This is a pretty good biz opportunity

[motion]

Not sure if you guys have talked about this, but.... cars that KBB at $2K are selling for $5K like hotcakes here in SoCal. I imagine its similar everywhere. Basically, anything with less than 200k on the odometer is going for $3500 or more. And they are fairly beat up. Its kinda crazy actually. The new entry point for used cars is now 3K-5K. I've also heard people are making serious money selling their expiring leased cars. Crazy market!

[quattrorunner]

Eh?

[kaisen]

So where is the opportunity, as you see it? A hot market means prices are higher for everyone. You still have to secure a supply of below-market cars to sell them at inflated prices to make a profit. Right?

I'm just poking fun..... I've been on this exact market for a few years now. Very, very little risk. Return as a percentage is huge. Unfortunately, there's just as much work involved in making $1,000 on a $3,000 car as it is $3,000 on a $30,000 car.

If I had access to capital, I'd make money hand over fist

[McLovin]

Originally Posted by motion

Not sure if you guys have talked about this, but.... cars that KBB at $2K are selling for $5K like hotcakes here in SoCal. I imagine its similar everywhere. Basically, anything with less than 200k on the odometer is going for $3500 or more. And they are fairly beat up. Its kinda crazy actually. The new entry point for used cars is now 3K-5K. I've also heard people are making serious money selling their expiring leased cars. Crazy market!

That's a great biz plan. If you can get KBB to sell you cars at their KBB prices!

As far as reselling the leased cars, you can give that biz a try. Seriously! It has a super low barrier to entry. You're in So. Cal, here's exactly how that would work for you:

First you'd get your used car retail dealer's license. The actual licensing part is basically "here's a mirror, please breath on it, if it fogs up, you're in."

Then you'd need a bond (in Cal probably $50K bond). Not expensive to get that.

The hardest part in your state is, like in many states, you have to have a separate "real" physical location. You can't use your house or your existing office. You'd need to have to meet minimum space/config requirements, which means a place to store a few cars and an office accessible to the public.

Not a huge problem, in your area you could prob rent a minimal conforming space for $1800-$2000 month.

You'd need an insurance policy, and a couple of other minor things.

Then you're in!

You'd sign up with Manheim and head out to their massive leased car return auction, where they auction 3,500 off lease BMW, MBs, Range Rovers, Jags, etc. before noon every week. Literally hundreds of cars every 15 minutes. You'd be buying directly from BMWFS, MB Financial, etc.

You'd be excited, cool cars for cheap! Then you'd notice all the asians and eastern europeans, etc. there. And the guys from the big franchise dealerships. (no, that bulge doesn't mean they're happy to see you, that's their checkbooks, silly!).

You'd be ready to go! You know that late model C class that you've been researching market data on goes for $25K on Craigslist. So, you're prepared to bid up to $20,000, knowing you can get $25K for it, it'll cost $500 to have it shipped to your shop and get it cleaned up a bit, etc., but still, $4,500 for a half day's work ain't bad!

So the car rolls up to the block, bidding begins. $18,000. $19,000. $22,000. $24,000. $24,500.

Oops.

So you let that one go, since you can't make any money on it.

Later on you get impatient, and make a purchase. Say a similar one for $24,000.

Now, you have to get the car back to your place. You get it cleaned up and ready to go. You put an add on Craigslist. You get a call! He wants to meet at your shop at 10. You drive over at 10. Hmm, he doesn't show up.

You drive home.

Repeat a few times.

A few tire kickers show up and waste your time.

Of course, you're doing this all yourself, because the cost of even one employee will blow this biz out of the water (salary, worker's comp, insurance, social security, etc. etc.)

Finally after 3 weeks, success! You sell the car for $24,750.

Yeah, you'd win a little more on some, lose a little more others, but that's about what you'd be looking at.

[quattrorunner]

Originally Posted by McLovin

That's a great biz plan. If you can get KBB to sell you cars at their KBB prices!

As far as reselling the leased cars, you can give that biz a try. Seriously! It has a super low barrier to entry. You're in So. Cal, here's exactly how that would work for you:

First you'd get your used car retail dealer's license. The actual licensing part is basically "here's a mirror, please breath on it, if it fogs up, you're in."

Then you'd need a bond (in Cal probably $50K bond). Not expensive to get that.

The hardest part in your state is, like in many states, you have to have a separate "real" physical location. You can't use your house or your existing office. You'd need to have to meet minimum space/config requirements, which means a place to store a few cars and an office accessible to the public.

Not a huge problem, in your area you could prob rent a minimal conforming space for $1800-$2000 month.

You'd need an insurance policy, and a couple of other minor things.

Then you're in!

You'd sign up with Manheim and head out to their massive leased car return auction, where they auction 3,500 off lease BMW, MBs, Range Rovers, Jags, etc. before noon every week. Literally hundreds of cars every 15 minutes. You'd be buying directly from BMWFS, MB Financial, etc.

You'd be excited, cool cars for cheap! Then you'd notice all the asians and eastern europeans, etc. there. And the guys from the big franchise dealerships. (no, that bulge doesn't mean they're happy to see you, that's their checkbooks, silly!).

You'd be ready to go! You know that late model C class that you've been researching market data on goes for $25K on Craigslist. So, you're prepared to bid up to $20,000, knowing you can get $25K for it, it'll cost $500 to have it shipped to your shop and get it cleaned up a bit, etc., but still, $4,500 for a half day's work ain't bad!

So the car rolls up to the block, bidding begins. $18,000. $19,000. $22,000. $24,000. $24,500.

Oops.

So you let that one go, since you can't make any money on it.

Later on you get impatient, and make a purchase. Say a similar one for $24,000.

Now, you have to get the car back to your place. You get it cleaned up and ready to go. You put an add on Craigslist. You get a call! He wants to meet at your shop at 10. You drive over at 10. Hmm, he doesn't show up.

You drive home.

Repeat a few times.

A few tire kickers show up and waste your time.

Of course, you're doing this all yourself, because the cost of even one employee will blow this biz out of the water (salary, worker's comp, insurance, social security, etc. etc.)

Finally after 3 weeks, success! You sell the car for $24,750.

Yeah, you'd win a little more on some, lose a little more others, but that's about what you'd be looking at.

Wow that's exactly why I quit doing that 6 years ago as a hobby/extra income.
That's almost exactly what I found as well.
But.......if things have changed, I'd like to know.

[look 171]

One of my friend is doing that right now as a side bus. He uses his house / driveway to store a couple of cars and an outdoor storage for RVs or junk storage place to store other cars that awaits repair or cleanup. He'd doing no more 6-8 cars at one time and get them from the auction house. He's only after cars that are under 8k because they sell fast. The 4-6k cars are best. AS soon as they are gone, he does it all over again. His has a normal job. This side thing pay for his mortgage and then some.

[look 171]

Originally Posted by quattrorunner

Wow that's exactly why I quit doing that 6 years ago as a hobby/extra income.
That's almost exactly what I found as well.
But.......if things have changed, I'd like to know.

Vegas is a big place, it should work there. Personally, I think it only works in a large city where you have a vast amount of people look for use lower end cars.

[quattrorunner]

Originally Posted by look 171

Vegas is a big place, it should work there. Personally, I think it only works in a large city where you have a vast amount of people look for use lower end cars.

Yeah but it's a hotbed for crime too. I left a porsche I was selling outside to show a guy that didn't show and as it turned out, he ended up showing after I went to bed and he just took it.
So there are rules you need to follow. Don't show the car at your house is first.

[McLovin]

IMO, the problem with the biz model, particularly in large cities like Vegas and So Cal (yeah, I known that's not a city), is the fact that this is a very "low barrier to entry" business.

Anybody and their brother can do this, with no education, no requirements, very little money to start up, etc., and everyone and their brother does it. That's why in lots of areas in places like LA or Vegas you see small used car lots on every corner. (They tend to come and go, but someone is always selling cars on any given lot).

So there is always a lot of competition, and those market forces work to put the squeeze on margins and profits. There's never a shortage of used car salesmen, and never will be.

[McLovin]

Now, if you really want to make huge money, start a *franchised* new car dealership!

Although it's in the same business, it's the exact opposite of Joe's Used Kars.

Unlike almost no barrier to entry, it has incredibly high barriers. For any decent brand, it's exceedingly difficult to be approved by the manufacturer. It's almost impossible for an "outsider" to ever get approved these days (by outsider I mean anyone that doesn't already have a long resume of successfully owning new car dealerships, preferably many of them).

And the costs are huge. To buy an existing new car dealership the "goodwill" part of the purchase price will be many millions, and that's only a part of the price.

But man oh man. The money (net profit) that a BMW, Mercedes, Toyota, Lexus, etc. dealership makes in places like Southern California would boggle your mind.

[look 171]

Originally Posted by McLovin

Now, if you really want to make huge money, start a *franchised* new car dealership!

Although it's in the same business, it's the exact opposite of Joe's Used Kars.

Unlike almost no barrier to entry, it has incredibly high barriers. For any decent brand, it's exceedingly difficult to be approved by the manufacturer. It's almost impossible for an "outsider" to ever get approved these days (by outsider I mean anyone that doesn't already have a long resume of successfully owning new car dealerships, preferably many of them).

And the costs are huge. To buy an existing new car dealership the "goodwill" part of the purchase price will be many millions, and that's only a part of the price.

But man oh man. The money (net profit) that a BMW, Mercedes, Toyota, Lexus, etc. dealership makes in places like Southern California would boggle your mind.

How much money do they make off each car they sell? 2-4k on each? How many cars move in a week so they can get caught up with their overhead? I have no idea, but fun to find out.

[McLovin]

Depends on the brand of car. Range Rovers, for example, can easily be $12,000 profit per car.

But most of the manufacturers have "incentive" money. So, the dealer gets a set $$ amount from the factory for each car sold. I can tell you from the financials that I've seen for high end dealerships, those checks alone are in the hundreds of thousands, per quarter.

Then there is service, parts, etc.

In your area (Los Angeles), the owners of the major dealerships (BMW, Mercedes, Toyota, Lexus, Land Rover, etc) are basically treated like rock stars in the business world, many have their own jets, etc. It's that kind of money.

[LeeH]

Originally Posted by quattrorunner

Wow that's exactly why I quit doing that 6 years ago as a hobby/extra income.
That's almost exactly what I found as well.
But.......if things have changed, I'd like to know.

Me too! I would pick out a dozen to twenty cars that I'd preview. I'd review book values, prices on Craigslist and Ebay and write down the absolute max I'd be willing to pay where I thought I might net $500 or so. My license was wholesale, but I knew a dealer who would run a car through retail channels for a couple of hundred bucks.

On sale day I'd be running from lane to lane watching my cars go through... usually for several hundred to a couple of thousand dollars more than the point where I figured I could make money.

I worked cars pretty hard for one year and netted right around $10K for my troubles. Most of that money came from cars I bought from Craigslist and sold at the auction, or VW TDIs I bought from Craigslist and sold to a dealer in California who specialized in them.

[look 171]

Originally Posted by McLovin

Depends on the brand of car. Range Rovers, for example, can easily be $12,000 profit per car.

But most of the manufacturers have "incentive" money. So, the dealer gets a set $$ amount from the factory for each car sold. I can tell you from the financials that I've seen for high end dealerships, those checks alone are in the hundreds of thousands, per quarter.

Then there is service, parts, etc.

In your area (Los Angeles), the owners of the major dealerships (BMW, Mercedes, Toyota, Lexus, Land Rover, etc) are basically treated like rock stars in the business world, many have their own jets, etc. It's that kind of money.

YOu think a toyota or VW's markup is 8-10k per car? Just for laughs, how much money do sales people get per car, $800 - 1000 bucks? I have heard they make a pretty good living selling for Lexus.

[Chocaholic]

I think he's talking about buying a $2500 99 Jeep Cherokee....clean it up a bit and resell for say $4200. Not much risk and a pretty good % return. As a hobby/side biz, you could probably do worse.

[MotoSook]

There are guys in the Midwest ("Rust Belt") that seem to move vehicles at a brisk pace off their used lots an web pages. They buy rust free cars from the south and west, clean them, spray paint the wheel wells black and voila!

I personally shopped on Craigslist in the southwest for my last per base and paid a premium to get a rust free vehicle.

Richard, you line up a bunch of sub-$10,000 cars from SoCal and ship them up here in the Chicagoland area to a partner dealership and you'd probably make money. A shipment a month or two. Kaisen probably knows more how well this would work.

[red-beard]

I'm guessing this is related to the cash for clunkers. A lot of the lower end used cars which today would be these $2K cars, were destroyed under the program. And in a bad economy, this is one way for people to save money: buy a used car.

[onewhippedpuppy]

Originally Posted by look 171

One of my friend is doing that right now as a side bus. He uses his house / driveway to store a couple of cars and an outdoor storage for RVs or junk storage place to store other cars that awaits repair or cleanup. He'd doing no more 6-8 cars at one time and get them from the auction house. He's only after cars that are under 8k because they sell fast. The 4-6k cars are best. AS soon as they are gone, he does it all over again. His has a normal job. This side thing pay for his mortgage and then some.

This. With some looking you can find good cars from private party sellers that are undervalued for whatever reason, or cars that are good at their core but need a little TLC. Fix the issues, clean them up, and resell them. It's not hard to get a few thousand in profit out of your sweat equity. If you aren't a DIY type this goes south in a hurry, mechanics aren't cheap. Clean and cheap used cars are always in demand.

[john70t]

Originally Posted by MotoSook

There are guys in the Midwest ("Rust Belt") that seem to move vehicles at a brisk pace off their used lots an web pages. They buy rust free cars from the south and west, clean them, spray paint the wheel wells black and voila!

25 years ago, I knew a guy with wife and kids who did this for a living. GA(+)--> MI.
His family was also in GA. So it worked out economically.

He dealt with the domestic fixer-upper crap mostly.
Hundreds of dollars per vehicle...when that meant something in the 1980's.

A bad choice IMHO.

[Laneco]

On cheap cars, we've found KBB to be extremely low. KBB hits our daughters little Subaru Forester for about $1,200 (good body, interior, etc) but over 200K.

Try buying a clean 4wheel drive Suburu in the pacific northwest with a 2.5 engine that has GOOD HEAD GASKETS for anywhere near $1,200. If you can find them for that, buy yourself a whole transport truck of them and do a resell.

For cheap cars, I suggest you ignore KBB.

angela