By on May 5, 2014

a1

Steven

Love your articles on TTAC. Especially those on auctions, your dealership, and used cars.

I was wondering, do you provide services to buyers looking to buy a specific car? The prices in ATL are much better than the market in New England, to the point where I would be willing to fly down, buy a car and drive it back up. (I also have some friends in ATL anyway.)

If you do please let me know. I’ve been hunting for a decent priced NB Mazda Miata – and in my neck of the woods many are quite over priced.

If not no worries. I’ll continue to enjoy your articles.

Thanks!

Even before I wandered aimlessly around the Internet and found this place, I tried to build a car buying service that would serve the public.

The problem back then was the same problem that exists now. The general public wants to buy “showhorse” cars for “workhorse” prices.

That’s a tough market to serve, and to be frank, I got tired of being jerked around.

a2

 

Corporate customers were willing for me to buy the workhorse so long as it met certain criteria. Before AirTran merged with Southwest, I used to buy their vehicles for the Atlanta market. All I had to do with them is check three simple boxes. White, under 60k miles, and it had to be a Ford. Windstars, Rangers and Tauruses were their primary wants. They paid me cost plus $500, and I was trusted to serve their interest at the sales.

Meanwhile, I ended up dealing with three types of public buyers.

1) The Online Hamlet

This is the guy who sees a great vehicle that fills every single one of their needs and then says, “Let me think about it.” 90+% of the time these customers are just wasting your life’s energy.

2) The Illusionist

These folks always thought that the auctions were loaded with a  cornucopia of cheap and plentiful vehicles. These misguided souls wanted the quivalent of an immaculate five year old Maxima for $5000…. with leather! After showing them the realities of the auction market through the Manheim Market Report, they would write back every once in a blue moon asking me if I had anything. When I did, they became an Online Hamlet.

3) The Extremist

There were two versions of the extremist. Those who wanted me to find a very specific type of vehicle; which was almost always old or rare. They weren’t so bad to deal with because they knew their stuff, understood that old cars aren’t perfect, and could often carry a conversation that went beyond the words, “I, me, mine… gimme! gimme!”

The flip side of that coin were those who had absolutely no care about what I got, because I was buying a car to help them solve a problem. The goodhearted fellow who was purchasing a car for a parent or child who needed a car to drive. Ss for what type of car, it didn’t matter so long as it was white and the size of a Camry.

I would ask these customers what car the person had been driving before, and just buy a newer version of it. Camry drivers got Camrys. Accord drivers got Accords. Volvos begat Volvos.

Which brings me to your unique situation. To be blunt, there are two issues. The first is I wholesale the overwhelming majority of the vehicles i buy
(about 80%) to other dealerships in the metro-Atlanta area.  These customers look at cars as investments. Not a coveted possession or a depreciating asset. I find the cars that can check off all their boxes and move on to the next one.

The second hurdle (more like a brick wall)i s that you are asking me to buy a highly popular and seasonal vehicle during the very worst time of year to buy it. A well-kept Miata in the springtime will get all the money in the world at the auctions. Even an unpopular droptop, such as the Volvo C70 I bought for $1000 last November, will end up selling for about $2700 (less auction fee) during this time of year. I was unfortunate to buy it with a transmission that was going south, but fortunate to buy it at the right times. So I made money on it.

If you want me to buy a vehicle, it’s cost plus $500 and I will only buy a “lemming” these days. Late model cars that are off-lease, a rental, or a repo. A 2012 Mazda 5 Sport, silver with a black/gray interior an 62k miles I’ll try to retail for $12k. But if I bought it for someone who already gave me a 20% non-refundable deposit on the average book value before the sale, they would wind up paying around $10,500.

Late model, less popular cars are worth my buying. A car that I can flip to another dealer that specializes in that type of vehicle? Not so much.

Good luck!

 

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38 Comments on “New or Used : Buy Retail? Sell Wholesale?...”


  • avatar
    87 Morgan

    Assisting people you know in the car buying process is terrible. They ask for advice/assistance, always for the unicorn low mileage garage queen CamCord, Tahoe, sequoia etc that needs to be within five model years hard loaded and below 10k and 4×4 if a SUV.

    • 0 avatar
      Steven Lang

      To be fair, a lot of the issues consumers have stems from a lack of good information about the wholesale markets.

      Then there is also the issue as to whether the public should be required to have an intermediary buy on their behalf through a remarketing channel. I have already made my love for free markets well known around here. But I also think that there is something to be said for keeping non-enthusiasts away from AS/IS and salvage vehicles.

      It’s an uneasy balance, and the legalities involved encourage most auctions to avoid direct public involvement.

      • 0 avatar
        Toad

        Car auctions are fast moving, high volume operations set up to make it easy for professionals to buy and sell vehicles quickly. This is not a place for amateurs. Some of the vehicles will be great, some will have issues, most will be somewhere in between. Car dealers buy in volume and the good cars tends to wash out the bad.

        The average consumer does not know what they are doing in this environment; it is not a retail situation. There is no warranty, no exchanges, no grace period (unless you can prove fraud). You bid, you bought, you own within 30 seconds. That is simply more than most retail customers can handle.

        I understand why auctions don’t want the general public on the premises; it just slows up the auction, creates customer service problems, and invites liability while generating no additional revenue. Who needs the hassle?

        People often want Costco prices with Nordstrom service. It just does not happen.

    • 0 avatar
      sportyaccordy

      Ha! Last summer I was car shopping after being carless for 3 years. I wanted something RWD, 4 seats, under 3200lbs. I wound up in a 350Z lmao. Lot of my car buddies I asked for help were pissed but once I couldn’t find an E36 M3 everything went out the window

  • avatar
    JohnnyFirebird

    Yeah, I fell into the “getting a car from auction for a sorta friend of the dealership” trap once. It’s tough – the car isn’t exactly what they want, and you’re left with a car you didn’t really want in your inventory because they got cold feet.

    I have seen some pretty amazing deals in auctions, especially during the winter. If you’re like me and like ugly / weird cars (especially ugly, weird colours) you can do OK. But even if you’re there, in person, at the auction you’ll have to remind yourself that there will be some recon on these vehicles. Condition reports and all that are great, but they don’t cover everything.

    The cheapest cars I’ve seen have been of the Mazda3 / Sebring / Avenger / Versa class. You’re not going to find a Toyota or Honda for cheap.

    I was stunned that a 2011 Mazda3 hatchback with 40,000 kilometers is only worth about $7000-8000 at the auction. Auto / power group / mags.

    • 0 avatar
      segfault

      I’m guessing from the kilometers designation that you’re in Canada. If so, Mazda’s alleged rust issues probably hurt their resale value pretty bad up there. Despite this, I saw quite a few Mazdas when I was in Quebec a few years back.

      Sebring/Avenger resale is terrible because they are among the least competitive cars in their class.

      Of course, this doesn’t explain the Versa.

  • avatar
    28-Cars-Later

    Two pieces of advice:

    1. Never seek out anything trendy or cool, or anything in demand at the time you search (i.e. convertible in May as Steve points out)

    2. Mileage does not increase the value as much as you’d think in wholesale. Case in point, back in the day a Chrysler dealer was dumping 300Ms along with Dodge product, they sold a silver 04 20K for like mid 14s and three cars later a gold 300M 60K for… 14s. Given the chance you wouldn’t bat an eye at the car with triple the mileage, but in wholesale its just not that simple. So my advice to you is when seeking out cars the most importance thing is *condition* but make your second criteria mileage, because you’re not going to save a kings ransom on the car with 150K vs the one with 80K for a bit more.

  • avatar
    ccd1

    I guess I don’t understand the question being asked. It’s just so easy to scour the entire country for what you want with the internet. Most dealers have internet managers to deal with online traffic. So what is to keep you from buying a car in Atlanta if that area has the prices you want???

    • 0 avatar

      At our Penn dealership we’ve sold cars to folks in Iowa, Georgia, Mass and just about anyone inside that fairly large range. Typically quirky vehicles after they are on the lot awhile like green wranglers and Mustangs off season. The internet works but as said above… In demand vehicles are in demand.

  • avatar
    xflowgolf

    the cost +$500 and 20% expected mandatory deposit seem like they’d ward off the illusionist and the online hamlet.

    That way, you’re never really stuck. If you buy a $10K vehicle with $2K in hand, you can turn around and re-auction the thing presumably for at least $8K, and likely similar money to what you paid.

    It also would weed out the BS’ers by making them put money in up front. I suppose the only “out” you might allow would be refunding that deposite BEFORE a hard date pre-auction in case they found their own vehicle alternate. Otherwise it’s locked up and non-refundable for a closed period.

    I imagine there’s still plenty of room for dispute though. Arguments over condition, price, etc. People can suck sometimes. Getting stuck with an unsaleable unicorn entirely out of your own pocket would not be a desireable position, and I could see why you’d be highly discerning before even considering accepting a “buy on behalf of” type arrangement with a member of the general public.

  • avatar
    olddavid

    Why do any retail? Surely 20% cannot be worth it by any measure.

  • avatar
    seth1065

    To get a Miata now you pay spring markup, you would be better off buying in July in Fla. I have been on and off looking for a miatia for years, but bought a saab vert instead. A great resource is miata.net, they are very helpful and have some decent deals from people selling there. they have offered to look at cars far away for me for nothing ( well a 6 pack ) , I would try that route if I was the OP

  • avatar

    More towards the crux of this article, I’m very VERY wary of buying cars for customers on spec. My favorite are subprime customers that want to order a car, but don’t want me to pull their (poor) credit so I can at least work the rough template of a deal before committing $5-7k of my floorplan to a stupid high-mileage car only they want. Uh…pay your bills first. Sorry.

    I remember one of my ‘orders’ was for a ’13 XC90 Prestige, which I found, and folks actually signed on the line and a lien instruction sheet was sent to me from the credit union before I ever clicked ‘CONFIRM’ on the OVE buy screen.

    I still go find cars for customers, but most of my friends don’t take advantage of it for some reason. They like paying more I suppose. I’m like Steve – $500 over my true end cost (bid + fee + PSI + transport + recon + TTL) and anything you want is yours.

    But please. Deposit first.

  • avatar
    APaGttH

    Steven:

    I’m looking for the following:

    Euro luxury wagon, 6-speed manual, diesel, dark brown, cloth interior, less than 30K miles, dealer maintained with all records in the glove box, lovingly autographed by the president of the Euro luxury brand swearing the work was done. It must get 60 MPG, go 0 to 60 in 4 seconds, and I must be able to drive it into a brick wall at 200 MPH and not only be able to walk away, but maybe, MAYBE replace the front bumper cover. It can’t be over 12 feet long, to ease urban parking, but it must have the interior passenger room of a 7-series and the cargo capacity of a 15-passenger Ford Econoline van.

    I am willing to pay $9,000 for it – FoB on delivery.

    Thank you in advance.

    • 0 avatar
      Drzhivago138

      $9,000?! For that price I demand perfectly-maintained Castaño leather, and it has to be able to last 50,000 miles with no maintenance!

    • 0 avatar
      thirty-three

      I can get one for you no problem. I have a friend in Nigeria who is in the process of getting a similar hard-to-find car for me (I want green, not brown). All I had to do was send him my bank account info so he can transfer the money. If you want me to, I can send him your account details too.

    • 0 avatar
      Helmut Spargel

      I think that if most enthusiasts actually got what they’d wanted it would end up looking something like the Homer, but brown.

    • 0 avatar
      360joules

      Don’t forget the popcorn!

  • avatar
    danio3834

    I try and relegate my buying services to the anti-extremist that Steve mentioned above. The type of person who really can’t deal effectively with the hassle of buying a car, and has loose specifications. Those kinds of people are ideal. You do have to grill them thoroughly to make sure you have all their needs and wants accounted for, but generally they’re pretty easy to tick off. Usually something like, a 4 door sedan similar in size to what I had before. Must have power windows and A/C.

    The extremists are OK to deal with as long as you don’t give them too much rope to hang you with. Once you’ve found “the” car, a downpayment is a good idea.

    The Hamlets are the perennial waste wasters. Let them come to you and don’t expect them to keep any appointments.

  • avatar
    el scotto

    Steven,
    thanks for all of your articles. I think TTAC should let you post your website address at the end of every article you publish. I mean, I’ve got an ad from some crap Chevy dealer on my screen. I’d much rather check out your site and see if I need to fly to ATL.

    • 0 avatar
      Steven Lang

      You can reach me at steve.lang@thetruthaboutcars.com .

      The site has to pay the bills, and I’ve usually opted to make my presence known as a writer.

      Robert Farago and Frank Williams have bought vehicles from me back in the old days. 2008 was a wonderful time to be buying and selling cars for the TTAC faithful. These days, if I buy a car, I’m competing against a lot of funny money and those who have established competitive advantages in the marketplace. They can pay more, which is why I prefer to wholesale.

      The funny thing is, I wasn’t trying to make this write-up an opinion du jour. There are a lot of great articles today that can sow the seeds of discussion. I just wanted folks to know exactly where my pulse was on buying vehicles, and why it’s such an amazingly challenging thing to do. It takes a lot of time and diligence to find (and recondition) the right cars at a marketable price.

  • avatar
    CapVandal

    I don’t really know how people could be clueless about used car prices these days.

    If someone knows exactly what they want, they simply look it up on auto trader or car guru and get an idea of the range of prices the vehicles go for.

    And also just how common or rare the vehicle is. If there are less than an average of 1 per state … it isn’t going to be a common car. If there are a hundred within 15 miles … sure.

    Auto Trader has a lot of FSBO’s … so you know if it is one owner and in a nice suburb, it tends to be more desirable than a city vehicle.

    Carguru seems to be primarily a dealer site. One nice feature is that they show how long a vehicle has been listed.

    I am not suggesting these sites are ideal. But it should temper a buyer’s fantasies about perfect car/ bargain price. Or the realism of finding a rare car in a specific location.

    However, I can see paying $500 simply for the service of having a professional look it over, handle the paperwork, and deliver the car. I have bought maybe 15 cars in my life — and a pro — there is no comparison. It might not matter on a pure vanilla deal in a suburban area where the title is clear and, if it wasn’t serviced, it wasn’t because of money. But anything dicier — I wouldn’t really know.

  • avatar
    turboprius

    I think the car prices could be associated with the huge cost-of-living in the Northeast. In the Atlanta suburbs, a 2500 sq. foot home built in 2000 would probably cost $200,000, while up in the say, Boston, suburbs, it would be more than twice that.

    It’s the urban proximity. That’s why East Paulding has cheaper homes than West Cobb, West Cobb has cheaper homes than East Cobb, and so on. Car prices here depend on dealer, but I haven’t studied car markets outside of Georgia and Alabama enough to know if the cost of living is associated with prices.

    • 0 avatar
      brenschluss

      $400k? I wish.

      Welcome to the million dollar 2500 square foot slab ranch of your dreams.

      http://www.redfin.com/MA/Newton/420-Dudley-Rd-02459/home/11483618

      I’ve never directly compared used car pricing to other areas but would be shocked if they weren’t more expensive in the NE.

  • avatar
    jim brewer

    Don’t know about that. New car prices tend to be pretty cheap in the Boston area as per Truecar.

    There just doesn’t seem to be all that much margin in the business to me. I’m exactly the kind of guy who would hang loose about color and make to get a good deal. But I’m a minority. If the car is an absolute clinker its the middle-man who gets stuck not me in a conventional transaction.

    In a very weak used car market as we had before the crash, (at least for nice cars) the value would be greater.

    • 0 avatar

      At our Penn dealership we’ve sold cars to folks in Iowa, Georgia, Mass and just about anyone inside that fairly large range. Typically quirky vehicles after they are on the lot awhile like green wranglers and Mustangs off season. The internet works but as said above… In demand vehicles are in demand.

  • avatar
    Stumpaster

    I call major BS on the notion that ATL vs BOS prices for a car made for ATL would warrant paying buyer fee and flying there and driving back. That’s about $1200 you talking about in direct costs.

    But Steve, as long as we have you ear, I would like a 1982 Volvo 240 turbo stick shift wagon with under 70K miles, not abused. Thanks!

  • avatar
    kosmo

    Steven,

    So it sounds like you ARE operating a car buying service for:

    1. Dealerships, and

    2. Retail customers you believe you can trust, and who put their money (deposit) where their mouth is.

    Keep up the great articles!

  • avatar
    kenwood

    Most friends, neighbors and relatives know me as a “car guy” and some have asked for help in buying cars. I’d ask all the questions of what they’d like in a vehicle, do all the research for them, make recommendations and rank their options for them. Then they’d go out and buy something because their bosses’ cousin’s housekeeper had one and said they liked it. Now I just point people to consumer reports and send them on their way.

  • avatar
    brucebanner

    Are people getting their notions about used car values from what they’d get for trade-in at a dealership? Ie. they expect to pay a similar price?

  • avatar
    05lgt

    Steve,
    It may be a few years, but if you’re still in this buisness, I’ll take you up on it eventually. The deposit / cost+ model is a perfect match for the “no immediate need” purchase I like to make. Thanks for letting me know it’s even a possible arangement.

  • avatar
    Sjalabais

    I have been asked to help friends and friends of friends to find cars countless times. I am certainly no business maker, even though I have at times earned a lot of money with buying and selling cars.

    What bothers me the most is that people don’t want to check what they buy. Young women that I try to hammer home the message “never buy a vehicle without personal inspection” end up buying crap on eBay. Everybody else seems to understand my checklists and suggestions, and then they go on buying the opposite. It’s annoying.

    But, hey, I get to surf for used cars with some temporary purpose.

  • avatar
    jimbob457

    I have long since completely lost track of the number of used vehicles I have purchased over the years for myself, my spouses, my family and my friends. A few principles stand out:

    1. The great 20th century financier Bernard Baruch was entirely correct when he advised: ‘buy your straw hats in the Fall.’

    2. Know your merchandise. Your indie mechanic is your best friend. You can hardly overpay for a good used car. You always overpay for a bad one unless you happen to be a mechanic.

    3. Certain unfashionable vehicles can be just the ticket unless, of course, you are trying to attract a woman. They often sell at huge discounts. I have at various times owned a used Pontiac Astre, a used AMC Pacer, two used Sterlings and even a used Daihatsu Charade.

    4. Even the much maligned used car salesman can be a highly useful resource. If you are on their Rolodex (or its modern equivalent), the fact that they know what you like and they see so many used cars can work to your benefit.

    5. Cash is king.

  • avatar
    sgeffe

    I’ve used a broker for three of my last new car purchases; my family has bought about 20 cars overall from him (new and used) in the last 15 years. A few-hundred over invoice, and he’ll make everything happen for you, even delivering the car to your door if desired. Same with used cars; tell him what you want, and he’ll bring it to you to test-drive, then buy. No haggle. No flim-flam.


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