“This is a guest post by a guy that I meet while I was working in Texas, He has worked at this so he really does know what he is talking about when it comes to making money at this. ”
Buying and selling cars can either be an extremely lucrative side business or quickly turn into a money pit. There is a fine line between making a large amount of money “flipping cars” or losing your shirt on every transaction you make. The difference lies in the details and what can seem insignificant can really cost you in the long run. Here are some suggestions for successfully buying and selling cars so that you can make money.
Do Not Be In A Rush
This is the first lesson I had to learn when I was engaged in this business. I am an impulsive person by nature and was quick to jump on what seemed like good deals at the time. This trait cost me thousands at first.
Whenever I made quick decisions I paid for it. No matter if I bought a car at an auction or from a personal individual I had to learn to never be in a rush. Good deals will ALWAYS be there and impulsive purchases always turned out bad several hours down the line when I found something major was wrong with the car I just bought. Instead, think about the purchase you are about to make and get several opinions about it.
Check Under The Hood
I quickly learned that appearances can be deceiving. A nice looking car that looks in perfect shape might have an expensive mechanical problem underneath the hood that the owner is not currently disclosing. To be fair, he or she might not know about the problem. For this reason it is a good idea to let a mechanic check out the car before you buy it.
After I had to spend a large sum of money fixing one costly repair I got into the habit of paying a mechanic $50 to do a used car inspection on every vehicle I was serious about buying. That might seem expensive but when you buy a vehicle and then find out later that you have to spend another $600 to fix the timing belt then that figure becomes really cheap.
Little things add up. There is a good chance you will have to make some significant repairs to any used car you buy. They are labeled “used” for a reason and parts break down. However, you want to know what is going to break down or what has already broken down before you buy this vehicle. This way, you can take off what the repair will cost you off the total purchase price.
Know And Consider Its Low Value
This seemingly insignificant detail cost me thousands of unnecessary dollars over the three years I was flipping cars for profit. It was not until the third vehicle I figured this out and made the necessary adjustments.
When I was looking at the value of a car I would always check NADA or Kelly’s Blue Book. Sounds smart enough, right? I did not know that these values are subjunctive and that you have to not only make your purchase based on the low resell value but also take $1,000 off that (KBB and NADA will usually give you three amounts: high, medium or low). You must consider the worst case scenario when making the decision on whether you can make money from a car purchase.
If a vehicle’s low resell value is $5,000 then you might have to sell it at $4,000-$4,500 if you do not want to sit on it for several months. In this business you need to be able to turn money quickly. I always hated when I could not sell a car within two weeks of buying it.
Sure Kelly’s Blue Book and NADA might say you can get $5,000-$6,500 for it but that might not be what the local market can bear.
The current economy and demand influences how much you can sell a car or truck for. Any car or trucks that runs well will eventually sell but you might have to wait a long time to get “high blue book,” if that is what you have based your profit on.
Think About A Car’s Demand
You need to factor in the demand as well. Currently, Jetta 1.9 TDIs are in high demand. The public loves how these vehicles look and they love the fact that they get over 40 miles per gallon. If you were to get a good deal on one then there will be a good chance you can resell it quick. Honda Accords and Honda Civics are selling really well right now.
Think about the demand of a specific vehicle. Trucks and SUVs are harder to sell and you need to spend more money to get them. Parts and repairs are also more expensive on bigger vehicles.
As I write this gas prices are going up and when that happens the public gets spooked and stops buying larger vehicles. When gas prices go down they buy them with a lot more frequency.
Consider a vehicle’s current demand and strive to get cars and trucks that you can sell quickly and do not have sit on them for six months before you can move them.
These four suggestions were written by Albert Randle of A & L Auto Transport Service, located in Houston, TX. His company specializes in transporting cars and trucks for individuals and dealerships. However, he spent three years buying and selling vehicles and blogs about the subject on various websites including damagedcarsinfo.com.