The Truth About Cars » wholesale http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Fri, 12 Dec 2014 19:16:55 +0000 en-US hourly 1 http://wordpress.org/?v=4.0.1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » wholesale http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Hammer Time: Batter Up! http://www.thetruthaboutcars.com/2014/05/hammer-time-batter-up/ http://www.thetruthaboutcars.com/2014/05/hammer-time-batter-up/#comments Fri, 16 May 2014 11:00:23 +0000 http://www.thetruthaboutcars.com/?p=820914 The bases are loaded and the score is tied. Two outs in the bottom of ninth. 3 balls. 1 strike. You know this pitcher better than you know your brother. The last pitch had almost cleared the left field pole, and the entire stadium. Your swing was as beautiful as Mickey Mantle in his prime. […]

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pitch

The bases are loaded and the score is tied. Two outs in the bottom of ninth. 3 balls. 1 strike.

You know this pitcher better than you know your brother. The last pitch had almost cleared the left field pole, and the entire stadium. Your swing was as beautiful as Mickey Mantle in his prime. Just a few inches to the right and you would have been on your way to a private party with friends instead of another walk back to the batter’s box.

The catcher signals, and you catch one finger out of the very corner of your eye. Fastball. The pitch comes, right down the middle. It’s almost like a dream and yet, you can’t do anything about it.

The stomach pangs in stress and anguish as the rest of your body remains still. You watch it go past. The thud in the catcher’s mitt. The umpire bellowing, “Stttaaarrriiikkeee!!!” Your manager had told you not to swing and now, you have 50,000 fans booing as you curse under the breath and step away from the batters box.

Will you get a pitch that good again? The pitcher grins as he now knows, his mistake ended up giving him an advantage.

This is how I felt yesterday afternoon. That manager who I wanted to fire was a neighbor who I had bought a car for nearly eight years ago. A four year old Cadillac Seville with only 26,000 miles, a CPO warranty still in effect, and the exact color they wanted for all of $12,600. It was nearly $4000 less than what the nearby dealer had offered for the same type of vehicle. Except his was a year older and had 10k miles with no warranty at all.

For 8 years they had been happy with it being their retirement vehicle. A lot of long-distance trabeling and one of my mechanics ensured that the vehicle would stay in good running order. No Northstar engine issues. A couple of oil leaks around the 100k mark. but nothing out of the ordinary given what it was. They were happy, and I was happy for them.

Then a Solara driven by an idiot decided to make a turn going against traffic and…. bam!…. hospital visit and totaled car.

The good news was that the folks were okay. Bad news? All the airbags did their job and a 12 year old Seville wasn’t a prime candidate for the replacement of this safety equipment and the surrounding sheetmetal. The car was totaled. There was some soreness. An honest apology from the bad driver, and another page for everyone would be turned.

I get the call that evening, “Steve, someone just totaled out the car. We’re at the hospital”

“Is everyone OK?”

“Kinda. Our friends are about 80 and they were shaken up a bit. A little sore. But no broken bones. Can you come up to the hospital and pick us up?”

“Sure. I’ll be right there.” I palmed the keys to a nearby 2003 Camry and made my way against rush-hour traffic to the hospital.

It took a couple of hours to get discharged. Since there was no bleeding or dying, there would be a lot of waiting. I parked at a nearby church where my wife teaches Sunday school and made the long trudge to the hospital.

“Is everything OK with ya’ll?”

An older lady was resting on a bed and my neighbors, along with an elderly stranger, were waiting for their turn.

“We’ll be fine. But chances are Manda will need a couple of days of rest before heading back to Ohio.”

I became a good listener for the next half hour. Eventually the subject came to their next car.

“Can you help us find a Malibu?”

Sure, what are you looking for?

“We thought we would get another silver car with leather. Two years old. Maybe around $10,000.”

“I hate to say it, but you’ll be waiting for another two years to get that type of car, if you’re lucky.”

“So what do you think we should get?”

A tricky question, and I had to wait a moment to formulate the right response. These people were conservative in tastes, and I knew that I would be dealing with folks who wanted a showhorse car at the same workhorse price I got eight years ago. That deal was a lightning strike, and the auction market is a lot more competitive in 2014 than it was in 2006.

“Go ahead and when you feel able, just go to a dealership and test drive a few vehicles. See what you like and let me know.”

This turned out to be a blessing and a curse. The blessing is that it shocked them back into the reality of modern day car prices. Everything cost a lot more these days. The curse came from them testing cars with cloth interiors they didn’t like, and leather interiors that they thought were the bee’s knees.

“Can you get us a 2010 Buick Lucerne or LaCrosse for around 10k?”

I sighed with my eyes, “Yes, but the reality is a one owner car that has been maintained at a dealership and has a perfect Carfax goes for a stiff premium at the auctions. If you want to buy a clean car, you have to pay a clean book price.”

I showed them the clean Manheim Market Report prices for those two vehicles.

“Well, we can handle a few dings here and there…”

Baloney! Folks who insist on leather for a late-model vehicle aren’t going to tolerate scratches and scuffs. They want the perfect car, and that’s perfectly fine. But there is a price for that.

It’s called the clean book value.

I decided to browse a bit as my neighbors were busy debating each other about the car when, I found it. The perfect car.

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A 2007 Saturn Aura XE in the same color silver as their old Cadillac. It had half the miles of their totaled Seville (68k vs. 136k). The 07 Aura had also been reconditioned by two dealerships that I like to buy from because they don’t scrimp on getting their vehicles front-line ready.

One owner. No accidents. Extensive service history. This would very likely be the best car at the auction that day.

“Hmmm… well that’s interesting. Can you tell me about it?”

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I showed them the Wikipedia listing. I explained to them that the 3.5 liter engine and four-speed automatic transmission were the same one used in my wife’s old Malibu Maxx that they had liked so much. I told them that Saturn was now an orphan brand, but any GM dealer can service these vehicles and that this vehicle would likely be at least a thousand or so cheaper than the Buick since Saturns are no longer bought by most of the major auto-finance dealerships.

03s802

Nobody shops around for a Saturn anymore.

“Yeah, but I’m not sure I want a Saturn.”

“Okay, well I’ll pull out the Carfax and let you read a few of the reviews from actual owners. I gotta eat with the family. Let me know what works.”

An hour later I got the news that I was anticipating…

“Barbara really wants to get the Buick. Just keep your eyes open, and if you find one, let us know.”

The next day the Saturn sold at the auction for $7500 plus a $200 auction fee. Throw in my $500 fee, and they could have bought the Saturn underneath the clean wholesale value. It would have been an easy slam dunk.

03s801

Instead, I wound up buying an 03 Volvo S80 in silver with 130k miles for just under $3000. A re-man transmission was put in it only 2,000 miles ago and the car just got the belt changed at 122k. The only reason why I was able to get it was because the alternator was weak, and only 1 of the other 108 dealers took the time to look at the history.

03s802

Most long-time dealers just assume these Volvos were traded-in for a bad transmission. Plus Volvos tend to be slow moving, but this one has the right color and recent maintenance history for a finance deal. I’ll take my chances.

I hated to see that Saturn go by though. It was the perfect car with the perfect everything else. Will I get another nice easy fastball down the middle? Eventually I will. Unfortunately, my chance to swing at it now depends on two managers who are probably still busy bickering with each other.

07sat1

That Aura will now be showcased by a dealer in Alabama. So what about you though? Has there ever been a car that you knew would be the perfect fit? But someone, somewhere, decided otherwise?

 

 

 

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Should You Sell Your Car At Carmax? http://www.thetruthaboutcars.com/2014/03/should-you-sell-your-car-at-carmax/ http://www.thetruthaboutcars.com/2014/03/should-you-sell-your-car-at-carmax/#comments Fri, 07 Mar 2014 10:00:14 +0000 http://www.thetruthaboutcars.com/?p=766585 100,000 miles? 200,000 miles? 300,000 miles? Everyone has a certain point with their daily driver when they would rather see money back in their pocket, instead of seeing more money fall out of their pocket. Time marches on. That old clunker loses it’s endearing qualities and then, what do you do? Well, the answer depends […]

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carmax

100,000 miles?

200,000 miles?

300,000 miles?

Everyone has a certain point with their daily driver when they would rather see money back in their pocket, instead of seeing more money fall out of their pocket.

Time marches on. That old clunker loses it’s endearing qualities and then, what do you do?

Well, the answer depends a lot on what type of vehicle you’re trying to sell… which is why I’m introducing Carmax’s wholesale operations into this write-up.

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A lot of us are already familiar with Carmax’s retail operation.

No-haggle pricing. No hard sells or bait-and-switch tactics. The foundation for what made Saturn such a successful new car brand back in the 1990’s has been refined, improved and eclipsed by Carmax.

Like em’ or hate em’, Carmax is now the official used car Goliath of the auto industry.

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This article from Automotive News does a great job of highlighting the retail side of their success. Carmax is now twice the size of second-place Autonation, and larger than the third, fourth, and fifth place automotive retailers combined. If Carmax manages to stay on track with a forecasted 500,000 units sold for 2014, and maintains their $2,150 in net profit per unit, they will likely eclipse over a billion dollars in profits… just with their retail operations.

That first billion is the one everyone here is already familiar with. However it’s the other side of their business, the wholesale side, that’s proven to be the more consistent money-maker during good times and bad.

This is how it works.

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You are tired of your car. More times than not, it has some type of problem that is either expensive or elusive. You have probably spent a fair penny trying to solve that issue, and even if you succeeded, you are weary of having to deal with yet another one down the road.

Enter Carmax. Have you ever noticed how much money Carmax spends on radio advertising? That little 30 second spiel about bringing your car in and getting treated right is more than just a hokey way of trying to get you in their door.

It’s arbitrage, with a churn that now numbers close to 7,000 vehicles.

Every… single.. week…

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Carmax inspects your vehicle. Appraises it’s value. Successfully buys it (or at least plants the seed for further business), and then they does something that is unique to automotive retailers.

They have weekly auctions for all of these vehicles. Wholesale auctions frequented by dealers who sometimes travel long distances to buy the very same cars that you are tired of driving.

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On average, a Carmax auction gets more eyeballs per vehicle basis anyone else. An auction with 100 vehicles will often have more than 100 dealers who are ready to bid up and buy all those vehicles.

It’s a free market, and because Carmax eliminates uncertainty by disclosing major defects to this dealer audience, they get a premium return for much of what they sell.

If the engine or transmission has mechanical issues. If there is frame damage or a salvage title, Carmax will disclose that issue in writing to all dealers before the sale.

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Even if it’s a $500 vehicle, you can dispute the vehicle if there was a major defect that wasn’t disclosed. I’ve done it successfully in the past many times and so have thousands of dealers who attend their sales. No system is perfect. But Carmax’s selling policy is designed to eliminate those uncertainties and provide disclosure with both the high end car, and the beater car.

That’s where you, the public, comes into the mix. Because Carmax can get the premium return along with a seller fee of about $165 for each vehicle sold, Carmax can pay more for certain cars than other dealers.

What types? In my experiences, Carmax tends to offer a solid edge to consumers in three distinct areas.

1) The unpopular car with expensive mechanical issues.

2) The Craigslist nightmare car.

3) The “I need money right now!” car.

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You may notice that these are the first two types are cars that few public individuals want to buy in the first place. That five year old Chevy Aveo with a bad automatic transmission, and a 25 year old Honda that looks like it got into a fight and lost, will have one thing in common.

They will both be lowballed by the general public. Once you put that Aveo online for $3000, someone will offer you $1500 over the phone and then not show up.

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That 1990 Honda Accord which has been driven 356,168 miles? Someone’s kid or an aspiring scammer is going to light up your cell phone with a never-ending torrent of stupid pointless questions.

“Is your car a diesel?” says the guy who doesn’t understand that the letters g-a-s do not equate to d-i-e-s-e-l.

“Is there anything wrong with it?” “Is it an automatic?” “What’s the least you’ll take for it?” “Can you drive it to my place?” “Um… Give me your address!”

It’s this moron brigade that helps Carmax make hundreds of millions of dollars. By giving you the opportunity to not deal with them, and giving dealers the opportunity to capitalize on your automotive misery.

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There’s also a more lucrative side for those dealers that visit these auctions. That Aveo I mentioned earlier? It can be bought for $2300. Then it will be fixed with a cheap tranny found through car-part.com, and then financed at $500 down and $260 a month for 36 months.

The sub-prime side of the car market can help a dealer more than double his money over the course of a few years. Not risk-free mind you, but the Carmax auctions provide them with a golden opportunity to buy 20 or 30 low-priced vehicles a week that actually come with mechanical disclosures.

Once you know what you’re buying and have the means to it marketable,  your risk of failure goes down substantially. This, along with the push of immediate competition, motivates dealers to pay more money for your impaired vehicle.

Nobody else does this when it comes to cheap older cars.

The creation of a free market with thousands of used vehicles, and fair disclosures, will likely net Carmax well over $300 million in profits by the end of this fiscal year.

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The average unit garners a little less than $900 in profit. Subtract Carmax’s seller fee of about $200, and you’re looking at only about a $700 spread on average between what Carmax will offer you, and what a large free market will pay for your vehicle.

Is that a better return than you will find on Craigslist, Autotrader, or a nearby car dealer? In some cases, without a doubt. The greater the uncertainty about the value of a product, the less an unknowledgeable person (or greedy person) will offer for it.

Personally, I would test out all of these avenues. If Carmax offers the best price, take it.

That is unless you live in northwest Georgia. In which case the address to my dealership is…

 

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Auction Day: Seconds! http://www.thetruthaboutcars.com/2013/03/auction-day-seconds/ http://www.thetruthaboutcars.com/2013/03/auction-day-seconds/#comments Mon, 11 Mar 2013 19:36:42 +0000 http://www.thetruthaboutcars.com/?p=480779 There comes a time when the prices for used cars at the auto auctions go the way of an exuberant bubble. A small army of consumers get their tax refunds. The car lots wake up from their winter slumber, and values for vehicles go the netheregions of the human imagination. I sell cars during this […]

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There comes a time when the prices for used cars at the auto auctions go the way of an exuberant bubble.

A small army of consumers get their tax refunds. The car lots wake up from their winter slumber, and values for vehicles go the netheregions of the human imagination.

I sell cars during this time, not buy them. In the last three months of every year I will usually buy a lot to avoid the tax time market prices. Sometimes as many as 12 vehicles in a day. But when tax season comes, I buy a chosen few and sell them by the dozen.

Then, after the buying frenzy begins to ever slowly ebb, there will be a welcome break in those hedonistic valuations. Where instead of winding up $1000 to $1500 behind the selling price, I wind up second to another bidder. Almost always to a guy who has been buying cars for a long time. Today was that day.

My first second was this 1991 Acura Integra. Now a lot of you folks will quickly realize that this vehicle is old enough to buy itself a drink, and you would be right. But age in a rust free climate that offers smooth roads is not that big of a deal.

The exterior? $260 paint job. The interior was presentable. A/C was fine. However the clutch was not shifting right, the big fartcan back muffler was a bit of a negative ding, and the hatch area had barely no semblance of the ultra-thin Acura fabric. The odometer showed 164k miles… which was probably inaccurate. I only bid up to $700 and watched a wholesaler outbid me at $750.

These sell quite well once they’re cleaned up. But I’m sure this one would have needed to be shucked to a paint shop, a mechanic shop, and an upholstery shop between the auction and the retail lot. Such time issues have a big hidden cost in our business and if you find another nasty surprise in that process, you can wind up ‘polishing a turd’. So this one simply went down the pipe.

Then we have the most heavily depreciate midsized car of the modern day. A Mitsubishi Galant. This 2009 model had 123,791 miles, and although the trunklid mentioned an ES trim level, apparently an ES in the rental happy Galant world only means alloy wheels as an option.

These lower trim vehicles usually sit at my lot for a bit. Cloth interiors. More than 120k… but an 09 model. I stopped bidding at $4900 for the sole reason that I usually can’t get the same margins with a higher cost vehicle with lower feature content. The final bid was $5000, and given that I already have several Tauruses and 3.5 Liter Intrepids that fit this bill at a far lower acquisiton cost, I can’t say I regret this decision.

Now this one was a gritting of the teeth moment. A 2007 GMC Canyon Work Truck with 111k and nothing too special about it. Except for the automatic. Late model, compact, automatic pickups are insanely easy to finance and this one had the added benefit of some paint transfer on the fenders that a less experienced buyer would falsely see as a permanent issue.

I bid up to $4500, and a friend of mine who buys up trucks was standing near me and bid $4600. I had to invoke King’s Rule and give him the favor of bowing out. In exchange for him looking out for me during the next go around. Hopefully that happens and I don’t wind up in a dogfight.

Finally we had the transportation equivalent of dog food go through the block. A 1999 Saturn SL. Based out. 5-speed. Perfect 35+ highway miles per gallon transportation for those folks who subscribe to the common practices of penny pinching and personal parsimony. I always have several of these on the road. Although the 5-speed is often a more challenging sale here in the Atlanta ex-urbs.

I showed a fist and held the bid at $1000. Waited for a few seconds. Then. Damn! Someone jumped in and I bid it up two more times before letting it go to some other nearby shadow for $1500. Typically I try to keep my costs under $2000 for a stickshift equipped basic vehicle, and this one would have likely cut it close once you added the buyers fee and the need for new rubber all the way around.

There was a ton of other stuff today. Fewer buyers came to the sale. But those who did show up bid all the money in the world. So if you’re in the market for a 1999 Lexus LS400 in clean condition and only 117k miles, you are looking at nearly $8000. Wholesale. If that sounds insane to you, just think about the financing terms that will be applied towards that vehicle. I’m seeing $1500 down. $80 a week for at least 36 months. Maybe even 48 months.

 

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