Used car lot idea

Hey guys, I have this dream of a business. Hypothetical of course.

I'd love to own a used car lot where I sell cars and motorcycles that may not be special, but are dead stock and mint, at a fair price and offering a warranty. Ideally there would be a competent shop to back it up. Take your car to chance your oil or rebuild your engine with us. A shop that can do anything. Maybe offer finance. It would be cool to offer OEM+ cars as well (cars that are slightly modified, say upgraded suspension or something).

How would you like to be able to buy an MKIV Jetta GLX in perfect condition, regardless of miles, with a one year warranty? Or a B13 Nissan Sentra?

An old turbo Spirit or Shadow? A '99 Explorer that you know has been thoroughly checked and won't let you down? Basically buying a new old car. No, no exotics and super rare cars, just a good dependable car for that first time owner or someone who can't afford a new car. Or someone who would rather drive a "new" 325i E46 rather than a Nissan Versa.

Of course there would be the usual "nice" car or classic around, maybe an M3 or Porsche every now and then, a classic Mustang, whatever.

Don't tell me it would be super expensive and difficult to set up, this is a dream. I want to know if you would be interested in these cars.

I'm guessing they would go for 40% over similar used cars.

Excellent service would be a priority to make customers happy, like I would like to be treated. Just here to take a look without any interest in buying whatsoever? That's fine, take a look, start the engine. Have a coke or a glass of water while your at it, it's on us.

Took your car to service? Take a loaner home. Maybe having a couple of E46's as loaners.

Am I on crack?

Just to clarify, I would buy cars that are in very good condition so it's cheaper to "restore them". Just rebuild crucial elements to reliability like cooling systems and what not.

On crack? Yes, indeed. No ready supply of product, small, weak market. Warranty on a decade old VW is another level of insanity that I won't even approach.

Bankruptcy and ruin...

this is basically what sellers like DENWERKS do on bring a trailer

Love the dream and +1 on preferring to own "new" older cars, but for me anyway like 80% of the fun is buying a rougher car on the cheap and bringing it back to life "wif me own too hans".

This is what CNC motors out of southern CA does for the ultra-high end market. I've walked through their showroom, and every car is basically a time capsule.

I imagined this is not a novelty in the US, but I live in Mexico and is completely unheard of. My dad bought a mint Explorer XLT from '99. Leather looks new, shifts smoothly and all. $1500 USD for it. Selling it for 3k after an extensive maintenance wouldn't be too crazy and surely someone would be willing to pay.

Thanks for your opinion guys.

In reply to Streetwiseguy:

Most of my ideas are another level of insanity haha

Most used dealers need large markups or sky high financing. Where's your large margins when two weeks of no selling happens?

In reply to Datsun310Guy:

Hey, I said fair prices, not cheap. I sell high end furniture and this happens all the time. A month without sales and then you get an order for 20k haha

The main problem is not offering a one year warranty, but offering a one year warranty that the customer actually trusts. There are so many aftermarket warranties out there that aren't worth the paper they're printed on that I suspect buyers may be suspicious there, giving you a hard time selling the value of the warranty. This is a sort of reputation that would have to be earned.

The types or cars you are describing typically require you to cast a broader net to find an audience, so not sure how many people would benefit from your warranty if they end up being more than an hour or so from your location.

I always wondered if you had a fixed profit margin for each car and you clearly communicated that, would you get more customers to your lot? So you show what you bought it for at the auction, what you spent to get it in good shape, and clearly list your ~$500 (or whatever, could even be a %) "profit/fee", would people appreciate that? Full disclosure/clarity.

Or is it too ingrained to haggle and they would still try to negotiate anyways. I guess if it worked it would probably be getting done already, but I know I've never seen it.

I'd assume your profit margin would be extremely low, if any, dealing with "common" cars, regardless of how clean and fixed up they may be. Take a trade-in that has an issue you weren't expecting or multiple issues pop-up during your ownership and you could be screwed for a month or more.

In order to make anything on cars like that, you'd have to price them higher than the typical car like that is going for in that area, but then it's put in to a different class of cars that are typically newer and/or nicer to begin with. The majority of people will typically go for the newer/nicer car within the same price range as an older car.

Then as previously mentioned, the haggling issue. Being a small-time used car dealer, people will expect to haggle. The only way I see by-passing this is going the Car-Max route of selling the car at a fixed amount, ensuring you maintain some sort of a decent profit margin.

The closest thing to that I've heard of are the places that specialize in one vehicle that goes for stupid money in good condition, old Grand Wagoneers, VW camper vans, etc. I doubt there's any money in what you're proposing, even going back father than the bottom of the depreciation curve your basic transportation type stuff typically isn't worth much.

Where would you buy these new-old cars and why wont the sellers ask 40% over beat up examples?

Would I spend 40% above market value for any given car just to get a 1-year warranty good at only one location in the country? No, I would not.

Technically, Driven, he's proposing what is essentially a fully refurbished car that comes with a 1-yr warranty, vs. just selling a warranty.

Speaking for myself, I would very likely fall victim to my cheap bastard nature and avoid the 40% premium; choosing instead to nickel and dime myself to death.

Then again, going to a place that had a nice MKI GTi instead of something ratty and "only needs a fuel pump" has merit.

The idea in and of itself isn't terrible. The challenge would be that you would have to be an expert on everything you sell. The guys selling one or two vehicles over and over (like the Wagoneer or VW folks mentioned earlier), already know the market, already know the cars inside and out, know what is trouble and what is cheap and easy to fix, have a grip of mechanics who are fast and cheap because all they do is work on VW Busses or similar, have lines on all the parts, scour Rock Auto for closeouts and buy 100 sets of rear brake shoes for $2 each because they know they will chew them up, etc.

If I was a car dealer in Mexico, I would focus on selling reconditioned cars the US never got into Texas or your most convenient American border, already with all the proper import paperwork filled out and ready to go to a US buyer. Stuff like the Ramcharger, 4 door Ranger trucks, Chrysler Phantom, 4 cyl Turbo Stratus, etc. Smaller market, but easier to control.

Crash Enburn wrote: Technically, Driven, he's proposing what is essentially a fully refurbished car that comes with a 1-yr warranty, vs. just selling a warranty.

If the price is 40% more than buying a similarly well maintained or "fully refurbished" one private party, which is how I read "40% over similar used cars", then it's still just paying for a (local) 1-year warranty.

Would work if you could get Edd China to be your mechanic

I think it's a cool idea--I'd love to buy a mint last-gen Prelude SH, for instance--but I think you'd have a really hard time making money at it.

In reply to Crash Enburn:

Exactly. I'm not talking about buying a well maintained car and flipping it for 40% more. I'm talking about taking a car that is already in good shape, fixing it more and selling it for a profit. The 40% markup also includes being treated as a human being at the dealership, having someone pick you up in a tow truck if you're stranded and getting a loaner while your car gets fixed under warranty. I mean, instead of a 5k Jetta you would be buying a 7k Jetta with all the advantages I mentioned, way more than an aftermarket warranty. Which, in any case, we don't have in Mexico :(

PS You seriously didn't get RamChargers in the US??

Ovid_and_Flem wrote: Would work if you could get Edd China to be your mechanic

Especially since he seemed to work for free!

The people who are used to driving old cars are usually used to wrenching on them. People who are dependent upon warranties are usually buying new / CPO.

I think there is a market for buying <$10k rust-free vehicles in Atlanta and reselling them in the North. Apparently you can't buy a 5+ year old vehicle up there that isn't rotten, and people are unwilling to travel to buy them.

FuzzWuzzy wrote: Then as previously mentioned, the haggling issue. Being a small-time used car dealer, people will expect to haggle. The only way I see by-passing this is going the Car-Max route of selling the car at a fixed amount, ensuring you maintain some sort of a decent profit margin.

This business model is an epidemic in the car world IMO. Regardless of dealer or private party, unless your price is already very, very good, if you refuse to negotiate on the price, I walk away no matter how much I want the car.