Help me understand the used car business model

[speedster911]

Trying to understand the Independent used car business model. I understand that a business can ask anything they want for an item they want to sell... but I still do not get it or perhaps understand the business logic.

Hypothetically - lets say a dealer (independent classic car dealer not a P dealer) has a car listed for 100K, The car is super nice, not super rare but fairly unique. The car sits for months without movement in advertised price and the price is higher than other comparable twins to this unique car. I always ask myself , Do they want to sell it or sit on it?

Questions:

1) I understand it may be a consigned car so no $$ out of their pocket to hold the high price. Most places charge an owner to consign don't they? When does an owner say enough monthly charges, sell the car at a realistic price?

2) If they own the car, they have a lot of $$ tied up or are paying interest. Is there a point in the used car business model where they say we need to unload this car?

3) Is there a % profit most classic car dealers are targeting or is it we paid 75K for the car, lets charge/ask 100K?

4) Is the Classic dealer in a tougher financial position because they may not get the lease revenue or commission from a bank for a loan like a P dealer receives?

5) A large % of these classic car dealers have no avenue for service / maintenance dollars after the sale. Their profit is 100% from car sales, what's the margin at the end of the year?

What am I missing to this puzzle, Thanks everyone

Speedster

[Unobtanium-inc]

Originally Posted by speedster911

Trying to understand the Independent used car business model. I understand that a business can ask anything they want for an item they want to sell... but I still do not get it or perhaps understand the business logic.

Hypothetically - lets say a dealer (independent classic car dealer not a P dealer) has a car listed for 100K, The car is super nice, not super rare but fairly unique. The car sits for months without movement in advertised price and the price is higher than other comparable twins to this unique car. I always ask myself , Do they want to sell it or sit on it?

Questions:

1) I understand it may be a consigned car so no $$ out of their pocket to hold the high price. Most places charge an owner to consign don't they? When does an owner say enough monthly charges, sell the car at a realistic price?

2) If they own the car, they have a lot of $$ tied up or are paying interest. Is there a point in the used car business model where they say we need to unload this car?

3) Is there a % profit most classic car dealers are targeting or is it we paid 75K for the car, lets charge/ask 100K?

4) Is the Classic dealer in a tougher financial position because they may not get the lease revenue or commission from a bank for a loan like a P dealer receives?

5) A large % of these classic car dealers have no avenue for service / maintenance dollars after the sale. Their profit is 100% from car sales, what's the margin at the end of the year?

What am I missing to this puzzle, Thanks everyone

Speedster

9 times out of 10 an overpriced car is #1, on consignment. Every dealer wants his showroom (both real and web) to be stacked with cars, so they don't care if one sells or doesn't, they need stock, even for window dressing. I don't like this model personally, I move em in and move em out. But I also don't take consignments, sell me your car or don't.

---Adam

[Catorce]

^speaking of which I missed out on that Sunroof coupe you just sold on eBay. That was a great deal for a sunroof. Was that reflective of the market? Sunroofs used to be like 85K even rough...

[Unobtanium-inc]

Originally Posted by Catorce

^speaking of which I missed out on that Sunroof coupe you just sold on eBay. That was a great deal for a sunroof. Was that reflective of the market? Sunroofs used to be like 85K even rough...

A and Pre-A sunroofs have commanded that kind of money, B/C ones as projects are normally under $50,000. I think $35,200 for this one was well sold, I was happy. Now if it was an SC add 20-25%.

---Adam

[Matt Monson]

Jesus. I remember when SCs were 15-20 all day long.

Speedster,
Classic and used car dealers still finance cars. They still earn points and closing costs on their loans. Why wouldn't they?

[Catorce]

Nice!

[Unobtanium-inc]

Originally Posted by Matt Monson

Jesus. I remember when SCs were 15-20 all day long.

Speedster,
Classic and used car dealers still finance cars. They still earn points and closing costs on their loans. Why wouldn't they?

Interesting story here about an SC Sunroof I sold to Sweden a few years back.

https://www.pca.org/news/2017-03-28/barnfinding-long-game-vs-short-game

---Adam

[LUFTKUL]

There are some smaller specialty, often Porsche, dealers that I think use the business as more of a tax shelter/hobby. They get to write off expenses, avoid some taxes, etc. They have a passion for Porsche or whatever marque and having a dealership affords easier buying and selling. The chase is probably more fun than the actual ownership.

The business is more of a fun side distraction that the owner may employ someone else to run. I've visited some dealers months apart and saw many of the same cars. That's more of a museum/hobby than a true bread and butter business.

[HenrikL]

Over here in Europe I think that the main customer group for classic car dealers are customers that can afford to not look too closely at the price tag.

[Matt Monson]

Originally Posted by HenrikL

Over here in Europe I think that the main customer group for classic car dealers are customers that can afford to not look too closely at the price tag.

A lot of people here are the same way. I don’t think many of Sloan and Canepa’s customers belong to Pelican.

[speedster911]

Originally Posted by Matt Monson

A lot of people here are the same way. I don’t think many of Sloan and Canepa’s customers belong to Pelican.

Many on PP have the $$$ but do not flaunt it as they do on other sites.

Thanks everyone for your comments- if the P bubble bursts or market makes a major correction many of the classic dealers will be gone, is that an accurate thought? Perhaps with the exception of those that are well established or use it as a conduit for their hobby.

How will the grade 1 and 2 cars be sold then? The few reputable dealers remaining or auctions?

I stopped by my local P dealer yesterday- they were helping liquidate someones collection: 56 Tbird, Viper, 356 coupe - not typical cars you see in this P dealers showroom.