The Co-Op Dealership option...

For those just starting out there's a possibly cheeper way to get into the car sales business without all the overhead of the bond, the insurance, and the car lot. You could buy into a current dealer organization and become a business partner with them like a Co-Op.

One group who helps set up and manage these Co-Op car dealership is www.autoincome.com. I've done some initial research into these guys this week and it sounds like a really cool idea. It's basically $500 a month buys you into the LLC., the Bond and the Insurance. You get a dealer plate, and an auction pass. This basically covers all the fixed costs of the business (overhead)

You're still responsible for misc. costs like title fees, shipping the docs and auction fees. But hey it's still less expense then you would have on your own and it sounds like you get everything in just 2-3 weeks instead of 4 months.

These guys have dealerships all over the country, in 20 states. Unfortunately they don't have any in Arizona... so if I joined I'd end up working with a dealership either in CA or TX.

Here's the big catch to this deal and coincidently where some people who call this a scam on the blogs probably got into trouble. I'm not a lawyer either so I'll just lay it out there as I understand it and maybe a lawyer can correct me if I screw it up. The key is to always present yourself as an agent of the dealership. I wouldn't be literally buying and selling the cars in the technical sense rather it's the dealership buying and selling the cars. Now it's a little confusing because I go the the auction or to another dealer and spend MY money to buy a car and pay any auction fees out of my pocket but officially the dealership owns the car. The title and all the paperwork would be sent to the dealership and handled there.

Now that I've purchased a car and put it into a storage facility or my garage... I don't want to park 10 cars on my front yard and put signs in them all saying that they are for sale... that would be illegal...i guess. No I need to run an add in the paper, craigs list or on eBay. If potential buyers are local I can show them the car, let them drive it but I can't sell them the car for cash, because I don't have the title. I take their info and a deposit for the car and tell them that I'll get the paperwork together and meet them the next day to deliver the car.

Let me interject some of my personal thoughts here. If I was buying a car from some guy on the street or even in front of his house I'd be a little leery. He tells me how he is a partner in a dealership out of state and that he needs a $250 deposit to hold the car before he puts together the paperwork and that I should come back the next day.... I'd probably walk away from the deal and or request some kind of escrow service. Just Sayin.

Then I send the buyers info and stuff via fax to my out of state dealership where they put together the temporary use permit, the MVD(DMV) paperwork and they overnight it back to me. (by the way I have to set up a corporate account with FedEX and pay for this shipping, just so you can add up total costs here). The next day I deliver the vehicle to the customer, they sign anything that they have to sign which is shipped back to the dealership. This paperwork process costs $50-100 a car.

I would also have to set up a business checking account in the name of the dealership ( I think that I would be the only signer on the account though??) Autoincome keeps track of all the stated costs and profits form my car sales for me and then they file a 1099 for me with the IRS. I'd better save my 30% baby...

The deal is month to month and to start you need to pay the first and the last two months up front.

They also offer a money back guarantee. To get it you have to do the following three things;

1. Buy and sell three (3) cars during the 90-day time period.

2. Approach thirty (30) new and/or used car dealers offering to buy and sell cars.

3. Run six (6) separate ads in major newspapers offering to buy used cars.

That's not so bad and honestly the ads are $175 and how much money could you really loose on 3 cars, $500 total? Then you have $300 for doc fees and shipping and another $300 for auction fees and your total exposure is only $775. Then you just have to go and talk to 30 dealers... no problem they aren't doing anything in their offices anyways, they're definitely not selling cars... If you go to all the GM dealers they're probably looking for work:)

I spoke with the owner of autoincome.com today for a good 45min and when I got off the phone I was pretty jazzed about the deal. I still think that it's a great way to get exposure. I don't believe that it's a scam and I might do it. Tim said that he'd help me get in touch with one of his dealer partners here in Arizona so that I could talk with someone face to face about it. He hasn't gotten back to me yet but hey maybe it takes a while to look up who your partners are and get back to a potential client. I'll let you know when I hear back form him.

**Update**

Tim got back to me this morning (within 24 hours of my request) with the name and number of one of his partners here in AZ!! I have a lot of respect for him and my natural distrust of anyone selling me something is feeling a lot more comfortable with this deal!

Total fees

$1500 First and last two months up front

$50-$200 per car, auction fees (I can't get anyone to tell me what I should expect these to be. Everyone tells me that it's different for every car... come on there's got to be a percentage... 5% of the high bid as a fee? That's the way that it works at Barrett Jacksons... Even when I called Manheim they couldn't tell me.."it's different for every car and every location" So I bid on a car and as I walk up to the window to pay they're in there spinning the big wheel to tell me how much my fees are?? Low money NO WHAMMIES')

$50-$100 per car doc fees

$25 per car overnight shipping

4% if you sell a car on eBay

$500 a month Co-Op fees

Still not as pricy as doing it all on your own....