If you are not an auto dealer with access to ‘Dealer Only ‘ Auto auctions…then you will ask yourself how to find cars to re-sell. You do have some choices….you can get your cars from government/public auctions or Craigslist/Ebay/Facebook MarketPlace/ LetGo, etc In this article I will focus on Craigslist…and in a follow up article I will cover Facebook MarketPlace and others.
When I first started out, I didn’t have access to any auctions. I simply used Craigslist and you can do. Craigslist auto category is divided into two sections. One section for “Dealers” and one for section for “Private” sellers. Ignore the Dealer section and look only in Private sellers category. It is here where you will find the best financial deals. The idea is to look for undervalued cars, cars that people want or need to sell fast. I call these distressed sellers. They need to sell their car ..because their moving, need some quick cash, brought a new one, estate sale, ..etc etc.
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You will have cars that are listed as “needs a little work”. These cars you should only look at if you can bring a mechanic with you (or you may be a mechanic yourself). Yes, you will find some gems… but my advice is to keep away from them if you don’t have the skill to sift the junk and find the gems. I’m not mechanically inclined, so I only search for distressed sells without the mechanical problems You can even do a search on Craigslist. Go to the auto section and do a search for these terms :
“Must sell”
“Sacrifice”
“ Or best offer”
“Priced for quick sale”
“Needs a little work”
Note: if you look at cars that need “a little work”..its only because you are a mechanic or have one that will go with you to see the cars…to make sure that you are not buying junk.
So anyway, you want to do this every day…scan thru the listings and set your targets on 5 or 6 cars that look promising in local area.
Make arrangements to see the car…and be sure that you bring cash. You will always have extra leverage with cash. Also note that the price listed in the ad has to be your starting point for negotiations. Let’s look at an example.
You have $3,000 to buy a vehicle to re-sell. You like Hondas and Toyotas…so that is what you look for. You see a Honda Civic listed for $2,800 needs a little work. The Craigslist ad says car needs a new bumper and radio replaced. Looks promising. First thing you have to do is discern (research) how much is this car worth in “Good Condition”. Then you need to calculate the “Street Value”. I define the street value as the midpoint between the highest and lowest sale prices for that car…. I usually check 2 or 3 sources to come up with the value of a car. The street value is the price you have to target if you want to sell your car quick (less than 30 days). Ok, so let’s go back to our Honda Civic. You calculate the street value to be $4,200 – $4,500. So far the car is looking like a good candidate.
Next you have to ascertain how much it will cost you to fix the car and get it to “Good Condition” for sale. Your mechanic says no problem, he can replace the bumper and radio for $350. Now you are getting excited. You can make a profit on this car. SO you go back to your seller and offer $2,500 cash for the Honda. The price listed is always your started point for haggling. I don’t care how pretty the car is looking..never pay the full asking price. Walk away. Have that vibration on you like you don’t care about the car…you can take it or leave it. Once you approach every purchase like this, you will always get the better (lower) prices. You have to learn how to feel your way with this. Buying good cars from distressed sellers is one way to source your vehicles. This is a little tricky at first but you will get the hang of it. Never buy something that doesn’t feel right. If you are savy enough you can draw up an agreement that says gives you 3 days (72 hours) in which to return the car if it is deemed to have some large unforeseeable mechanical problem. Most people will be agreeable to this. I have done it myself on many occasions. If the seller balks…then take that as a sign that there is some hidden problem that they are hiding. Walk away. There are tons of cars online for sale. There is no lack…only abundance.
Ok…so we got our first car …a honda civic which we brought for $2,500 and needs approximately $350-$400 in work to get to “Good Condition”. This brings us to $3,000 in costs for inventory. Factor in another $100 for sales ads …and you can expect to make about $1,000 on this vehicle.
Now a lesson to learn is never cut yourself short. The research has to be accurate. When you are checking on the price of a car, equipment trim levels, engine size and type, etc . all play a part in the valuation of a car. When in doubt, always value it lower. When you are looking at whether to buy a car or not, look at the gap between your total cost to acquire the car (including mechanic costs, sales costs, prep detail, etc)… and the lowest price point of the Street Value. If you don’t have at least $1,200 gap there…then don’t bother. Look for another car to invest in.
If you want a more reliable source for your vehicles, contact me to get your auto dealer license based on Adesa or Manheim auto auction. Adesa and Manheim run the largest Dealer Only Private Auctions in the country. Most of these vehicles are from “off lease”, corporate fleets, and rentals.