Self employed motor trader - advice on direction
Discussion
I'm a self employed motor trader and to compete, my cars have to be in the lowest quartile price wise - or moreoften in the cheapest one or two - of cars available provincewide (i live in northern ireland). If i pitch to the middle price points the phone doesnt even ring, no matter how good the car.
I dont have a forecourt, and operate via my website and advertise via the biggest site here - www.usedcarsni.com which works out at about £25 a month for ten 'slots', i also advertise on gumtree daily, removed my previous days adverts. I have a website and try promote the 'company name / website name / brand' wherever possible, whether it be via simple car window stickers, via facebook, word of mouth, etc, so my website is getting maybe 1,000 hits a month.
With net margins being slim i've had to go for volume to get a wage from it, however the margins arent enough to grow the business, therefore after 18 months my 'pot' is if anything smaller.
I've been selling 20-25 cars a month but there is some serious prep and running about to maintain that, therefore i've been more recently aiming to sell 10-12 cars per month, on bigger margins and more 'hand picked' cars rather than having to try to retail pretty much all of whats offered to me. Whilst the stock i have has for the most part decent margins, the phone isnt ringing to any great extent, therefore i can forsee having to drop prices to make the phone ring, therefore forcing me back down the perpetual 'volume' route.
I've looked at doing cars a little bit left of field, though this can be a little hit and miss. I've had some success with Jaguars this year, but the market is very price sensitive, so they have to be bought 'right' which is difficult. Petrol BMW's have also went for me recently too, though they tend to be very spec driven.
The other routes i've tried are people carriers, which tend to generate a lot of trade ins as people 'upsize'.
Selling the glaringly obvious mid range hatchbacks means you're very much selling on price again as if you're 1.6 Zetec Focus is £50 more expensive than someone elses, they'll go there.
The market seems to want diesels, but i've had serious reliability issues with them and quite a few have either had large prep bills against them or large warranty bills.
I've also looked at 'breaking' the odd car - i've both a corsa and a clio in my garage at the moment in bits, and whilst i've made a bit off them, theres nothing has made me think theres a fortune at it - unless you'd ten or twenty cars about you.
Has anyone any advice as to where i should take this from here? I need to focus on a particular direction, but i cant afford to make a mistake by going down the wrong route?
I dont have a forecourt, and operate via my website and advertise via the biggest site here - www.usedcarsni.com which works out at about £25 a month for ten 'slots', i also advertise on gumtree daily, removed my previous days adverts. I have a website and try promote the 'company name / website name / brand' wherever possible, whether it be via simple car window stickers, via facebook, word of mouth, etc, so my website is getting maybe 1,000 hits a month.
With net margins being slim i've had to go for volume to get a wage from it, however the margins arent enough to grow the business, therefore after 18 months my 'pot' is if anything smaller.
I've been selling 20-25 cars a month but there is some serious prep and running about to maintain that, therefore i've been more recently aiming to sell 10-12 cars per month, on bigger margins and more 'hand picked' cars rather than having to try to retail pretty much all of whats offered to me. Whilst the stock i have has for the most part decent margins, the phone isnt ringing to any great extent, therefore i can forsee having to drop prices to make the phone ring, therefore forcing me back down the perpetual 'volume' route.
I've looked at doing cars a little bit left of field, though this can be a little hit and miss. I've had some success with Jaguars this year, but the market is very price sensitive, so they have to be bought 'right' which is difficult. Petrol BMW's have also went for me recently too, though they tend to be very spec driven.
The other routes i've tried are people carriers, which tend to generate a lot of trade ins as people 'upsize'.
Selling the glaringly obvious mid range hatchbacks means you're very much selling on price again as if you're 1.6 Zetec Focus is £50 more expensive than someone elses, they'll go there.
The market seems to want diesels, but i've had serious reliability issues with them and quite a few have either had large prep bills against them or large warranty bills.
I've also looked at 'breaking' the odd car - i've both a corsa and a clio in my garage at the moment in bits, and whilst i've made a bit off them, theres nothing has made me think theres a fortune at it - unless you'd ten or twenty cars about you.
Has anyone any advice as to where i should take this from here? I need to focus on a particular direction, but i cant afford to make a mistake by going down the wrong route?
5LDC said:
So you sell any commercial vehicles? If u can get hold of Vw transporters - t4 or t5 at the right price they sell very very well.
Have just sold a few vans. Was thinking that might be a route as i'm vat registered which would put off a lot of the part time traders who are only looking to make a small turn, thus potentially less competitionDo you offer finance on the vehicles?
This can be a major generator of profit but on most of the stock your currently carrying many (credit worthy) people will not require it.
Perhaps keep a smaller number of mainstream cars at 4,995-6,995 and offer finance.
Your stock is only sitting at 13 vehicles today, you'll certainly need more than that to earn a sensible living at it doing it honestly.
Fly by night guys can do it with half a dozen but wont be paying VAT,Income tax or preparing the cars correctly.
If you cant beat them on price beat them on buying em right, is it only other dealers you source from?
This can be a major generator of profit but on most of the stock your currently carrying many (credit worthy) people will not require it.
Perhaps keep a smaller number of mainstream cars at 4,995-6,995 and offer finance.
Your stock is only sitting at 13 vehicles today, you'll certainly need more than that to earn a sensible living at it doing it honestly.
Fly by night guys can do it with half a dozen but wont be paying VAT,Income tax or preparing the cars correctly.
If you cant beat them on price beat them on buying em right, is it only other dealers you source from?
I would deregister for VAT, have half a dozen cars to sell from home, and get a job selling Landrover or similar.
You will earn more money, and your pot will be intact.
Fact is at your level you are competing against home traders who pay no vat, tax, warranty costs, and no comeback either as they sell as private not trade.
I own a garage , have been self employed for 16 years, in the motor trade for 25 years, but am turning away from it, not enough profit to keep me interested.
A lot of smaller dealers close to me have closed down over the last few years and current trading conditions are the worst I have ever known.BCA is full of privates or disheartened traders giving too much money for mediocre stock.Buying from main dealers is also difficult-some retail their own non franchise vehicles or take your bid to deal then punt the cars round all their traders to get a bit more.
Personally I have found margins on sub £5k cars are not worth it if,like myself,you prep and warrant your cars properly.You can't turn them over in a reasonable time unless you cut the margin to the bone.
These days I buy cars off private sellers to retail at £15-20k,travelling the length and breath of the country to do so,have around 6 or 7 at a time and trade out of the trade ins.
Personally I have found margins on sub £5k cars are not worth it if,like myself,you prep and warrant your cars properly.You can't turn them over in a reasonable time unless you cut the margin to the bone.
These days I buy cars off private sellers to retail at £15-20k,travelling the length and breath of the country to do so,have around 6 or 7 at a time and trade out of the trade ins.
whythem said:
You need to increase your margins. One way to do that is buy your stock from a cheaper market, ie go up to Scotland and check out the auctions there. Many of the dealers in the south west travel weekly up to places like Fife etc.
I live in Northern Ireland but i take your point. There are traders from here who buy from the mainland then ship them back.Central Car Auctions near Glasgow publishes a fairly comprehensive list of priced examples, refreshed each month.
How do the prices compare?
http://www.centralcarauctions.com/trade/about/pric...
How do the prices compare?
http://www.centralcarauctions.com/trade/about/pric...
Without getting too personal, you're in a race to the bottom price wise which means you have no differentiation over competitors and thus are not in a sustainable or profitable business.
There is only one way to survive and that is to gain and sustain a competitive advantage through differentiation. And that is only viable if the industry is itself profitable (Porters Five Forces of Competition). If the industry is profitable, you need to choose how you're going to compete; on cost, differentiation or focus (cost focus or differentiation focus). Each of these strategies has a different route to competitive advantage. So you have to make a choice about the type of competitive advantage you seek to attain; being all things to all people is not a strategy and means you will have no competitive advantage at all. You seem to be in a cost leadership position at the moment, which means scale is important to you.
This is just a flavour of what is a very complex issue (if it wasn't complex, every business in the world would be successful). To determine your own strategy requires knowledge of your industry, knowledge of the principles of competitive advantage and then the strategy and funding to take forward your intent. It's hard, but doable. Good luck!
There is only one way to survive and that is to gain and sustain a competitive advantage through differentiation. And that is only viable if the industry is itself profitable (Porters Five Forces of Competition). If the industry is profitable, you need to choose how you're going to compete; on cost, differentiation or focus (cost focus or differentiation focus). Each of these strategies has a different route to competitive advantage. So you have to make a choice about the type of competitive advantage you seek to attain; being all things to all people is not a strategy and means you will have no competitive advantage at all. You seem to be in a cost leadership position at the moment, which means scale is important to you.
This is just a flavour of what is a very complex issue (if it wasn't complex, every business in the world would be successful). To determine your own strategy requires knowledge of your industry, knowledge of the principles of competitive advantage and then the strategy and funding to take forward your intent. It's hard, but doable. Good luck!
I tried to be the cheapest, but the customers expect the same and I made little money, now I'm within the top 5-6 cars in terms of price and I now sell them making decent profit, my cars are very well prepped, everything gets MOT'd and serviced and if they need timing belts etc regardless of age and mileage they get done.
Everything we buy is HPI clear and has service history, anything without history and not HPI clear gets traded.
Everything comes with a 3 month warranty which we often upswell, we take a lot of good swappers in and we trade out all the rubbish.
Some cars do become overage but they still sell at good prices just have to hold it out!
I don't want to appeal to the customers who want the cheapest car as they are often those who haggle the hardest and complain at the smallest of issues!
My customers are generally looking at the best examples of those models and more often than not have realistic expectations of used cars, my warranty claims are consistent regardless of price achieved, we have consistent favourite types of stock.
Me personally when I'm looking to buy a car or bike, I won't even look at the cheapest advert making the assumption it's either dodgy, has no history, is a dog etc I'm sure this is how a lot of other buyers think.
Everything we buy is HPI clear and has service history, anything without history and not HPI clear gets traded.
Everything comes with a 3 month warranty which we often upswell, we take a lot of good swappers in and we trade out all the rubbish.
Some cars do become overage but they still sell at good prices just have to hold it out!
I don't want to appeal to the customers who want the cheapest car as they are often those who haggle the hardest and complain at the smallest of issues!
My customers are generally looking at the best examples of those models and more often than not have realistic expectations of used cars, my warranty claims are consistent regardless of price achieved, we have consistent favourite types of stock.
Me personally when I'm looking to buy a car or bike, I won't even look at the cheapest advert making the assumption it's either dodgy, has no history, is a dog etc I'm sure this is how a lot of other buyers think.
Trying to buy a car for one of our youngsters...............
Cars that are for the youth and cheap on the insurance are gone in a flash.
so maybe fiestas,corsas 106 clios etc 1.4 or below could be a good shout?
or go for mainly one brand? mercs or bmw etc mpv or 4x4 ?
as mentioned vans are always a good shout esp if you do some finance on them
try and avoid stuff that people can buy on hire etc
Cars that are for the youth and cheap on the insurance are gone in a flash.
so maybe fiestas,corsas 106 clios etc 1.4 or below could be a good shout?
or go for mainly one brand? mercs or bmw etc mpv or 4x4 ?
as mentioned vans are always a good shout esp if you do some finance on them
try and avoid stuff that people can buy on hire etc
Jazzer77 said:
Do you offer finance on the vehicles?
This can be a major generator of profit but on most of the stock your currently carrying many (credit worthy) people will not require it.
I have rarely been asked about finance so hadnt thought to take it much further at this stage. Also, i think my average price is quite low, and average age relatively old, so there may not be the need with my current stock type.This can be a major generator of profit but on most of the stock your currently carrying many (credit worthy) people will not require it.
Jazzer77 said:
Perhaps keep a smaller number of mainstream cars at 4,995-6,995 and offer finance.
Yes, i think thats a good idea.Jazzer77 said:
Your stock is only sitting at 13 vehicles today, you'll certainly need more than that to earn a sensible living at it doing it honestly.
Fly by night guys can do it with half a dozen but wont be paying VAT,Income tax or preparing the cars correctly.
Well, the problem is i've been working on my own and keeping 20 cars on the production line as it were is very time consuming - sourcing, buying, transporting, bodywork, mechanicals, valeting are all individual steps so when i was doing that for 20 cars it all got crazy.Fly by night guys can do it with half a dozen but wont be paying VAT,Income tax or preparing the cars correctly.
Jazzer77 said:
If you cant beat them on price beat them on buying em right, is it only other dealers you source from?
Yes, currently. Hi there Paul
I'm going to shoot from the hip, please don't take offence. I don't know you from Adam and so my words are purely based on business advice.
There are a few things which caught my eye. When ever someone says they have to sell on price I tend to think it means they have no selling skills. Either that or their product is poor quality. If yours is the cheapest one on the market people are going to buy it, all you can do is put them off. If yours is the most expensive they aren't going to buy it so you have to do everything in your power to make them.
You are buying from dealers and then trying to sell on to private individuals taking a profit in the middle. Your source of cars is easy, like auctions every dealer in the land goes there. The dealers you are buying from have absolutely no interest in the product they are selling you, all they want you to do is to give a big enough number so that they can bolt Mr Jones into their shiny new car. If you turn up and complain about the quality of the "description" (made by a guy in a shiny suit who has no desire to get dirty and even less time to actually drive the car) you are told there were 3 other bids at the same price (as there would be given the lying b'stards description) so take it or leave it. If you choose to leave it someone else will walk in, take the car either because they couldn't see the faults or because they want to get in with the dealer. If you do take the car you hear those immortal words, "I'll sort you out on the next one". Hmm, and the Easter Bunny s
ts chocolate covered raisins.
So from the outset I'm not sure your supply of cars is sound. You're trying to pick the meat from some very tired bones.
Ironically from your buyer's perspective it does rather beg the question what was wrong with the car which precluded the main dealer from selling it themselves? We are all looking for revenue opportunity in the motor trade and if that means employing a used car manager to retail all the decent group part exchanges then they'll take that profit quite happily. We sell all our part exchanges and generally they find homes quite easily because they are better than their peers, we inspect them properly because we know we are going to have to stand to them. Because we are selling them directly they are sensibly priced, there is no third party mouth to feed.
Looking at your website you are trying to be all things to all men. A van, a people carrier, an oddball, a prestige car, a family car, even a Porsche. This means several things. You only have 1 car to tempt the buyer and there is a risk that buyer might know more than you about the specific car you are selling, at which point you just step back, let them pull the car to pieces, and / or make it the cheapest one. When you have the best example in the country they get a bargain, if it's a bit average they at least know it was cheap. As an example your Porsche Boxster caught my eye. On the face of it a cheap car given the number on the speedo. OK not everyone's first choice of interior colour but if the car was as good as it's 44k miles then it ought to have made more money. The problem is you had nothing to judge it by so it had to be cheap. The only thing I saw was "full service history from Porsche main dealer or specialist" and a stamp from a BMW specialist and an independent Tyre & MOT outfit! Because we spend our whole lives looking at Porsches we know where that car would have rested within it's peer group and could have qualified that to a prospective buyer.
Compare that to someone who finds a niche, be it Porsches, Vans, diesels (and I don't think they are inherently unreliable more a reflection on your buying process), convertibles, people carriers, Jaguars or whatever. You have a dozen examples for people to see, they will travel further knowing there is a selection, your knowledge bank increases, you can ask more money based on that knowledge and they fact people know they have less risk buying from you. You even start to build up a reputation after a while to the point where people seek you out, both to buy & sell.
You seem a decent enough chap, you want to do the right thing and from a cursory glance your cars seem well prepared. So why compete against people who don't share your morals, have no interest in paying Vat and other taxes and won't be there to pick up the pieces?
As for what to specialise in? Well that's your shout but I wouldn't listen too carefully to suggestions on here. Know your market and what it wants. Small cheap to insure cars are great for first time buyers but they all have no money, will more than likely knacker something as they learn to master the clutch and drive it like they stole it so there is little likelihood of your being able to buy it back in 18 months time. Similarly up to £5k cars on finance might mean the person hasn't got any money to mend the car when it goes wrong so you marry the car for the next 3 years. If you refuse they complain to the finance company who then put pressure on you.
The vans sound more promising. As you correctly pointed out the fact you are Vat registered means you won't be competing against private bods who can instantly take 20% less margin for the same profit. You might even find your relatively remote location allows you to corner a market. You will still need a good source of product so I would suggest avoiding the local van dealers. What ever the niche I think that's the way forward. One word of warning though, you must know your onions. There will be some hard lessons I have no doubt.
Once again I really do apologise is my words sound harsh or personal. They genuinely aren't intended as such. I have no idea who you are and know nothing of your background. You came on here asking a question and if anything contained within my ramblings means you are able to see a bit of light at the end of the tunnel then happy days. If you do end up retiring to the sunshine in a couple of years remember me
I wish you all the best & keep smiling
Henry
I'm going to shoot from the hip, please don't take offence. I don't know you from Adam and so my words are purely based on business advice.
There are a few things which caught my eye. When ever someone says they have to sell on price I tend to think it means they have no selling skills. Either that or their product is poor quality. If yours is the cheapest one on the market people are going to buy it, all you can do is put them off. If yours is the most expensive they aren't going to buy it so you have to do everything in your power to make them.
You are buying from dealers and then trying to sell on to private individuals taking a profit in the middle. Your source of cars is easy, like auctions every dealer in the land goes there. The dealers you are buying from have absolutely no interest in the product they are selling you, all they want you to do is to give a big enough number so that they can bolt Mr Jones into their shiny new car. If you turn up and complain about the quality of the "description" (made by a guy in a shiny suit who has no desire to get dirty and even less time to actually drive the car) you are told there were 3 other bids at the same price (as there would be given the lying b'stards description) so take it or leave it. If you choose to leave it someone else will walk in, take the car either because they couldn't see the faults or because they want to get in with the dealer. If you do take the car you hear those immortal words, "I'll sort you out on the next one". Hmm, and the Easter Bunny s
ts chocolate covered raisins.So from the outset I'm not sure your supply of cars is sound. You're trying to pick the meat from some very tired bones.
Ironically from your buyer's perspective it does rather beg the question what was wrong with the car which precluded the main dealer from selling it themselves? We are all looking for revenue opportunity in the motor trade and if that means employing a used car manager to retail all the decent group part exchanges then they'll take that profit quite happily. We sell all our part exchanges and generally they find homes quite easily because they are better than their peers, we inspect them properly because we know we are going to have to stand to them. Because we are selling them directly they are sensibly priced, there is no third party mouth to feed.
Looking at your website you are trying to be all things to all men. A van, a people carrier, an oddball, a prestige car, a family car, even a Porsche. This means several things. You only have 1 car to tempt the buyer and there is a risk that buyer might know more than you about the specific car you are selling, at which point you just step back, let them pull the car to pieces, and / or make it the cheapest one. When you have the best example in the country they get a bargain, if it's a bit average they at least know it was cheap. As an example your Porsche Boxster caught my eye. On the face of it a cheap car given the number on the speedo. OK not everyone's first choice of interior colour but if the car was as good as it's 44k miles then it ought to have made more money. The problem is you had nothing to judge it by so it had to be cheap. The only thing I saw was "full service history from Porsche main dealer or specialist" and a stamp from a BMW specialist and an independent Tyre & MOT outfit! Because we spend our whole lives looking at Porsches we know where that car would have rested within it's peer group and could have qualified that to a prospective buyer.
Compare that to someone who finds a niche, be it Porsches, Vans, diesels (and I don't think they are inherently unreliable more a reflection on your buying process), convertibles, people carriers, Jaguars or whatever. You have a dozen examples for people to see, they will travel further knowing there is a selection, your knowledge bank increases, you can ask more money based on that knowledge and they fact people know they have less risk buying from you. You even start to build up a reputation after a while to the point where people seek you out, both to buy & sell.
You seem a decent enough chap, you want to do the right thing and from a cursory glance your cars seem well prepared. So why compete against people who don't share your morals, have no interest in paying Vat and other taxes and won't be there to pick up the pieces?
As for what to specialise in? Well that's your shout but I wouldn't listen too carefully to suggestions on here. Know your market and what it wants. Small cheap to insure cars are great for first time buyers but they all have no money, will more than likely knacker something as they learn to master the clutch and drive it like they stole it so there is little likelihood of your being able to buy it back in 18 months time. Similarly up to £5k cars on finance might mean the person hasn't got any money to mend the car when it goes wrong so you marry the car for the next 3 years. If you refuse they complain to the finance company who then put pressure on you.
The vans sound more promising. As you correctly pointed out the fact you are Vat registered means you won't be competing against private bods who can instantly take 20% less margin for the same profit. You might even find your relatively remote location allows you to corner a market. You will still need a good source of product so I would suggest avoiding the local van dealers. What ever the niche I think that's the way forward. One word of warning though, you must know your onions. There will be some hard lessons I have no doubt.
Once again I really do apologise is my words sound harsh or personal. They genuinely aren't intended as such. I have no idea who you are and know nothing of your background. You came on here asking a question and if anything contained within my ramblings means you are able to see a bit of light at the end of the tunnel then happy days. If you do end up retiring to the sunshine in a couple of years remember me
I wish you all the best & keep smiling
Henry
rog007 said:
Without getting too personal, you're in a race to the bottom price wise which means you have no differentiation over competitors and thus are not in a sustainable or profitable business.
There is only one way to survive and that is to gain and sustain a competitive advantage through differentiation. And that is only viable if the industry is itself profitable (Porters Five Forces of Competition). If the industry is profitable, you need to choose how you're going to compete; on cost, differentiation or focus (cost focus or differentiation focus). Each of these strategies has a different route to competitive advantage. So you have to make a choice about the type of competitive advantage you seek to attain; being all things to all people is not a strategy and means you will have no competitive advantage at all. You seem to be in a cost leadership position at the moment, which means scale is important to you.
This is just a flavour of what is a very complex issue (if it wasn't complex, every business in the world would be successful). To determine your own strategy requires knowledge of your industry, knowledge of the principles of competitive advantage and then the strategy and funding to take forward your intent. It's hard, but doable. Good luck!
I'm not in the motor trade (I flog marketing qualifications!) but agree with what you are saying here. I suspect from all I read and hear that the used motor trade is what Porter would call a zero sum sector at the moment. Having said that, the differentiation focus route makes a lot of sense - out of marketing jargon that means specialisation. If you have had a good year with Jaguars why not specialise in them, really get to know the cars, have a few in stock and become known as the place to buy a Jag from - and at the same time become known to your suppliers as the person who will buy Jags. Doesn't have to be Jags, but hopefully you get the idea!There is only one way to survive and that is to gain and sustain a competitive advantage through differentiation. And that is only viable if the industry is itself profitable (Porters Five Forces of Competition). If the industry is profitable, you need to choose how you're going to compete; on cost, differentiation or focus (cost focus or differentiation focus). Each of these strategies has a different route to competitive advantage. So you have to make a choice about the type of competitive advantage you seek to attain; being all things to all people is not a strategy and means you will have no competitive advantage at all. You seem to be in a cost leadership position at the moment, which means scale is important to you.
This is just a flavour of what is a very complex issue (if it wasn't complex, every business in the world would be successful). To determine your own strategy requires knowledge of your industry, knowledge of the principles of competitive advantage and then the strategy and funding to take forward your intent. It's hard, but doable. Good luck!
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