How to make a profit in the used car business
If you are looking to make money selling used cars then there is no reason why you can’t turn your love of motoring into a profitable business. Clearly there are risks involved in buying and selling cars so it’s important to do your research to make sure you don’t spend your hard-earned money buying cars which you just can’t sell on for a profit.
If you know a lot about cars and have good customer sales skills then there is no reason why selling used cars couldn’t be a profitable business for you.
Darren from Big Motoring World knows a thing or two about selling used cars. Check out how many cars they have, just to give you an idea – https://www.bigmotoringworld.co.uk/used/cars/ … so we thought, who better to give some advice. Here are Darren’s key areas to consider, which could help to make the sales more successful:
- Only buy cars you can sell for a profit
This might seem obvious but it means that when you make buying decisions, it needs to be done in a logical way with profit in mind. There are some times of the year when people buy cars more than others so you need to know and understand your marketplace. If you are selling convertibles they are more likely to sell in the summer, for example. Keep an eye on the economy as if people are tightening their purse strings, they won’t be looking to shell out on a new car. Timing can be crucial to success.
Also, make sure the cars you are buying don’t require lots of repairs. If you are buying your stock at auction, make sure they are decent cars as the last thing you want to do is spend a fortune doing them up before you can sell them on. It’s all about making the profit.
- Check out online car auctions
If you are looking for stock to sell on, there is a whole lot more opportunity to buy online nowadays with many car auctions out there. You have a chance of coming across bargains which other people won’t spot.
You will still need to visit the car to check it out before buying but using online sites will give you access to a far wider range of stock than if you are restricted to local second-hand car sales in the area where you live.
- Always inspect before you buy
If you come across a car that seems too good to be true, it probably is. Whenever you find a used car which you are tempted to add to your portfolio, run an inspection first as the most popular cars might well have been treated badly by their previous owners and driven hard, so always check out a car first. It might be repairable and still very profitable but if not, you need to walk away.
- Avoid complicated vehicles
You want to keep your used car business simple and make a profit so try to avoid cars which come with a complex and costly interior. Otherwise, a seemingly simple fault could end up with the car back in your forecourt and you out of pocket due to a costly repair bill. Cars with in-built computer systems can end up going wrong and costing a lot more money to fix, than they are worth, so try to keep your cars simple.
- Think bigger
Once you sell your first car, you will have the experience of what it was like to buy, and sell a car so you need to capitalise on that and think bigger to help grow your profits. Set yourself sales targets and if you need to, take someone on part-time to work with you on the sales side, leaving you free to source the cars and grow the business. Don’t limit yourself to what only you can do, think bigger and grow the business. You could employ a mechanic to help repair and maintain the cars you sell, so customers get an additional service. Always look to grow your chance for profits.
You need to let people know that your business is up and running and the kind of cars which you are buying and selling so setting up a marketing campaign including advertising, is essential to help make your used car business profitable.
Look into online advertising on the car auction sites, as well as locally. You need to spread word of mouth as well so explore leaving your business cards with local garages and petrol stations and any other type of joint promotions you can carry out with local businesses.
If you have premises you can put out promotional standing flags to catch the eye of passing motorists, or you could include flyers in local newspapers which are delivered to people’s homes. Whichever marketing techniques you go for, the important thing is to let your potential customers know that you have the right car for them just waiting to be bought.
The average retail net profit in 2018 for selling used cars was $70. The car dealership’s ability to make capital through selling used vehicles is based on various things, starting with the amount of cash the dealer has in it.
- It doesn’t matter if you’re negotiating to purchase a used vehicle from a private party or car dealership. You have to learn some simple concepts that can save you lots of capital. Here are some but a few:
- Arm yourself with factual information on which to base your negotiations and then get the numbers
- Make the perfect opening offer
- Make sure that you also counteroffer
- As you approach an agreement, the salesperson/dealership can complicate the deal by providing you with extras like free maintenance. However, these extras can be difficult to quantify so it’d be better to keep the arrangement simple and stick to the price of the vehicle
- Ink the deal
Well, you have to ensure that you:
- Only sell the vehicles that you can make a profit from
- Check out online car auctions – it can be an opportunity to spot car bargains that other dealers won’t notice
- Avoid complicated vehicles – you want to keep your auto business simple and make a profit. So it would be best if you avoided cars that come with a complex and expensive interior
- Set up a marketing strategy that’ll help you make the profits you want and also reach your target audience easily
For most people, that might be between 10% to 15% of your income. Therefore, if you earn $30,000 a year, that’s going to be a high-mileage used vehicle for $3,000 to $4,500.