Auction Day: Mamas Don't Let Your Babies Grow Up To Buy Buicks Edition
One auction. One auctioneer. 121 vehicles. 86 buyers.
When you have 85 sets of eyes competing against your automotive tastes and your wallet, the chances of finding a good deal at an auction goes into a deep decline.
Such was the way of last Monday. But there were some surprises.
For starters, the inop vehicles were fairly marketable. Just in highly different ways. The first one that was sold at the side of the building was a 2003 Lincoln Town Car with a bad transmission and a fairly worn interior. A few scuffs and dents. 122k. I had a close friend of mine all over it. So I held off and watched it go to $2600 before selling.
The price was still too rich for my blood given about $1500 in additional repair and recon costs. Old V8 cars also tend to sit a bit longer on lots these days unless they sell for a cheap price or a low down payment.
Full sized new cars now have the longest average days in inventory at 90 days. Used full sized cars also reflect that like of buyer interest. So if it’s late model and big, I watch.
A 2003 model, like the one my friend bought, will likely have a bit over $4000 in it once everything is said and done. It may sell fast, or not. However even a $1000 down payment is higher than the current national average of $950. Try to get $75 a week as the weekly payment for this car and it will likely take nearly 9 months to make your money back.
A lot of deals these days have far longer breakeven points, as I’m about to show below.
The popular car with all the options may be an easy sell on paper. But you better sell that paper to a ready and willing finance company real quick because your breakeven could be as long as two years.
Consider a 2004 Honda Accord EX with over 160k miles, but all the features of the time.
Would it go for $5000 at this auction? $5500?
Try $7500 once the auction fee is included at the wholesale price.
The good news for a car dealer, is that finance prices for Camcords are about as high as helium. An Accord that has say, $8000 in it after recon and detail costs, may yield nearly twice that amount under a 48 to 60 month financing term.
The bad news is the risk and the marketability of that paper. It’s not easy to find a finance company that would be willing to buy paper on a car with over 150,000 miles. Even fewer will give you a good price for it. Chances are that they may only give you 65 to 70 cents on the dollar, and that includes having the customer pay on time for the first six months and other little hoops.
Auto finance hoops multiply as a car gets older and more used up. Due to the limits, some of the buy here-pay here operations will use their own financial resources to tote the note themselves. Or even access ‘funny money’ from the auto finance securitization markets to make whatever margins they need to meet their quarterly profits.
Those who can access these markets are the big guys in this business. As for me, the local independent, I would rather be buying older Buicks.
The only car I got that day was a 2001 Buick Century with a few scuffs and paint transfers to iron out from the senior citizen who owned it. Mileage was only 93k. One owner. No accidents. Nothing special… but the price. $1915 if you included the auction fee.
It’s a one owner with 11 maintenance trips to the dealership and a well kept interior. The perfect type of car if you’re looking to finance a vehicle that has been conservatively driven and well maintained. To be frank, I consider a vehicle’s condition to be ten times more important than the type.
You can always make good money, and build good relationships, if you sell a good car.
I can always find a buyer at a $500 to $700 down payment. The market is easy these days in terms of demand. What I need is something that will last them. Because if something breaks down on their car, I don’t get paid.
I estimate the breakeven for the Buick will be right around six months. Or if I sell it outright for cash, I may get a nice four figure return. That profit level used to be the norm for me on cash deals, even at this price range, back in the housing bubble days.
I miss those times. But then again, I think our society functions far better if we are ‘keepers’ of our cars instead of traders and debtors. For those looking for a keeper, a 90,000 mile unpopular Buick will cost far less in today’s market than a fashionable 160,000 mile Accord.
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Steven, this is a very well written piece! I have spent thirteen years on the retail side of this business, working on both coasts, and for multiple dealerships. My great-uncle, may he rest in piece, owned a wholesale business and car lot for more than forty years. I have been a salesman, service writer, internet sales manager... (among other things!), and as you have mentioned, your reputation is everything in the car business. Although certain vehicles like the Century are not the most interesting or exciting, they offer customers a safe, reliable, form of transportation. They also offer you an opportunity to turn a fair profit, in a relatively short period of time, without creating a lot of additional headaches. Choosing inventory is always a gamble. Knowing your target audience is crucial.
How come we never get these kind of deals here in Colorado? Love to have that one owner Buick!