How much profit can used car dealer make.From buying a car from the aution.On cheaps cars?

Question

I"m trying to become a license car dealer.I was wondering how much would a car cost. At the auction for cheaps cars.Then how much can I sell it @ the car lot.I'm just wondering how much profit I can make.

Answer 1

Buying and selling cars at low volume like you are talking about can be profitable if done right.

A car with high miles, bad brakes, torn interior, bad paint, minor engine problems for example will go cheap at the auction. If you can fix these minor imperfections yourself of know somebody who can fix them cheaply then you will maximize your profits.

The best cars to concentrate on are the cars that will sell for less than $2500. Cash cars for people who can't get financed or just want a inexpensive decent ride will be looking for.

So you go to the auction and buy a car that has bad paint and needs brakes for $800. Take it back to your shop, repaint it for $300, replace the brakes for $150 in parts and then clean it up real good for $50. Now you've got a good looking car with no mechanical problems that you can easily sell for $2300. That's a cool $1000 profit.

But if you try to buy a good looking car with no mechanical problems you'll pay $1900 for it at auction, you'll still need to clean it up and then you'll still be selling a $2300 car and only making $400 profit.

In other words, the profit isn't in the buying and selling, it's in the reconditioning. If you can do that cheaply, you'll keep your profit margins high.

Answer 2

It's a very competitive business out there. It's a matter of how little you are willing to make. Not every dealer out there makes a $1000 + avg on cheap cars. I'd say that if you are selling cheap cars($3000) you should be happy to get $500avg net, net.
The problem is too many dealers and wholesalers with that mafs and afc money. These guys are doing it for $100-200 per car because it isn't their own money.
If you are looking at sale prices in internet ads and such, be aware that those cars are not sold. That is asking prices. You'll go to the auction and you'll see how much a nice car brings and it'll scare you. you need to compare with the cars that have sold.
good luck

Answer 3

At most car dealerships, the used car department earns far more profit, per car, than the new car department. You can easily make $4,000 gross profit per car if you can buy them cheap enough. In most cases, that means buying them from auction. Auction cars are often repos or low quality trade-ins that car dealers don't want on their lots. Be careful. You really have to know what cars are worth, or you'll end up paying too much and not making any money.

Answer 4

See that down payment on the windshield? that is what you would want to pay for the car at auction. Financing people with questionable credit is where the money is. You also insure the car against loss and charge that to the payments. There is money to be made but the amount you have to put on the lot is huge. As part of a business plan you finance the cars sitting out there and you have to turn over inventory often to keep the front row ready cars selling. Mechanical nightmares law suits and a whole host of problems await you. People who don't want to pay after the down payment. Rule #1 miss the first payment customer really did not want to pay for the car anyway. So be strong and that missed Friday payment = Sunday morning Repossession. Own a tow truck and bullet proof jacket? It is a lot harder than most people think to make money on used cars. Rule #2 people don't get rid of cars that are running perfectly they tend to play down the problems.

Answer 5

The way I understand it, bidding starts at the cost of towing and storage of a confiscated car. Then your selling price starts at the Kelly Blue Book value and can go as high as the market will bear. As long as you make a bit of money on each car, you're still in the game and bound to get better with time.