used auto sales

[Richard Ehler]

I am planning on adding used car sales to my auto center, in atlanta, ga.  Any advice on software, buying, selling, financing, evaluating, reconditioning would be appreciated.

[ScottSpec]

I sold my shop after 31 years this past year. Here is a few of my experiences with selling used cars, and we never officially sold used cars, just one here and there, and they were usually older cars 10 - 15 years that were well cared for, in good condition . Usually in the $4-$10,000 range. The first challenge we ran into a lot, is that because we had a great reputation for high quality work, people expected the cars we sold to somehow magically be better than a new car. The other issue that came up a lot is that at some point these cars will have an issue, or issues. When they bring the car in for the issue, the first thing they will do is remind you that they just bought this car from you.  An unspoken expectation that you should take care of it for them. They also seem to come from this frame of reference that since you fix cars, it would be no big deal for you to take care of it for them. I had a guy buy a $3 or $4,000 car from me. It developed an oil leak a year later. He was very upset that I would not fix it for him. After all, as he told me, he just bought it a year ago. I had a customer buy one of my loaner cars. It was not for sale, but he came in one day essentially wanting to buy it. So I sold it to him for about $4,000 as is. Six months later the transmission failed. When he bought it, he knew the transmissions in this vehicle were problematic. Guess what he wanted me to do. Yes, put a transmission in it. It would have cost me more than he even paid for the vehicle. You should see how upset he was when I told him no.

Here is one more good one. One of my employees would buy and sell a car here and there. It was always a requirement of mine that when he sold a car, he made sure the customer knew he was buying it from him personally, not from the shop. Well, one of the ones he sold ended up needing about $4,000 worth of repairs over the next year. It was a $4,000 car, but it was in good condition when it was sold. A year after the customer purchased it, and had all the unforeseen expenses, he called me to tell me how dissatisfied he was, and that he thought I should be responsible somehow. He said he knows he bought it from my employee, but came up with this thing about being a conflict of interest or something, and as the shop owner I should take some responsibility for the problems he was having with the car.    

I know a shop near me that has a used car lot and seems to do ok with it. The last time I spoke with him, the biggest challenge he was having was getting cars to sell.

If you move forward with it, I hope it goes well for you. Oh, I just remembered something else. The owner of the shop that is across from my old shop has partnered with another guy, who used to own the shop next to his, to sell used cars. They have a lot somewhere away from the shop, so customers won't associate the shop with the used cars. I think I read a similar recommendation here on this forum at one time.

Scott

[Richard Ehler]

Thank  you for taking the time to answer

[Mason Garza]

Richard,

We actually opened a used car dealership about two years ago. We are one of those shops that have a great reputation and people would rather buy from us then other used car lots. Like ScottSpec, we have had our share of customers wanting there cars repaired because they purchased it from us. I implemented an extended warranty coverage with a third party provider. Not all cars were covered due to age of vehicle but majority of them were. 

We keep an average of 15-20 cars on the lot. Because we stay so busy in the transmission field we don't push the car lot as needed. But it does generate income when you least expect it. It also makes it easier to purchase vehicles from customers that don't want to fix there cars and just want to sell them and start over. 

A few pointers I would look into:

1) Search out a good Extended Warranty Provider. We use Alpha Warranties, CarShield, and Preferred Warranties

2) Frazer Software for used car dealership. If you are as busy as us you will need something that is smooth and easy. Plus they have GREAT CUSTOMER SERVICE.

3) Credit Acceptance: If you just want to open a used car lot and help with additional income flow then I would definitely sign up with them. Once you learn the program, one person can do it all.

4) Buy Here Pay Here financing (Basically in house financing) is a great thing to have. Some people just can't pay cash for a vehicle. Our starting minimal  down payment is $2,500. If the client is invested then so are we. We don't do the $1,000 or below. We don't have time to chase vehicles around.

5) As you start, have a mixture of cash cars and 10 year old cars. In this industry there is a car for everyone. There is never a bad car. (Well there is! lol)

6) Pray along the way.

 

Have a great day!

Mason

[Richard Ehler]

WOW!  Great info.  Exactly what I was looking for  on the programs to buy/sell/finance, etc.  You the man!!

[Mason Garza]

Your welcome! When we jumped into the used car market, I couldn't find many other shops that was doing what we did. I am sure they are out there but they just didn't have anything posted to help with the guidance. If you have questions along the way just let me know. I experienced my share so far but I have also learned the solutions. 

 

Blessings

[flacvabeach]

I did used cars for about five years. It helps if you're properly capitalized  to own your inventory, otherwise you'll be at the mercy of a floor plan company like NextGear.  I used them and never had a problem, but floor plans add a whole new level of complexity to managing your inventory.  It's like a chess game - you can't fall in love with a car, thinking you're sure you'll find a buyer at your target price.  

You have to remember where you are in the wholesale food chain.  Dealers get the pick of the used car crop with big outfits like Carmax coming close behind.  Hard to compete with them for great cars, so you end up at the wholesale auction, which can be a brutal environment.  You have to remember that every one of those cars is in the auction for a reason.  Sometimes it's apparent, other times it's not and those were the ones that scared me.  Replacing a cat on a car you bought at auction a week ago is a big hit on your margin.  The auctions offer methods to limit your risk, but that jacks up the wholesale cost.  If you don't have experience at the wholesale auctions, get ready for an education.  It's competitive and chaotic.

If I had it to do over, I would place more emphasis on buy here pay here. but do it right - GPS on every car and assume you're going to have to send recovery guys after some percentage of cars.  I sold some cars three or more times.  On the up side, when you build up a sizeable number of clients, it can be a great long-term stream of income.  BHPH probably makes used car dealers look like villains, but you're providing transportation for folks that would have no other way to get it.

ALWAYS get a dealer title for any car you buy - that way you can always get a duplicate from DMV.  If you lose the paperwork for a car that has a long chain of signatures on the title, powers of attorney etc. you've got a big problem.