If you could buy a used car this way, would you?
March 8, 2010 4:19 PM Subscribe
If you could buy a used car this way, would you?
I’m thinking about starting a business selling used cars in a new way and want to see what kind of reaction my fellow Mefites have to my idea.
First some background information.
Car dealerships buy most of their used cars at various auctions around the country. The dealership then “books in” each vehicle at a price based loosely on what they paid for the vehicle. This is the price that the dealership “owns” the car for and becomes the basis for the retail price that the customer sees and is the cost that the dealership uses to negotiate the sale of that vehicle. What most consumers, used car salespeople, and even some used car managers don’t know is that the price they think the dealership owns the car for often has little to do with what they paid for the car at the auction.
If, for instance, there is a car that normally sells at auction for $12,000 but the dealership manages to buy it for $10,000, they will book it in for $12,000, price it at $13,999 and sell it for $13,000. The salesperson gets paid 30% of the $1,000 gross, the sales manager gets a little chunk and the dealership keeps the rest. As far as customer and salespeople are concerned, the dealership just made a very modest $700 (roughly) on the car deal ($1,000 gross less the salesperson’s 30% commission). In reality, they just made $2,700 of which $2,000 goes straight to the owners.
Basically I want to be able to bypass that and order used cars for customers and be FAR more upfront about what I’m making on each deal.
Here is my plan. The various used car auction houses have now become very sophisticated and consolidated to the point where finding specific vehicles are easy to find almost to order. I would run a small office. A customer would contact me and almost certainly meet me in person and they would let me know what kind of car they would like to buy. It would be assumed at this point that the customer has done all of their research and test driving and are ready to buy a car. I can take as much or as little detail as the customer wants. If the customer has to have a specific color, equipment, price, mileage, year, or something, I can find that. However, since used cars are not built to order, the more flexible the customer is, the fast I can locate a car. Once I have all the details, the customer would give me a $1,000 deposit and sign a contract in effect stating that I’m going to locate a car for them and once I find and buy the car, the customer is obligated to pay for it or they forfeit their deposit. If, after one/three/six months (the time period might change based on feedback or the customer), I haven’t located a car that works for them, the customer gets the deposit back or can ask me to keep trying. Either way, if I find the car the customer wants, they must buy it and if I don’t they get their money back. Cars that are coming up for auction get listed in a searchable database about one week beforehand so if I think I’ve found a car that will work but it isn’t quite the right color or doesn’t have exactly the equipment they wanted I can call the customer and ask. The customer is basically buying the car sight-unseen but I can access condition reports (example here link) that give highly detailed information about the cars condition. I also have over 20 years of experience in selling used cars and buying them at the auction so I can tell customers what work might need to be done and give an estimate on what it should cost (new tires, new brakes, etc) as well as what price I think it would make sense to buy a specific vehicle. At the initial meeting, I would pull up an auction report that shows how much that car should sell for at the auction based on data from previous auctions.
For this service I only charge a fee ranging from 9.5% on something with a purchase price of $5,000 or less up to 3.9% on something $40,000 or more. My fee would scale linearly between those two points and the customer pays the fee to get the car delivered at cost as well as all the other relevant fees charged by the state (title fee, sales tax, etc). The only profit I get is the percentage based fee.
In the example I used above, I would buy the car for $10,000 and charge about 8.7% or $870. I would not be able to provide financing but should be able to refer customers to some good banks that will offer competitive rates and I wouldn't be able to offer any of the traditional add-ons that get offered in the finance office (gap coverage, service contracts, etc), otherwise, the transaction would be similar to what normally happens at a dealership in that I would take care of the title-work and the other associated paperwork. It might cost as much as $250 to transport the car so the customer would end up paying $11,120 instead of $13,000 and, rather than traveling all over the place hoping to get the right car, got exactly the car they want and had much more control over the details.
It would be mostly newer, used cars so I wouldn’t really have to worry about getting a lemon and they would often still be covered under the manufacturer warranty. There would be no haggling and no mystery about how much things cost or where money is going as I would show invoices to the customer. By its nature, there is no pressure since we wouldn't be talking unless the customer is ready to buy.
I think that covers everything (and thanks for sticking with me thus far) but if I'm missing anything or there is anything I've missed, just let me know.
So, if you could order a used car and buy it cheaper than otherwise possible, would you be willing to buy a used car this way? If not, why not and what might change your mind?
I’m thinking about starting a business selling used cars in a new way and want to see what kind of reaction my fellow Mefites have to my idea.
First some background information.
Car dealerships buy most of their used cars at various auctions around the country. The dealership then “books in” each vehicle at a price based loosely on what they paid for the vehicle. This is the price that the dealership “owns” the car for and becomes the basis for the retail price that the customer sees and is the cost that the dealership uses to negotiate the sale of that vehicle. What most consumers, used car salespeople, and even some used car managers don’t know is that the price they think the dealership owns the car for often has little to do with what they paid for the car at the auction.
If, for instance, there is a car that normally sells at auction for $12,000 but the dealership manages to buy it for $10,000, they will book it in for $12,000, price it at $13,999 and sell it for $13,000. The salesperson gets paid 30% of the $1,000 gross, the sales manager gets a little chunk and the dealership keeps the rest. As far as customer and salespeople are concerned, the dealership just made a very modest $700 (roughly) on the car deal ($1,000 gross less the salesperson’s 30% commission). In reality, they just made $2,700 of which $2,000 goes straight to the owners.
Basically I want to be able to bypass that and order used cars for customers and be FAR more upfront about what I’m making on each deal.
Here is my plan. The various used car auction houses have now become very sophisticated and consolidated to the point where finding specific vehicles are easy to find almost to order. I would run a small office. A customer would contact me and almost certainly meet me in person and they would let me know what kind of car they would like to buy. It would be assumed at this point that the customer has done all of their research and test driving and are ready to buy a car. I can take as much or as little detail as the customer wants. If the customer has to have a specific color, equipment, price, mileage, year, or something, I can find that. However, since used cars are not built to order, the more flexible the customer is, the fast I can locate a car. Once I have all the details, the customer would give me a $1,000 deposit and sign a contract in effect stating that I’m going to locate a car for them and once I find and buy the car, the customer is obligated to pay for it or they forfeit their deposit. If, after one/three/six months (the time period might change based on feedback or the customer), I haven’t located a car that works for them, the customer gets the deposit back or can ask me to keep trying. Either way, if I find the car the customer wants, they must buy it and if I don’t they get their money back. Cars that are coming up for auction get listed in a searchable database about one week beforehand so if I think I’ve found a car that will work but it isn’t quite the right color or doesn’t have exactly the equipment they wanted I can call the customer and ask. The customer is basically buying the car sight-unseen but I can access condition reports (example here link) that give highly detailed information about the cars condition. I also have over 20 years of experience in selling used cars and buying them at the auction so I can tell customers what work might need to be done and give an estimate on what it should cost (new tires, new brakes, etc) as well as what price I think it would make sense to buy a specific vehicle. At the initial meeting, I would pull up an auction report that shows how much that car should sell for at the auction based on data from previous auctions.
For this service I only charge a fee ranging from 9.5% on something with a purchase price of $5,000 or less up to 3.9% on something $40,000 or more. My fee would scale linearly between those two points and the customer pays the fee to get the car delivered at cost as well as all the other relevant fees charged by the state (title fee, sales tax, etc). The only profit I get is the percentage based fee.
In the example I used above, I would buy the car for $10,000 and charge about 8.7% or $870. I would not be able to provide financing but should be able to refer customers to some good banks that will offer competitive rates and I wouldn't be able to offer any of the traditional add-ons that get offered in the finance office (gap coverage, service contracts, etc), otherwise, the transaction would be similar to what normally happens at a dealership in that I would take care of the title-work and the other associated paperwork. It might cost as much as $250 to transport the car so the customer would end up paying $11,120 instead of $13,000 and, rather than traveling all over the place hoping to get the right car, got exactly the car they want and had much more control over the details.
It would be mostly newer, used cars so I wouldn’t really have to worry about getting a lemon and they would often still be covered under the manufacturer warranty. There would be no haggling and no mystery about how much things cost or where money is going as I would show invoices to the customer. By its nature, there is no pressure since we wouldn't be talking unless the customer is ready to buy.
I think that covers everything (and thanks for sticking with me thus far) but if I'm missing anything or there is anything I've missed, just let me know.
So, if you could order a used car and buy it cheaper than otherwise possible, would you be willing to buy a used car this way? If not, why not and what might change your mind?
Response by poster: The difference is that most of those brokers are matching buyers to cars at dealerships and negotiate the purchase price from the dealership or fleet manager and are, therefore, paying the hidden cost that gets generated between the auction and the car getting booked in at the dealership.
posted by VTX at 4:39 PM on March 8, 2010
posted by VTX at 4:39 PM on March 8, 2010
So you're basically a broker, is that right?
The two major problems that leaps out to me as a hypothetical buyer are the matter of warranty—what if a car isn't covered under its manufacturer warranty?—and the matter of the price. If you're making a percentage of the auction price, what interest do you have in getting the best price at auction for me?
posted by Fiasco da Gama at 4:40 PM on March 8, 2010
The two major problems that leaps out to me as a hypothetical buyer are the matter of warranty—what if a car isn't covered under its manufacturer warranty?—and the matter of the price. If you're making a percentage of the auction price, what interest do you have in getting the best price at auction for me?
posted by Fiasco da Gama at 4:40 PM on March 8, 2010
Response by poster: @ Fiasco: Basically yeah, I'm a broker but instead of locating cars at dealerships and adding a middleman I'm cutting out most of them. I'd be operating in Minnesota where I'm required by law to put a warranty nearly every vehicle I would sell for 60 days or 2,500 miles. I'd be careful enough about the cars that I buy that I can nearly guarantee that I would never have a claim.
My competitive advantage is that I can get cars for less than any dealership by a large margin. While my fee is based on purchase price, it doesn't change a lot based on movements in purchase price of even $2,000. I would be counting on the customer to give me guidance about how important a good deal is to them. Some customers might really want a specific color or mileage while other customers would trade details about the car for a better price, I do whatever is more important to the customer and I can always talk it over with the customer before the auction to determine what they are willing to pay for a specific car compared to market price that I get from the auction. IE: the customer might tell me, "You said the market average for that car is $10,000 if it is exactly what I want, pay no more than $9,500." The details would be in the contract and I would always make the decision that saves the customer money if, for some reason, the customer can't be reached.
posted by VTX at 4:55 PM on March 8, 2010
My competitive advantage is that I can get cars for less than any dealership by a large margin. While my fee is based on purchase price, it doesn't change a lot based on movements in purchase price of even $2,000. I would be counting on the customer to give me guidance about how important a good deal is to them. Some customers might really want a specific color or mileage while other customers would trade details about the car for a better price, I do whatever is more important to the customer and I can always talk it over with the customer before the auction to determine what they are willing to pay for a specific car compared to market price that I get from the auction. IE: the customer might tell me, "You said the market average for that car is $10,000 if it is exactly what I want, pay no more than $9,500." The details would be in the contract and I would always make the decision that saves the customer money if, for some reason, the customer can't be reached.
posted by VTX at 4:55 PM on March 8, 2010
An ex-wife of mine came home one evening in late 1986, extremely enthused about an auto broker she heard about through a colleague. I knew she was looking for a sporty little car, and told her, that because condition meant everything in certain car classes, like sports cars and small runabouts, that she'd be a fool to buy that kind of car through a broker. And, I offered, again, to go with her, and inspect any car she did find, in private sale or dealer channels.
But, those were the heydays of empowered wimin, and she was all that...
She bought a 1985 Fiero a couple days later, from the broker. For $986 less than it sold new, 20 months before, as I discovered later when I found an envelope of slightly faded paperwork (and some "personal items" from the previous owner), looking over the car, in its "trunk," which had copies of the original loan paperwork. I probably snickered a little too much when I handed her that paperwork, and asked her not to call me, ever, when the thing didn't work, and she, being the red headed owner of a red Fiero, never did. And that turkey didn't work, a lot in Massachusetts winters...
Perhaps you'd be the first honest auto broker in North America, but if you aren't giving real warranties (seriously, you think 60 days / 2500 miles on a $40,000 Lex is a warranty?), how does anybody hold your feet to the fire, for subsequent vehicle condition issues? And if somebody is paying upwards of $20,000 for any kind of vehicle, condition is still absolutely paramount, and they'd be a fool, in my opinion to buy, sight unseen. Price isn't everything in car deals, until you're down to $3000 beaters...
posted by paulsc at 5:03 PM on March 8, 2010
But, those were the heydays of empowered wimin, and she was all that...
She bought a 1985 Fiero a couple days later, from the broker. For $986 less than it sold new, 20 months before, as I discovered later when I found an envelope of slightly faded paperwork (and some "personal items" from the previous owner), looking over the car, in its "trunk," which had copies of the original loan paperwork. I probably snickered a little too much when I handed her that paperwork, and asked her not to call me, ever, when the thing didn't work, and she, being the red headed owner of a red Fiero, never did. And that turkey didn't work, a lot in Massachusetts winters...
Perhaps you'd be the first honest auto broker in North America, but if you aren't giving real warranties (seriously, you think 60 days / 2500 miles on a $40,000 Lex is a warranty?), how does anybody hold your feet to the fire, for subsequent vehicle condition issues? And if somebody is paying upwards of $20,000 for any kind of vehicle, condition is still absolutely paramount, and they'd be a fool, in my opinion to buy, sight unseen. Price isn't everything in car deals, until you're down to $3000 beaters...
posted by paulsc at 5:03 PM on March 8, 2010
Response by poster: @Paulsc: If you follow the link you'll see that the condition reports that I'd have access to from the auction are VERY detailed, I would never hesitate to stand behind any sales. A problem with a $40,000 Lexus wouldn't be my problem, it would be a Lexus dealer's problem as that vehicle would be covered under the manufacturer's warranty. Frankly, there is no difference in terms of warranty between what I'd offer and any other used car dealer in the state. The same is true for "holding my feet to the fire" the warranty that you get from any used car dealer isn't any more or less "real" than the one you get from me.
The difference between buying sight unseen and inspecting the car yourself is VERY small and in a lot of way, I'd put more faith in the professionals that inspect the cars at the auction (since, if they miss something that wasn't on the condition report I can hold THEM accountable).
posted by VTX at 5:18 PM on March 8, 2010
The difference between buying sight unseen and inspecting the car yourself is VERY small and in a lot of way, I'd put more faith in the professionals that inspect the cars at the auction (since, if they miss something that wasn't on the condition report I can hold THEM accountable).
posted by VTX at 5:18 PM on March 8, 2010
I bought my last car through a car broker. Here are the steps I went through. They have two major differences to your plan (in bold). I would not have bought from you under your conditions.
1. Rang broker. Told him what vehicle I was after - age range, mileage, features, and price I was willing to pay.
2. Paid a $1000 deposit. Agreed to pay a $500 finders fee (not a percentage) and all associated on-road costs.
3. Broker kept in contact with me about vehicles that were available at the auctions he went to.
4. When broker found a car that may suit my needs, he called either prior to or while at the auction. I was not committed to buying the car until he called and confirmed that the car was what I wanted.
5. When he called with a suitable car, and I said 'yes', the deal was then confirmed. I think I had to send him a text message to that effect immediately after our phone call.
6. He bought the car, arranged for registration transfer, road-worthy certificate, and any repairs required to get the car to pass the road-worthy test.
7. I paid cost price for the repairs.
8. I then paid the balance owing by bank transfer, bank cheque or cash and collected the car.
9. The broker also offered me a cost-price warranty on the car which was something like $300 for a 3 month warranty, $500 for 6 months. It was my choice to take it or not.
Some of the brilliant things about buying from a broker:
- I didn't have a car at the time so I couldn't travel to view suitable vehicles.
- I don't have a lot of mechanical expertise so I couldn't check the car before purchase. He had years of experience and a good reputation.
- I wanted a car that did not come from my coastal area (rust issues). He was able to buy a car that had been traded in at a dealership 500km from the coast. No rust whatsoever.
- The type of car I wanted (a 4x4 diesel single-cab ute with steel tray under 10 years old with low mileage) was one of the most popular types of vehicles to buy in my area. Thus private and dealer sales were beyond my budget. The car he finally bought for me had some cosmetic body damage (which he arranged the repair of at cost price) and was covered in dust when it came up for auction. He got it for $2k less than it should have gone for if it had been cleaned, and had the $400 body repair already done.
Me and my rural friends adore our car brokers. All of my friends now buy this way. It's so convenient, money saving and reliable.
My advice to you:
1. Charge a set fee, not a percentage.
2. Do not make the buyer committed to buying the car until you get their express approval.
3. The contract can be cancelled at any time buy the buyer if you have not yet suggested any cars for them to buy that fit their conditions. If you have offered cars that have been suitable but declined, then an admin fee of 50% of your broker's fee could be deducted ($250 in my situation).
4. Work bloody hard with lots of integrity to develop your reputation. In my experience it is word of mouth, not public advertising, that gets our brokers their business.
posted by Kerasia at 5:21 PM on March 8, 2010 [1 favorite]
1. Rang broker. Told him what vehicle I was after - age range, mileage, features, and price I was willing to pay.
2. Paid a $1000 deposit. Agreed to pay a $500 finders fee (not a percentage) and all associated on-road costs.
3. Broker kept in contact with me about vehicles that were available at the auctions he went to.
4. When broker found a car that may suit my needs, he called either prior to or while at the auction. I was not committed to buying the car until he called and confirmed that the car was what I wanted.
5. When he called with a suitable car, and I said 'yes', the deal was then confirmed. I think I had to send him a text message to that effect immediately after our phone call.
6. He bought the car, arranged for registration transfer, road-worthy certificate, and any repairs required to get the car to pass the road-worthy test.
7. I paid cost price for the repairs.
8. I then paid the balance owing by bank transfer, bank cheque or cash and collected the car.
9. The broker also offered me a cost-price warranty on the car which was something like $300 for a 3 month warranty, $500 for 6 months. It was my choice to take it or not.
Some of the brilliant things about buying from a broker:
- I didn't have a car at the time so I couldn't travel to view suitable vehicles.
- I don't have a lot of mechanical expertise so I couldn't check the car before purchase. He had years of experience and a good reputation.
- I wanted a car that did not come from my coastal area (rust issues). He was able to buy a car that had been traded in at a dealership 500km from the coast. No rust whatsoever.
- The type of car I wanted (a 4x4 diesel single-cab ute with steel tray under 10 years old with low mileage) was one of the most popular types of vehicles to buy in my area. Thus private and dealer sales were beyond my budget. The car he finally bought for me had some cosmetic body damage (which he arranged the repair of at cost price) and was covered in dust when it came up for auction. He got it for $2k less than it should have gone for if it had been cleaned, and had the $400 body repair already done.
Me and my rural friends adore our car brokers. All of my friends now buy this way. It's so convenient, money saving and reliable.
My advice to you:
1. Charge a set fee, not a percentage.
2. Do not make the buyer committed to buying the car until you get their express approval.
3. The contract can be cancelled at any time buy the buyer if you have not yet suggested any cars for them to buy that fit their conditions. If you have offered cars that have been suitable but declined, then an admin fee of 50% of your broker's fee could be deducted ($250 in my situation).
4. Work bloody hard with lots of integrity to develop your reputation. In my experience it is word of mouth, not public advertising, that gets our brokers their business.
posted by Kerasia at 5:21 PM on March 8, 2010 [1 favorite]
"... I would never hesitate to stand behind any sales. A problem with a $40,000 Lexus wouldn't be my problem, it would be a Lexus dealer's problem as that vehicle would be covered under the manufacturer's warranty. ..."
posted by VTX at 8:18 PM on March 8
Good to know, VTX. And OK, I guess, if that's what your customers want to argue, standing in front of the tech rep at some Lexus dealer, with your bill of sale in hand. Emphasis added to what I've quoted from you, by me, of course, for rhetorical effect...
But I wonder, if a $40,000 Lex I bought from you had a bent wheel from being poorly unloaded by an auto transport driver, according to the Lexus dealer, 2 months and 2 days, but only 150 miles after delivery from you, because your customer was in China on a subsequent business trip, are you going to replace it, no charge, for your customer?
posted by paulsc at 5:30 PM on March 8, 2010
posted by VTX at 8:18 PM on March 8
Good to know, VTX. And OK, I guess, if that's what your customers want to argue, standing in front of the tech rep at some Lexus dealer, with your bill of sale in hand. Emphasis added to what I've quoted from you, by me, of course, for rhetorical effect...
But I wonder, if a $40,000 Lex I bought from you had a bent wheel from being poorly unloaded by an auto transport driver, according to the Lexus dealer, 2 months and 2 days, but only 150 miles after delivery from you, because your customer was in China on a subsequent business trip, are you going to replace it, no charge, for your customer?
posted by paulsc at 5:30 PM on March 8, 2010
Response by poster: @Paulsc: Kind of. I would get it replaced but I wouldn't be paying for it, any time situations like this (and they are exceedingly rare) have come up in the past, the transport company has been on the hook for the cost of the repair.
posted by VTX at 5:50 PM on March 8, 2010
posted by VTX at 5:50 PM on March 8, 2010
But, those were the heydays of empowered wimin, and she was all that...
Is it really necessary to employ sexism in telling this story? Does it offer anything useful to the asker? No.
posted by lunasol at 6:24 PM on March 8, 2010 [4 favorites]
Is it really necessary to employ sexism in telling this story? Does it offer anything useful to the asker? No.
posted by lunasol at 6:24 PM on March 8, 2010 [4 favorites]
Here's the thing- good, sellable cars don't end up at auction. Nobody auctions a car if they think they can sell it at retail.
So you are going to have heaps of trouble with lemons and such.
posted by gjc at 6:57 PM on March 8, 2010
So you are going to have heaps of trouble with lemons and such.
posted by gjc at 6:57 PM on March 8, 2010
Here's the thing- good, sellable cars don't end up at auction. Nobody auctions a car if they think they can sell it at retail.
I think that depends car seller involved. Sure a private seller may not do that unless they need the money quick.
In my case, and the other situations I know of with friends, many of the cars bought by brokers at auctions are trade-ins from dealers who don't want the bother of handling 2nd hand cars. They take the trade-in from the new car buyer and then truck a bunch of trade-ins to the auctions to recoup the trade-in amount. It's nothing about the car, per se, it's the priorities of the seller that result in the car ending up at auction.
posted by Kerasia at 7:03 PM on March 8, 2010
I think that depends car seller involved. Sure a private seller may not do that unless they need the money quick.
In my case, and the other situations I know of with friends, many of the cars bought by brokers at auctions are trade-ins from dealers who don't want the bother of handling 2nd hand cars. They take the trade-in from the new car buyer and then truck a bunch of trade-ins to the auctions to recoup the trade-in amount. It's nothing about the car, per se, it's the priorities of the seller that result in the car ending up at auction.
posted by Kerasia at 7:03 PM on March 8, 2010
Hmm, well I bought my second car through an auto broker and it was absolutely a fantastic experience, so to answer your question in general, yes I would absolutely use an auto broker. Would I use your method? That would really depend on whether or not your reputation was any good.
My experience with a broker was through a poker buddy of my dad's, so I knew I wasn't going to get scammed. So, to start out with, you'd really have to work your personal networks and ask people you know to refer business to you. I would rather hunt for my own used car than trust a scammy broker whose reputation I didn't know.
Second point is: how many people want a broker for a newer used car? They know they can go to the (currently hurting) car dealers for a 'certified pre-owned' with a great warranty. When I went to the broker I used, it was because I was close to broke, we were using some creative financing, and he needed to match some specific cost parameters with my desire for a safe, reliable car. As a result, I ended up buying an older (decade old) super reliable economy car---not exactly a two year old Lexus! Admittedly, in my case the guy was doing my dad a favor (and his profit margin on that deal was low) and there are sure to be some well-funded people who just don't want the bother of looking for a car (that's where the need for a stellar reputation comes in, though).
Third, I definitely echo Kerasia about the set fee rather than percentage (you can scale up to make your profit margins work). My dad was a real estate guy, and he made his money on percentage; to put it diplomatically, his customers were not helped by this but he certainly was.
posted by librarylis at 7:18 PM on March 8, 2010
My experience with a broker was through a poker buddy of my dad's, so I knew I wasn't going to get scammed. So, to start out with, you'd really have to work your personal networks and ask people you know to refer business to you. I would rather hunt for my own used car than trust a scammy broker whose reputation I didn't know.
Second point is: how many people want a broker for a newer used car? They know they can go to the (currently hurting) car dealers for a 'certified pre-owned' with a great warranty. When I went to the broker I used, it was because I was close to broke, we were using some creative financing, and he needed to match some specific cost parameters with my desire for a safe, reliable car. As a result, I ended up buying an older (decade old) super reliable economy car---not exactly a two year old Lexus! Admittedly, in my case the guy was doing my dad a favor (and his profit margin on that deal was low) and there are sure to be some well-funded people who just don't want the bother of looking for a car (that's where the need for a stellar reputation comes in, though).
Third, I definitely echo Kerasia about the set fee rather than percentage (you can scale up to make your profit margins work). My dad was a real estate guy, and he made his money on percentage; to put it diplomatically, his customers were not helped by this but he certainly was.
posted by librarylis at 7:18 PM on March 8, 2010
Oops, I forgot point four: I didn't care what kind of warranty I got from my broker. He stood behind his deal, and I think he gave us a 60 day warranty, but it didn't matter to me at all. Again, though, I doubt I'm the typical customer, as I got a super reliable economy car that I still own and that's rarely been to the mechanic; I cared about reliability even more than cost.
posted by librarylis at 7:22 PM on March 8, 2010
posted by librarylis at 7:22 PM on March 8, 2010
Response by poster: Kerasia is right on, if a Honda dealer takes in a Chevy on trade it might cost them a lot in advertising to sell the car to the point where it might make more sense for them to sell it to someone for whom it is easier to sell. Additionally, the vast majority of the inventory that you see on most used car lots are purchased at these same auctions.
I would also add that auctions are the way that most car rental companies and lease companies sell cars when they are done with them.
posted by VTX at 7:23 PM on March 8, 2010
I would also add that auctions are the way that most car rental companies and lease companies sell cars when they are done with them.
posted by VTX at 7:23 PM on March 8, 2010
...auctions are the way that most car rental companies and lease companies sell cars ...
And this is why I'd never buy a car from auction...
posted by hwyengr at 8:26 PM on March 8, 2010
And this is why I'd never buy a car from auction...
posted by hwyengr at 8:26 PM on March 8, 2010
Response by poster: @hwyengr: 1. It isn't like they hide the fact that they are rental returns. If you didn't want one, you can avoid easily. The auction takes great pains to make as much information available about the car as possible.
2. Rental returns are often really good cars to buy. For the most part, the term "drive it like a rental" doesn't really apply to rental cars as most people drive them no differently than they drive their own cars. The rental companies also maintain their fleet meticulously to make sure that they get as much value from them at the auction as possible and minimize their own repair costs. Each of my son's first cars were rental returns and they were both fantastic cars but I've been doing this for 20 years, what do I know?
posted by VTX at 8:49 PM on March 8, 2010
2. Rental returns are often really good cars to buy. For the most part, the term "drive it like a rental" doesn't really apply to rental cars as most people drive them no differently than they drive their own cars. The rental companies also maintain their fleet meticulously to make sure that they get as much value from them at the auction as possible and minimize their own repair costs. Each of my son's first cars were rental returns and they were both fantastic cars but I've been doing this for 20 years, what do I know?
posted by VTX at 8:49 PM on March 8, 2010
Response by poster: Oh, and lease returns are usually in even better condition.
posted by VTX at 8:50 PM on March 8, 2010
posted by VTX at 8:50 PM on March 8, 2010
Don't worry about my opinion, I'm not your target customer. People above have given you good reasons why they would and do use a broker, but none of those apply to me.
I've never bought a used car without my mechanic seeing it. I've followed the manufacturer's break-in suggestions on every new car I've bought. I'm meticulous about maintenance. I simply can't bring myself to purchase a used car without having seen it in the metal and seeing the previous owner's maintenance records, or conversing with the PO. This is how I acquired a car with probably the weakest clutch known to man, the 1992 Ford Taurus SHO, with 107k on the original drivetrain.
So, to answer your original question, I would not buy a used car this way.
posted by hwyengr at 10:00 PM on March 8, 2010
I've never bought a used car without my mechanic seeing it. I've followed the manufacturer's break-in suggestions on every new car I've bought. I'm meticulous about maintenance. I simply can't bring myself to purchase a used car without having seen it in the metal and seeing the previous owner's maintenance records, or conversing with the PO. This is how I acquired a car with probably the weakest clutch known to man, the 1992 Ford Taurus SHO, with 107k on the original drivetrain.
So, to answer your original question, I would not buy a used car this way.
posted by hwyengr at 10:00 PM on March 8, 2010
Sounds to me like you have a subscription to Manheim or something similar, and your business model is that you'll use it to find cars for individuals, rather than dealers only. My advice is to keep it simple -- "For a fee of $X, I will find you the car you are looking for within X many days."
If you want people to do something in a radically different way than they are used to doing it, AND you want to operate in a business sector that (rightly or wrongly) has a reputation for shady business practices, you have to offer a value proposition that is a no-brainer.
For example, if I can give you $500 to go find the car I want, then fine -- go for it. I'd rather do that then spend all my weekends trolling the classifieds or the used car lots.
But if I have to start using a calculator to figure out how much I'm paying you, and you need a spreadsheet to demonstrate to me how you've saved me money, and I need to worry about losing money if you bring me a sorta similar car, but not the exact right car.... well, you're making me think too much and worry too much, and I'm just gonna say thanks, but no thanks.
Find the magic combination of price and convenience that people are willing to pay for, and then build your business from there.
posted by spilon at 6:28 AM on March 9, 2010
If you want people to do something in a radically different way than they are used to doing it, AND you want to operate in a business sector that (rightly or wrongly) has a reputation for shady business practices, you have to offer a value proposition that is a no-brainer.
For example, if I can give you $500 to go find the car I want, then fine -- go for it. I'd rather do that then spend all my weekends trolling the classifieds or the used car lots.
But if I have to start using a calculator to figure out how much I'm paying you, and you need a spreadsheet to demonstrate to me how you've saved me money, and I need to worry about losing money if you bring me a sorta similar car, but not the exact right car.... well, you're making me think too much and worry too much, and I'm just gonna say thanks, but no thanks.
Find the magic combination of price and convenience that people are willing to pay for, and then build your business from there.
posted by spilon at 6:28 AM on March 9, 2010
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posted by dacoit at 4:33 PM on March 8, 2010