Question for the car dealers out there

[Sneds]

As some of you may or may not know, I am at university studying accountancy. Now I was looking to do a project which basically consists of buying maybe 2 or 3 cars and selling them on.

However, I don't really have any experience in this and I was wondering if anybody had some advice for me. One thing I don't really understand is ownership of the cars. If I am buying a car with the sole intention of selling it again, is there a way that it wouldn't come up as or extra owner?

All advice gratefully received. x

 

[USER1999]

A good way to lose money if you don't know what you are doing. A mate of mine bought a Golf GTI for £1500, and having spent £2000 on it, then sold it on for £600.

2nd hand cars can be a dodgy business.

 

[AuburnWarrior]

Get yourself to a.n.other main dealership and ask to see their part exchange models. You should be able to pick some of them up for as little as £1. With a bit of TLC you should be able to sell them on for a handsome profit.

A guy did this recently - he wanted to be able to buy a brand new car from a £1 outlet. He did the above - went to a main dealer and bought a part ex for £1 - did it up - sold it - used the money to buy a better car - did it up - etc, etc until he had the money to buy a brand new Nissan Micra. It took him 8 cars to get to the new one I believe.

You will need to know a bit about cars and the second hand market otherwise you can come a cropper...

 

[Robobum]

Get yourself to a.n.other main dealership and ask to see their part exchange models. You should be able to pick some of them up for as little as £1. With a bit of TLC you should be able to sell them on for a handsome profit.

A guy did this recently - he wanted to be able to buy a brand new car from a £1 outlet. He did the above - went to a main dealer and bought a part ex for £1 - did it up - sold it - used the money to buy a better car - did it up - etc, etc until he had the money to buy a brand new Nissan Micra. It took him 8 cars to get to the new one I believe.

You will need to know a bit about cars and the second hand market otherwise you can come a cropper...

So he spent all that time and effort buying and doing up cars to eventually buy a brand new Micra which is also worth £1

 

[Sneds]

I don't really intend to do anything to the cars apart from very very superficial maintaince. It's more of an experiement really, and profit isn't of great importance, although too big a cost isn't really ideal. x

 

[Smiffy]

Get yourself to a.n.other main dealership and ask to see their part exchange models. You should be able to pick some of them up for as little as £1.

I've been in the motor trade (selling) for 24 years and have yet to see a main dealership sell a part exchange for £1.00.
Would not be worth the time and effort and most main dealerships send their part ex's to the auctions now. Avoids litigation in the event that you drove an old wreck off their forecourt, the brakes failed and you ploughed into a bus stop seriously injuring somebody.
Despite them selling the car to you on a "trade sale" basis, the onus would still be on them in the eyes of the law.

PS I'll answer the original question in more depth this evening when the boss isn't looking...

 

[Timh27]

My advice would be a trip to the local car auction. I have a mate whos been doing that for years and you can get some bargains there.

 

[Lump]

This is a reply off a car forum i frequent, I aplogise for the long post but he really does know his stuff. This is based on a 5k car and the guy becoming a small one man dealer:

So that's an "asking" price of £5k - no guarantee whatsoever it'll sell for that. people always want something off/thrown in. Just because the buyer gets it free - doesn't mean it costs the dealer the same.

That aside, there's an £1,150 margin there. A mighty 30% of capital invested.

So, out of that £1,150, one must pay VAT at 3/23 of the gross margin: £150
One is obliged to have the car at the least safety-checked (an MoT will suffice as a minimal level of mechanical inspection) so that's £54
You'll need some fuel to get it home (the light WILL be on), do a couple of test drives and leave about 1/4 of a tank in so as not to appear a complete skinflint. So call that £30
As a dealer, one must provide a warranty. That can either be self underwritten (basically cross your fingers for 90 days and hope you don't have to stump up for anything) Providing a reasonable level of third party cover for three months on such a car is another £150
Having sorted a few in my time a BMW engine management light, sorted properly (not just the bulb removed) is never less than £400.
You need to valet it, even doing it yourself takes time & materials, a decent valet somewhere is £50.
You need to advertise it, say PH, AT & ebay. That's getting on for another £100.
It takes time and a favour or two to get the car back to your home/premises say £20 to a mate.
Storage doesn't come free usually once you have a dozen cars hanging around. It takes your time to get a car from your place to your friendly technician MoT station, bodyshop, dealership etc.

So without allowing for auction fees, storage, any bodywork or mechanical preparation, "throwing in" six months' tax, a set of mats, a second key as quite often cars of this age only have one, doing the next service for the customer if it's due imminently, the costs of all the calls you will make, negotiation room, making an over-allowance for a PX, placing zero value on your own time etc , all that has cost you £954 of your original £1,150.

So you're down to £196 of potential net profit, a 5% net return - before you've even talked about a deal with a buyer. Don't underestimate the sheer amount of graft required of you (for free) before you've even picked up the phone to the first enquiry. Let's say that first enquiry has a deep desire to own your car at the asking price. You have made less than £200. Which if you're a limited company of which you're a director and you choose to pay yourself the lot, will be subject to some 20% Corporation Tax (£40) - leaving £160 to pay yourself, 13% Employers' NI (£21), 11% Personal NI (£18) and even paying yourself not a lot (as most of us traders are presently, if we're paying ourselves at all) 20% Income Tax (£32), your original £1,150 "profit" has become...

£89 in your pocket. Divide that by the hours you will expend (bear in mind how many of those £89s you'll need to pay your bills per month and therefore how many cars you need to turn over per month) in sourcing, preparing, marketing, selling, delivering, administering and accounting (as you'll need to pay one of those a couple of grand a year) and a few £ for the legal stuff in registering a company. The rigmarole you need to go through to be registered with DVLA to supply number plates, have an HPI account, CAP & Glass's subscriptions, a fax machine/line (you WILL need one), traders, public liability & employer's liability insurance (if you have people doing your valeting/mechanical prep for you), obtain trade plates, pay for your business bank account, time & cost of setting up a decent website etc. etc and it's quite easy to say how you'll be working 80+ hours a week for sub minimum wage, if any at all and you have to ask yourself, is it all worth it? if you make a few £ and expand to premises, you can look forward to having to make £1k a week just to open the doors. Even from home and doing it properly, you'll need about £50k to even make thinking about it make sense.

 

[AuburnWarrior]

Get yourself to a.n.other main dealership and ask to see their part exchange models. You should be able to pick some of them up for as little as £1.

I've been in the motor trade (selling) for 24 years and have yet to see a main dealership sell a part exchange for £1.00.
Would not be worth the time and effort and most main dealerships send their part ex's to the auctions now. Avoids litigation in the event that you drove an old wreck off their forecourt, the brakes failed and you ploughed into a bus stop seriously injuring somebody.
Despite them selling the car to you on a "trade sale" basis, the onus would still be on them in the eyes of the law.

PS I'll answer the original question in more depth this evening when the boss isn't looking...

That geezer off the TV - Discovery channel I think - he always shows how to buy cars from main dealers for £1. Is he lying to us?? The swine!!

 

[Smiffy]

That geezer off the TV - Discovery channel I think - he always shows how to buy cars from main dealers for £1. Is he lying to us?? The swine!!

I can assure you of one thing....

If you have 10 main dealers in your area, visit every single one of them and ask for the sales manager.
When he comes out, tell him you want to buy his old £1.00 part exchanges.
The one thing I can guarantee you.

You will have 10 sales managers of main dealerships in your area taking the piss out of you for the rest of the day. Maybe even the rest of the week.
Trust me.
I've got a crap swing but know what I'm talking about here.

 

[AuburnWarrior]

That geezer off the TV - Discovery channel I think - he always shows how to buy cars from main dealers for £1. Is he lying to us?? The swine!!

I can assure you of one thing....

If you have 10 main dealers in your area, visit every single one of them and ask for the sales manager.
When he comes out, tell him you want to buy his old £1.00 part exchanges.
The one thing I can guarantee you.

You will have 10 sales managers of main dealerships in your area taking the piss out of you for the rest of the day. Maybe even the rest of the week.
Trust me.
I've got a crap swing but know what I'm talking about here.

I hate that man off the TV now!! I shall boycott his shows in protest!!

 

[RGDave]

I've bought cars from auctions and t.b.h. the chances of getting lucky are fairly slim on cheap cars.
e.g. buy a car for £2000 that would be on sale privately for £2500 and £3000 at a back-street dealer. Chances are, it'll need some work and if you choose not to do anything with it other than wash and wax, soon enough you'll have a big ugly bloke on your door saying you sold him a motor with dodgy brakes or tyres or a million other things.
I paid £2k for a ford and then spent at least £600 putting things right. I considered myself lucky. I could've bought a private one for £2.5k and it would still have needed a clutch/cambelt, a sensor and brake service.....

The best buys are newer cars, quite often you'll get one with a full service book and recent (ish) work from a main dealer. But you'd need to invest some serious cash.

As for picking up stuff for pennies, well I've never managed to get a P/X car off anyone. I bought a car once for £1 off a mate and sold it a few months down the line for £350 (which was about right). Sadly, I bumped into the new owner of it about a year later and discovered he'd bought it for £600 off some geezer.......about 5 owners later.

Mugs game....unless you know what you're doing.

 

[Sneds]

Hmmm ok, thanks for all the comments much appreciated. Back to the drawing board it seems x