Used car resale

[muppetdave]

Just a quick question, borne more out of interest really. What kind of margins would someone selling secondhand cars be looking to recover as a general rule?

[spikeyhead]

muppetdave said:

Just a quick question, borne more out of interest really. What kind of margins would someone selling secondhand cars be looking to recover as a general rule?

It really depends.

If you're buying at auction and selling from home, you'll be lucky to get more than £500 difference between the auction hammer price and sales price on a £3000 car that didn't need any work doing to it. Unless you've got a decent account with the auction house then you'll lose £200 of that in auction commission and indemnity.

Start buying half a dozen cars a week and selling them on a decent lot and that margin can be doubled, however there's also a good chance that some of the cars you buy will have issues that need solving. Most of them will need MOTs and not all will go straight through so thares more expense eating into your margin. Sell enough cars to make a living on and you'll need to VAT register. Do that and you're likely to need an accountant as well as the expense of the car lot.

If you know what you're doing then there's still good money to be made, however its also an easy way of losing money.

[pgilc1]

spikeyhead said:

muppetdave said:

Just a quick question, borne more out of interest really. What kind of margins would someone selling secondhand cars be looking to recover as a general rule?

It really depends.

If you're buying at auction and selling from home, you'll be lucky to get more than £500 difference between the auction hammer price and sales price on a £3000 car that didn't need any work doing to it. Unless you've got a decent account with the auction house then you'll lose £200 of that in auction commission and indemnity.

Start buying half a dozen cars a week and selling them on a decent lot and that margin can be doubled, however there's also a good chance that some of the cars you buy will have issues that need solving. Most of them will need MOTs and not all will go straight through so thares more expense eating into your margin. Sell enough cars to make a living on and you'll need to VAT register. Do that and you're likely to need an accountant as well as the expense of the car lot.

If you know what you're doing then there's still good money to be made, however its also an easy way of losing money.

+1

I sold cars for several years from home and thats pretty much what i was getting £300-£500 on cars usually between £500 and £2000. Thats the market that worked best for me. Much above that and people expect to see proper warranties, forecourt, and finance facilities.

Cars £5000-£10000 probably £2000 gross on a forecourt.

Interestingly i recently sold a trade car to a dealer local to me for £13K, and its now on his forecourt for £15,495.

Your high end dealers, like BMW and Merc, look for around £5000 gross margin.

[muppetdave]

That's interesting, thankls guys

[MitchT]

I had an idea for selling used cars...

• I lease premises where seller could put their car
• Seller pays a small 'rental' for the space that their car occupies while it's there
• Buyer turns up, browses cars on site and decides what they want to buy
• I administer the sale and take a commission
• Seller gets their money, buyer gets their car

The idea is that the sale would be a private one taking place between the seller and the buyer, I would not be a car dealer, I would merely provide a showroom type environment in which the seller could display their car while it was for sale and administer the transfer of ownership one way and money the other way. I would charge a fee for the time that the car was in the showroom and a commission on the sale.

Pros:
• I wouldn't have the liabilities that a conventional car dealer would, such as SoGA, requirement to provide warranty, etc. because it was a private sale
• Cars would change hands quicker as the absence of a need to provide a car that meets certain conditions means no money would have to be spent preparing it for sale - all responsibility would be on the car's previous owner - so prices could be lower, thus facilitating quicker sales

Cons:
• Would have limited appeal as people generally like to use their car while it's up for sale, so it would only really appeal to owners of second cars, though that could be a good thing as it would likely attract 'interesting' non-daily-driver cars.

[pgilc1]

Interesting. The problems i forsee would be

(a) no trade in facilities.
(b) no finance facilities.
(c) an unscrupulous seller could effectively hide behind you when selling a pup.
(d) an unscrupulous trader could hide behind you when selling.
(e) the buyer will still come back to you if there are problems.

A trader friend of mine has a slight variation on this though. He is a trader with a small used car lot. He cant afford to stock the lot fully himself, so he allows other traders to put their cars there too, and he takes a commission when he sells it.

[m4tt]

Thats basically taking the sale or return concept and basing your business around that. In principle, great, you have lots of stock but haven't paid for it.

Lots of smaller garages will advertise your car and hold it for you then take a commission on the sale. Can be a bit dodgy if the right agreements aren't in place...

[gumshoe]

pgilc1 said:

Interesting. The problems i forsee would be

(a) no trade in facilities.
(b) no finance facilities.
(c) an unscrupulous seller could effectively hide behind you when selling a pup.
(d) an unscrupulous trader could hide behind you when selling.
(e) the buyer will still come back to you if there are problems.

A trader friend of mine has a slight variation on this though. He is a trader with a small used car lot. He cant afford to stock the lot fully himself, so he allows other traders to put their cars there too, and he takes a commission when he sells it.

SOR can be a good business model, but it does have it's own problem.