Sourcing cars in the motor trader

Sourcing cars in the motor trader

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Discussion

sasha320

Original Poster:

595 posts

247 months

Thursday 29th September 2016
quotequote all
Hi, I have done a great deal of research into all the considerations for buying and selling premium sports cars e.g., 911, AMG etc. and becoming a trader.

Pretty much all aspects of running such a business appear to be surmountable and subject to working sensibly and working hard; as well as carefully building relationships in the trade, car dealing seems quite enjoyable too.

The ONLY thing I am unable to 'crack' is where to source the cars.

Main dealers aren't interested in passing on trade-ins to anything but the most established traders, auction prices aren't competitive and so I can't identify where small time premium traders source low mileage, well kept cars that prep easily and well.

Not looking for anyone to give away their secrets, but in very general terms where do small premium traders source their cars?

anonymous-user

53 months

Thursday 29th September 2016
quotequote all
Private purchases
Auctions
Deals with larger dealers.
Deals with leasing firms.

singlecoil

33,313 posts

245 months

Thursday 29th September 2016
quotequote all
Probably from private sellers who need the money fast.

Witness all the ads from dealers masquerading as cars for sale, you click on the link and it says "sorry, sold, similar wanted".

av185

18,433 posts

126 months

Thursday 29th September 2016
quotequote all
Porsche Finance provided generally good quality ex lease and contract 911s snatchbacks at Nottingham BCA at sensible money up till a few years back but that ship has long since sailed unless you are willing to pay waay over book prices.

Sourcing decent 911s of all ages is becoming increasingly difficult....yes buying privately is an option but again, bear in mind you will be competing with strong bidding OPCs and quality independents. The kind of bids you will have to make will inevitably mean you will need to have a buyer lined up.

Good luck...you will need it!

Wilmslowboy

4,189 posts

205 months

Thursday 29th September 2016
quotequote all
I work for a large dealer group , most of our non retail cars go to auction - 30k+ cars a year, we get great rates from the auction houses etc

We avoid trading them as the whole situation is open to abuse, back handers , hassle etc

Some very new stuff, such as Porsche, BMW etc is sent to the local franchised garages, were it is bought unseen over the phone etc (underwritten)

If you want to buy from dealers you will need to establish great relationships, and be first to answer the phone when it rings, and be willing to bid over the phone and back up with prompt payment and collection...


Best to start with wanted ads etc


Edited by Wilmslowboy on Thursday 29th September 22:30

barryrs

4,376 posts

222 months

Thursday 29th September 2016
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The Sytner group has its own auction site that regularly has premium cars listed and might be worth a look (you will need to provide business details to register for access).

cashmax

1,099 posts

239 months

Friday 30th September 2016
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Every single trader will tell you that sourcing stock is the single biggest challenge to success. It is also the largest barrier to entry. They can almost always shift much more than they can get their hands on.

Auctions are for selling nowadays, not buying. They attract retail buyers who often get carried away, paying over book for many cars.

Dealerships are about relationships, with the auction houses making it impossibly easy for them to channel everything down that route. With space being a premium, the auction houses will guarantee a book price and any trade buyers will have to better that. Either way, not many dealers take a PX that isn't already sold anymore.

To be successful in todays market, you need to have some kind of niche which either allows you to command a premium on the way out, allowing you to pay a premium on the way in. Normally, this will be a particular make and model of car (i.e. 911) or a strategy that supports it such as export or trade to trade.

To start a retail trade business in todays market from scratch is a tall order.


sasha320

Original Poster:

595 posts

247 months

Friday 30th September 2016
quotequote all
cashmax said:
Every single trader will tell you that sourcing stock is the single biggest challenge to success. It is also the largest barrier to entry. They can almost always shift much more than they can get their hands on.

Auctions are for selling nowadays, not buying. They attract retail buyers who often get carried away, paying over book for many cars.

Dealerships are about relationships, with the auction houses making it impossibly easy for them to channel everything down that route. With space being a premium, the auction houses will guarantee a book price and any trade buyers will have to better that. Either way, not many dealers take a PX that isn't already sold anymore.

To be successful in todays market, you need to have some kind of niche which either allows you to command a premium on the way out, allowing you to pay a premium on the way in. Normally, this will be a particular make and model of car (i.e. 911) or a strategy that supports it such as export or trade to trade.

To start a retail trade business in todays market from scratch is a tall order.
Thank you for elaborating.

Really useful summary of the realities of the market - confirming that a small scale retail trade business is a non-starter for a new business.

I'm now turning my attention to export and will report back on early findings and probably ask again for any insights.

Thanks for all replied.

walm

10,609 posts

201 months

Friday 30th September 2016
quotequote all
sasha320 said:
Thank you for elaborating.

Really useful summary of the realities of the market - confirming that a small scale retail trade business is a non-starter for a new business.

I'm now turning my attention to export and will report back on early findings and probably ask again for any insights.

Thanks for all replied.
You seem to have already reached a sensible conclusion but I wanted to let you know my knowledge in this industry.
My job involves doing financial analysis on a bunch of players in the auto trade.
Usually the bigger ones such as Inchcape, Lookers etc...
But also through some of my work on Autotrader I have more insight into the wider (and smaller) market (the main Autotrader customers are small traders).

The economics for a small trader are truly shocking.

Take even the bigger ones, say Inchcape.
Gross profit margin is around 15%. So £1,500 on a £10k car.

OK sounds reasonable... yes... well then you need to pay marketing, rent, car prep and sales force (or just you).
After all that Inchcape AT BEST make 3% on the sale of a car on average.
So on that car retailing at £10k you make £300.
Even on a £50k 911 you are only making £1,500.
Which means that if you end up paying slightly over book when sourcing - you are rather rapidly making ZERO.

And the advent of the internet has lowered barriers to entry.
It is now incredibly easy for a new trader to set up who may not even need a proper forecourt location.
They days of the walk-in are gone.
Customers do all their pre-purchase research online and then just turn up for a test drive and buy.
Just anecdotally the last three cars I bought were from warehouses (and these weren't particularly cheap cars)!

Hence most dealers focus on making money by selling finance, which can help materially.

markcoznottz

7,155 posts

223 months

Sunday 2nd October 2016
quotequote all
walm said:
sasha320 said:
Thank you for elaborating.

Really useful summary of the realities of the market - confirming that a small scale retail trade business is a non-starter for a new business.

I'm now turning my attention to export and will report back on early findings and probably ask again for any insights.

Thanks for all replied.
You seem to have already reached a sensible conclusion but I wanted to let you know my knowledge in this industry.
My job involves doing financial analysis on a bunch of players in the auto trade.
Usually the bigger ones such as Inchcape, Lookers etc...
But also through some of my work on Autotrader I have more insight into the wider (and smaller) market (the main Autotrader customers are small traders).

The economics for a small trader are truly shocking.

Take even the bigger ones, say Inchcape.
Gross profit margin is around 15%. So £1,500 on a £10k car.

OK sounds reasonable... yes... well then you need to pay marketing, rent, car prep and sales force (or just you).
After all that Inchcape AT BEST make 3% on the sale of a car on average.
So on that car retailing at £10k you make £300.
Even on a £50k 911 you are only making £1,500.
Which means that if you end up paying slightly over book when sourcing - you are rather rapidly making ZERO.

And the advent of the internet has lowered barriers to entry.
It is now incredibly easy for a new trader to set up who may not even need a proper forecourt location.
They days of the walk-in are gone.
Customers do all their pre-purchase research online and then just turn up for a test drive and buy.
Just anecdotally the last three cars I bought were from warehouses (and these weren't particularly cheap cars)!

Hence most dealers focus on making money by selling finance, which can help materially.
Brilliant post, from someone who obviously knows what is happening at ground level. There is also the issue of having premises and staff, and also very long hours which eats into profitability.

cashmax

1,099 posts

239 months

Sunday 2nd October 2016
quotequote all
There is a further consideration that is well worth noting. Many of the main dealers nowadays are primarily retail finance houses. They will often advertise the more expensive vehicles at below cost to attract customers. Their assumption is that almost 100% of their customers will choose a funding option other than cash and their profit will lie in the finance and aftersales business rather than the car itself. A cash buyer at a main dealer is a VERY disappointing prospect.

I mention this because more and more independent retailers are simply unable to compete on screen price as a result and the main dealers will pay big money for the best stock, in many cases, overbook.

sasha320

Original Poster:

595 posts

247 months

Sunday 2nd October 2016
quotequote all
Thanks. This is all starting to make a great deal more sense. Finance is the key. Basically consumers have become so demanding that all the realistic margin gets absorbed into sourcing, prepping and discounting the car and the profit comes from the interest on the finance - some of which goes to the finance provider and some of which goes to the retailer.

In which case, what are the economics of the finance deals?

I assume the asset to be financed needs to be tidy and risk free, so nearly new and / or within manufacturer's warranty so PCP type finance can be reliably put on it? Actually forget it, although a low interest economic environment makes cars more affordable I bet the margins are still slim to the extent that the only competitive finance comes from big players.

I've always wondered why PCP in premium garages selling 3 to 5 year old cars was prohibitive.

cashmax

1,099 posts

239 months

Sunday 2nd October 2016
quotequote all
Well, in short, the main dealers have it sown up. They get decent margins from the finance and they create a dependency from the end users. The aim is too get punters into a deal with a guaranteed residual value and a big bubble on the end to keep the payments down.

This means that the punter is coming straight back through the door at the end of the term to do it all over again with another car. The main dealer gets -

Locked in punters that he knows are coming back and when
All the servicing maintenance costs
The volume bonus on the new vehicles
A pipeline of used stock he knows is coming back in
The opportunity to pull a car back early with a tempting deal if he has a punter willing to pay big money for it

In essence the sale of the asset itself becomes almost irrelevant.

nct001

733 posts

132 months

Sunday 2nd October 2016
quotequote all
It's not that hard and it's not that prices in the trade are too high it's your understanding of the market is too weak, but that will come with experience.

I just logged into bca in one minute I found an early 911 which will be if no interest to ninety per cent of specialists and will be sold on price. It's from Sytner and has 12 stamps in book.


There's £2500 margin in the car.

If it needs any parts I know where to source for low money in oe spec and any cosmetic prep it would need I could do myself / in house.

You can take a horse to water.... Get out there and buy some cars!!!


veevee

1,455 posts

150 months

Sunday 2nd October 2016
quotequote all
nct001 said:
It's not that hard and it's not that prices in the trade are too high it's your understanding of the market is too weak, but that will come with experience.

I just logged into bca in one minute I found an early 911 which will be if no interest to ninety per cent of specialists and will be sold on price. It's from Sytner and has 12 stamps in book.


There's £2500 margin in the car.

If it needs any parts I know where to source for low money in oe spec and any cosmetic prep it would need I could do myself / in house.

You can take a horse to water.... Get out there and buy some cars!!!

I'd say nearly all the deals are going to be here, below the radar of the big players, and too expensive or specialist for the smaller/more traditional traders and dealers. Make most of the money when you buy the car, but you'd need to know what you're doing.

Trabi601

4,865 posts

94 months

Sunday 2nd October 2016
quotequote all
£2500 gross on a car that has some very expensive known issues?

You have bigger balls than me!

anonymous-user

53 months

Sunday 2nd October 2016
quotequote all
veevee said:
I'd say nearly all the deals are going to be here, below the radar of the big players, and too expensive or specialist for the smaller/more traditional traders and dealers. Make most of the money when you buy the car, but you'd need to know what you're doing.
Has that car sold?

I think the point is that it's great if you can pick it up a trade book value at auction, but there will be enthusiastic amateur there prepared to pay most of the margin over book value.

Wilmslowboy

4,189 posts

205 months

Sunday 2nd October 2016
quotequote all
Yep loads of opportunities in 10+ year old cars - but at this age you really do need to know what you are doing - in the example you quoted - tired clutch, suspension, tyres or worse case, bore scoring could blow any potential profit away - great opportunity if you REALLY know your stuff.

Not sure I would class a 15 year old, 100k+ miles 996 as a "premium sports car'' as wanted by the OP.


There is always room for specialist niche traders.

sasha320

Original Poster:

595 posts

247 months

Sunday 2nd October 2016
quotequote all
veevee said:
I'd say nearly all the deals are going to be here, below the radar of the big players, and too expensive or specialist for the smaller/more traditional traders and dealers. Make most of the money when you buy the car, but you'd need to know what you're doing.
I'm listening, but a 100k miles 996 is an example of your point but does not really prove it.

As mentioned in an earlier post, wouldn't the risk increase on deals like this? Such that you'd have to set aside an amount for when you come across the inevitable lemon sooner?

However thanks for your perspective and you're right that my understanding is a long way off mature!



flatsix3.6

756 posts

180 months

Monday 3rd October 2016
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Is it the same with commercial vans.