus a weekly payment. He gets most if not all his money out on the down and the rest is gravy, so there is very little to no risk.

He is still small scale because his paradigm is always small, but it could easily be scaled.

I often wish I was a gearhead because I see this field ripe with low hanging fruit. I personally hate dealing with cars, so this is a no go for me, but it is an easy one to get into.

 

[Russ H]

used cars, buy here pay here sites have huge fastlane potential. You can even start small and build up.

I have a buddy who buys used cars very cheap, details them a bit, and resells them for a down plus a weekly payment. He gets most if not all his money out on the down and the rest is gravy, so there is very little to no risk.

He is still small scale because his paradigm is always small, but it could easily be scaled.

I often wish I was a gearhead because I see this field ripe with low hanging fruit. I personally hate dealing with cars, so this is a no go for me, but it is an easy one to get into.

Kurt-

I can see how your buddy's model would work for initial build up of cash for buying into something more fastlane, but I'm missing how his biz could be scaled and automated to make millions.

Prolly obvious to you-- care to share?

(not a taunt, would really appreciate your expounding a bit on how this could be made fastlane!)

-Russ H.

 

[kurtyordy]

Kurt-

I can see how your buddy's model would work for initial build up of cash for buying into something more fastlane, but I'm missing how his biz could be scaled and automated to make millions.

Prolly obvious to you-- care to share?

(not a taunt, would really appreciate your expounding a bit on how this could be made fastlane!)

-Russ H.

No problem Russ.

Here is how I would scale it if I had even the slightest bit of interest in this field.

First to be clear, I am referring to sub 5k cars. It is just like renting in the slums, you will always have customers.

There are essentially three parts of the biz to systematize. 1. acquiring cars. 2. selling cars. 3. financing cars.

1. acquiring cars- this imho opinion would be the hardest part to fastlane, but I do not think it would impossible. I think it would be just like finding a manager for any other biz. You would need someone you can trust who can follow the criteria you lay out for acquiring. Obviously there would be some trade in offers, but I imagine at this price level these would not be a large portion of the inventory. I imagine most will come from pickup trades from other dealers or going to auctions.

Most new car dealers bring in these cars cheap as trades, but their target market is not the sub 5k customer, so branding wise they do not want to put a lot of time/money into moving these vehicles. So they either sell them to a wholesaler or take them to a car auction to dump them. Giving the acquirerer set criteria, they can source many cars this way. Initially, this would be very part time because they will be able to source much faster than the selling side can sell.

2. selling-this is the easiest part for in my mind. Give the person the profit you are looking for and how you want the deals structured, and give them enough commission and they will perform. Location will be the most important key to this success to cut down on marketing costs.

3. Financing- If 1 and 2 are working properly, this should be gravy. The only part I am completely not sure about is collecting on non payment. obviously there would be repo issues, and I have no idea about that.

A good buyer would be able to source multiple selling locations if taken full time. So once the selling and financing arm is established at one spot, go and create another about 30 minutes away.

Maybe this take is too simplistic and I am missing major elements, but it seems fairly doable.

 

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[EastWind]

NO!!!!!

car dealing is not fastlane, and will never be.

first of all, pay attention to a dealership near you, and notice how long a car sits on their lots. the margin is low! a car can sit there for months! if you are doing it big, you will need a big line of credit from the bank, and today, that did a lot of car dealerships in, they couldn't get credit and went under! both new and used dealers!

as you grow, the amount of people you need grows with the amount of cars you sell almost in an equal ratio. this is not good for fastlane! so does the amount of space to store your car, office space, marketing cost, etc!

if you are starting at the used car level. one bad car, can eat into your profits. i have done used car dealing, and it was a somewhat decent side gig until i had a few string of bad lucks and i was done! i won't recommend it to my enemy! my humble opinion, especially if you are intent on being honest to people!

 

[Russ H]

Thanks, EastWind.

I've had friends in the used and new car biz, and they said the same. While it scales on paper, it doesn't work in real life.

Anyone else out there w/experience in the car sales biz?

-Russ H.

 

[Chrono4001]

I figured, its either this or a few others options I could do.

Funny thing actually theres an exotic car dealer which has some of the rarest high end supercars around (some of which include an F50, an enzo and 2 MC12s) and despite their low mileages and great prices the only high end supercar they sold was an enzo last year.

I hope to take one of the MC12's off their hands by next year at least.

 

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[CommonCents]

Here's one car sales idea that might work these days:

Rent a vacant car dealership lot/commercial retail lot, many of them around.

Do a consignment lot where customers pay you to "store" their car on the lot and show it for them. Get a listing fee and a sales success fee, either flat rate or %, line up ads in autotrader, craigslist etc... offer additional services such as detailing, photography for ads, placing ads online/autotrader/craigslist etc... offer sales contracts, a closing room to for both parties to meet and do paperwork etc...

You are an enhanced selling service for customers selling their cars, you take no ownership of the vehicle.

You can have multiple services for car sellers, detailing, ad listing on multiple platforms, etc...

People don't like strangers coming to their house to look at cars
people don't like meeting strangers on a street corner to sell their car
people want an easy turnkey service to make selling their car simple.

For customers to get started, you'd have thousands of leads in your area by calling all the 4sale ads. "Hey, I have a lot you can keep your mustang for sale and I have the following services available to help you sell..."

The traditional car biz is tough. Maybe if you have a high end clientele you can work dealer to dealer auto auctions(that's where I buy my high end vehicles, thru a broker). Gotta have your dealers license, know what you are doing in buying, and a good clientele though.

 

[EastWind]

Here's one car sales idea that might work these days:

Rent a vacant car dealership lot/commercial retail lot, many of them around.

Do a consignment lot where customers pay you to "store" their car on the lot and show it for them. Get a listing fee and a sales success fee, either flat rate or %, line up ads in autotrader, craigslist etc... offer additional services such as detailing, photography for ads, placing ads online/autotrader/craigslist etc... offer sales contracts, a closing room to for both parties to meet and do paperwork etc...

You are an enhanced selling service for customers selling their cars, you take no ownership of the vehicle.

You can have multiple services for car sellers, detailing, ad listing on multiple platforms, etc...

People don't like strangers coming to their house to look at cars
people don't like meeting strangers on a street corner to sell their car
people want an easy turnkey service to make selling their car simple.

For customers to get started, you'd have thousands of leads in your area by calling all the 4sale ads. "Hey, I have a lot you can keep your mustang for sale and I have the following services available to help you sell..."

The traditional car biz is tough. Maybe if you have a high end clientele you can work dealer to dealer auto auctions(that's where I buy my high end vehicles, thru a broker). Gotta have your dealers license, know what you are doing in buying, and a good clientele though.

so who is responsible for any damage to the car while in your lot?
what if the owner wants to use their car, is the lot open for them to come in and out as they wish?
if the owner stores the car there, where does the key stay? what if the car get's stolen?
what if someone stores a stolen car there, car in divorce dispute, etc?
if the key is not stored at the lot, that means everytime someone wants to see the car, the owner has to leave their house/location and come to your lot to show the car?
if the key is stored with you, i assume the title will be, so you can sell the car, right?
what if someone stores a stolen car with a fake title and you end up selling it?
if you are selling the car for people, you become a dealer, and you are just operating without license... it's not that easy.

 

[LagunaLauren]

My understanding is that dealing cars will not make you rich, especially in used cars. I've negotiated large national contracts for new car dealer groups and have learned a lot about profits for dealerships. New car dealers don't make much money on new car sales (typically 1-2%). They make almost all their profit on the fixed ops; ie the service department. Even then, on a dealership that makes $90Million gross, the net profit to the dealer/owner is typically $500k-$1Million. And to get to that level, they have ~100 employees and $Millions in loans for the property, floorplan, etc.

I've never known anyone to get rich reselling cars. But that's not to say it can't be done. Just unlikely from my understanding.

 

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[Bond]

Here's one: SAOIRSE32 :: Bill Cullen: self-made Irish millionaire :: June :: 2005

 

[Luke12321]

I know a guy who has made millions wholesaling cars who lives just about two minutes from my house. I live in very rural NC....When I mention to people he will give them the best deal on a car if he has anything in inventory they are interested in, they shrug it off.

They do this because, he does not advertise nor really care if anyone wants to buy a car from him. From experience, the only way someone from the public will buy a car from him is if you beat a dealer to it or before it is gone to the auction.

His model is this. Buy from new car retail lot (the trade in's), get them detailed, then either a used car dealer will buy it or he will send it to the auction for resell. He also had a retail lot in a bigger town, in which he had one guy running that retail lot.

So, how does he gets cars so cheap, in such volume? (I would imagine he does 50-75 cars a month)

Pay for the connection! He pays the owner of the retail lots (I remember hearing 25k cash per year back in the 80's so you can only imagine what it is now). For this, he gets first choice at any trade in's and the lowest price on trade ins that the owner would be willing to give (mind you, he already has a huge lump of CASH already).

The only "work" he was doing, was making the buys. He even had other people doing that for him as well from other states (West Virgina, maybe the cars are cheap there, no clue but probably not, probably just had a retail connection there too).

He hired out all the detailing, selling, paperwork, ect.

I would imagine he was netting around 500k a year. (Probably around $800 profit a car)

I don't know if that is fastlane money to you but most would take it.

Lastly, I know these connections did not come overnight for him. He eventually had the best detail guy around and well the retail connections. Hope this examples helps as you explore the idea further.

 

[EastWind]

I know a guy who has made millions wholesaling cars who lives just about two minutes from my house. I live in very rural NC....When I mention to people he will give them the best deal on a car if he has anything in inventory they are interested in, they shrug it off.

They do this because, he does not advertise nor really care if anyone wants to buy a car from him. From experience, the only way someone from the public will buy a car from him is if you beat a dealer to it or before it is gone to the auction.

His model is this. Buy from new car retail lot (the trade in's), get them detailed, then either a used car dealer will buy it or he will send it to the auction for resell. He also had a retail lot in a bigger town, in which he had one guy running that retail lot.

So, how does he gets cars so cheap, in such volume? (I would imagine he does 50-75 cars a month)

Pay for the connection! He pays the owner of the retail lots (I remember hearing 25k cash per year back in the 80's so you can only imagine what it is now). For this, he gets first choice at any trade in's and the lowest price on trade ins that the owner would be willing to give (mind you, he already has a huge lump of CASH already).

The only "work" he was doing, was making the buys. He even had other people doing that for him as well from other states (West Virgina, maybe the cars are cheap there, no clue but probably not, probably just had a retail connection there too).

He hired out all the detailing, selling, paperwork, ect.

I would imagine he was netting around 500k a year. (Probably around $800 profit a car)

I don't know if that is fastlane money to you but most would take it.

Lastly, I know these connections did not come overnight for him. He eventually had the best detail guy around and well the retail connections. Hope this examples helps as you explore the idea further.

you IMAGINE he was netting around $500k a year. Until you see actually his records, don't let your imagination run wild!

Now you said, he probably does around 50-75 car a month, so let's agree on average of 63 car a month. You also wrote, probably around $800 a profit.
Do the math that's 63 * $800 = $50,400 = $605k a year before tax.

So where does he store these cars? a lot? the lot has rent! and other costs. to detail the cars cost money. to sell cars at auction cost money! you must cut the auction house a fee. and selling an average of 63cars a month? that's a little over 2 cars. Mon-Sunday. Do you know how many people will have to come see a car before they buy it?

You assume this guy is a millionaire, perhaps, but how long has he been in the business? 10yrs? it's possible to save a million, making $200k a year. Not fastlane. The hustle and bustle of buying cars, towing em, fixing em. making sure they are not salvaged or have unreported accidents such as frame damage, etc, adds up. It's overrated.

 

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[Luke12321]

You got me, you know his business better than I do.

"Do you know how many people will have to come see a car before they buy it?"

As I said, he does not deal with the public unless you seek him out. Because he don't advertise, most people don't hear about him. Car dealers, they will have cash on hand...ready to buy. If you try to come finance a car from him at his home, he will refuse you. He don't sell you on the car...he just says test drive it, bring it back in a few days and if you want it, great. If not, he could careless because he has a network of dealers or a auction with buyers ready for the car. That is what wholesalers do.

Storing the cars? He stores them right beside his house, which has a 3-bay garage for detailing and plenty of land to park the other cars on. As I said, I live in RURAL NC....like, an acre of land sells for 3-4k.

As for his retail lot, he purchased it a long time ago....before the town had really grown to what it is today. I would imagine he got it for a very good deal, or he wouldn't have purchased it (He is tight, just gotta know the guy). He def wouldn't rent a lot, it just isn't his nature....he buys and sells. He if anyone, should understand what appreciates and depreciates.

I am not saying he is a millionaire (I don't do his taxes nor work at his bank) and I was just given this example as I know this guy has a very successful wholesaling car business. He has been in the business for 30+ years.

 

[hatterasguy]

Pushing metal is a tough way to earn a living, more so in this economy. Unless you love it I wouldn't get into it.

Used car dealers are all a little slimy too.

 

[Kontent]

Hey, I think you should check this out. Pretty neat info:
Nash Kabbara Discusses Becoming an Entrepreneur - Grasshopper Virtual Phone | Company Blog

 

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[NHS]

geez I need new glasses. deleted post.

 

[AJGlobal]

NO!!!!!

car dealing is not fastlane, and will never be.

first of all, pay attention to a dealership near you, and notice how long a car sits on their lots. the margin is low! a car can sit there for months! if you are doing it big, you will need a big line of credit from the bank, and today, that did a lot of car dealerships in, they couldn't get credit and went under! both new and used dealers!

as you grow, the amount of people you need grows with the amount of cars you sell almost in an equal ratio. this is not good for fastlane! so does the amount of space to store your car, office space, marketing cost, etc!

if you are starting at the used car level. one bad car, can eat into your profits. i have done used car dealing, and it was a somewhat decent side gig until i had a few string of bad lucks and i was done! i won't recommend it to my enemy! my humble opinion, especially if you are intent on being honest to people!

I would have to agree with you here. I got into the car dealing deal about 5 years ago as a "side" venture. It was probably one of the biggest nightmares I've encountered as a biz owner. I applied and got a retail license. There is so little room to make money and so much paperwork and bullshit that most people don't see. Unless your Roger Penske this is NOT the way to go fastlane. I could sit here and give you a laundry list of reasons why but I'll spare you all the boring details unless someone really wants to know. After a little over a year I shut it down. I still have my dealers license and use it for myself, friends and family as it has its advantages.