Strategy

I've been thinking lately about what I want my car sales strategy to be. There are a lot of "angles"out there to make money in used cars.

• Buy here Pay here,
• financing
• warrantees
• certified
• specialization
• quantity over quality
• cheep
• trucks

So I was thinking about a specialization to service a specific demographic. Like late model BMWs. BMW has a huge cult following and a great internet network. These cars are basically worshiped. I'm thinking about picking one brand, car and generation and becoming a specialist of that specific car. Then marketing my services to the internet gurus as a car finding service.

This would work great for a number of different cars; Mini's, RX 7-8, Mercedes, Jeeps etc...

I don't want to deal with buy her pay here... I just don't want to deal with the hasle. Besides it seems like these guys all get a pretty bad reputaiton. Which is understandable because you end up repo-ing a lot of cars... It's just not my style. Though I'm sure that they make a ton of money!

I don't think that I want to deal with financing either. I know that there's a lot of money there

too but I want to focus on the debt free niche.

I'm all about warrantees! I thought a lot about it and the only difference between a "certified" used car and an non-certified car is the warrantee. I think that I could package this just like the big car dealers. Add the price of the warrantee into the sale price of the car.

Now this would have to be

some pretty aggressive pricing and I may just price my commission into the deal so I don't make any money on the warrantee and just make my money on the car... It's a great sales tool.

I have to start out cheep because I don't have a ton of money to put into this. But eventually I'd like to go more mid priced used cars. $5-10k. We'll see as these would have to be financed by someone and I'd have to look for financeable cars, late model and clean title etc...

I have this firm belief that to be successful you have to differentiate yourself from the competition. I think that specializing can really help you differentiate. But I want to go a step further then that. I want to use transparency of the transaction to be completely up front with my customers. I don't want anyone to feel like they're being ripped off. I'm thinking about outlining everything that I have in the car. Showing the customer the my profit and where I make the money. This is a tactic that no-one is using and probably for good reason.

I want to show everything,

• My cost of the vehicle at auction/ private party
• My cost to recondition the vehicle
• Transporting the vehicle
• Dealer overhead
• Advertising
• Sale price
• My profit.

Now the risk in doing this is that I would tell people how much money I'm making on the deal and tell them exactly how much they can negotiate. I don't really want to deal with negotiation so I'll be just fine walking away if I need to but I'd like to just set the price, show that it isn't my desire to make a killing on a car but to just get a little for my troubles. If I can get my price right this should be a huge selling point. Who else in the marketplace does this? NO ONE! How refreshing would it be to buy a car from someone like this where you know that you aren't being raked over the coals!!!

I'll do two or three things to "specialize" and "differentiate", I believe that this is not only the way to be successful but it's also the only way be make it in this tough market.

Speaking of the market I'm really bummed out with the comments made by Warren Buffet today in his annual shareholder letter. He didn't sound very confident in the next couple of years. I was surprised with his comments about the government interaction and how he thinks that it will make the situation worse and lead to huge inflation. Maybe inflation will help the car markets but I doubt it.

Oh and I don't think that I'll be selling anything from the Big 3....

Phil

The difference between a Man and a boy...

I just bought the book No More Mondays and I love it. It spoke right to my heart and helped me man up and take control of my future. I've been contemplating what the real difference is between a man and a boy.

Little boys blame everyone around them for their situation. Men work with what they have and make it into something great.

Little boys sulk and mope when they get laid off. Men do whatever it takes to put food on the table for their kids even if it's delivering pizzas while starting thier own business.

Little boys wait arround for the government handouts, Men step up, pay their taxes and work hard until success is born.

I'm striving to be a MAN rather then a little boy, I even quit playing video games:) All the best Phil

Dealerlicense.com

I'm thinking of buying a book package from dealerlicense.com. I think that the $100 package has everything that I really need and if it works out I can then buy a couple of the individual other products that I like.

Let me know your thoughts and what you have purchased to help get started.

Phil

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....

What does it take to be a car dealer????

So what does it really take to be a car dealer? Well that depends on where you live. I live in Arizona so I've found some answers for here.

1. You need a place to do business, in my town it requires C2 zoning and has to be approved by both the city and the Dealer Licensing Unit (more on them later). The place of business has to have 2 parking spaces dedicated. The office has to be dedicated to car sales. You have to have a sign permanently attached (no vinyl signs or paint on the windows) that is legible from 300 ft away. That's not so bad until you start trying to find a place on the cheep. The best I could find was a guy advertising on craigslist for a 400 sqf shack for $500 a month. It meets the minimum standards.
2. You need a $100,000 Dealer Bond. I hear that these cost anywhere from $1000-$5000 depending on your credit, assets, and experience. This is due in one payment upfront every year. The quote I received is in that range.
3. You need some kind of legal business entity. I'm leaning toward an LLC as it provides some liability protection (even though I'm still signing that I'm personally liable on everything this may be useful in the future.)
4. Finally once you have all this stuff all lined up and PAID for then you complete your application for your license with the MVD (DMV). This is where things get a little tricky... to process you application takes upwards of 4 months... So you're sitting on a leas, a bond good for 12 months and a whole lot of expenditures and you have no clue if you will be approved, if you site will be approved or anything. For someone starting out small this is a huge issue. It's like $10000 just to make it through those first couple of months.
5. Once you have your license then you have to start getting yourself into auctions and working your way into the tight "brotherhood" of car sales people. This will cost money too.
6. Then you go to an auction and start buying cars (even though half you cash was spent on rent and you bond which you didn't get a return on for 4 MONTHS!!). Here is another tricky spot. If you're like me you've been to Barrett Jacksons or seen it on TV but you've never been to a "dealer only auction". So while you're waiting for your license to be approved you start asking any dealer you can find for some friendly advice and maybe letting you tag along to an auction or two. Be careful here as this is the response I got form one guy I asked.... By the way just to clarify I stated "I'd be happy to take you out to lunch after the auction or compensate as appropriate."

first off let me tell you I have been in the business for many years & for you to ask someone to let you come to the auction with you 1st off is costly (some charge a visitor fee $250) if you are not a listed buyer & there are auctions that you can go to as a visitor but that clearly puts you in the ring with much more competion where everyone is trying to do the same thing buy em cheap n flip em for money & I have to say it has afforded me a very comfortable lifestyle & allowed me to move my family from an apt. to a home very quickly however - for you to ask someone to basically train you teach you the ropes bring you in & help you network would definitly constitute a VERY COSTLY LUNCH like a $500 one - it is insulting for you to expect someone to utlize their time for you to make money & you compensate with lunch? there are many auctions for dealer's some sell crap some sell good stuff but better be ready to pay BIGTIME cuz with that cheap ass attitude they will have you paying double in no time - here's some free "help" ask yourself what a 1/2 of day's pay would be to you? LUNCH? I don't think so - watch how you are to people it will come back to bite you in the ass - sometimes it's called KHARMA aka revenge!

Can you believe this Guy? I just copied and pasted typo's, bad grammar and all. This is definitely someone I want to hire as a paid mentor. I especially like his reference to Karma and the way you treat others will come back to bite you.....hmmmm I think that he may have a point there.

And used car sales people really have a hard time understanding why they have such a bad image?

Actually I've been getting a lot of this same attitude as I've asked around. I was at a Nissan dealership asking the sales manager for his opinion on what I wanted to do and he got mad and stormed out of the showroom yelling back "that peon used car guys are a dime a dozen and that I'll be there one day and gone the next."

So what is it with the Used Car Industry and the Dealer only auctions. There's a ton of secrecy and temper surrounding it all. I get the feeling that there is some big secret that no-one want's me to know about. Then I talk to other people "in the know" and they tell me that the pricing at the auction isn't that great and that they add on a buyers fee of $50-$200 to every car. That makes sense as the auctions here in AZ look pretty swanky form the outside.

These people are suggesting that I build wholesale relationships with some new/used dealers where as they get cars in through trades that they don't want to sell on their lot they can call me and I'll buy from them without the auction fees for either party. That sounds good but every dealer I've spoken with would prefer just to deal with the auction where you get your money right away and you don't have to deal with used car sales guys directly....

So that's how you get your dealer license here in Arizona. Sounds like fun. But atleast there's a barrier to entry for any weak competition. You just have to ask yourself if you're the strong or the weak competition type.

Phil

Dave Ramsey

I know it's weird and no Dave Ramsey doesn't have much to do with the car industry except that he is hard core about no debt especially for cars which is an oxymoron in the auto industry. In fact this economic crisis that we're in now all came about because people and banks were STUPID with debt.

My wife and I recently read Dave's book and we're whittling away at our debt. I like my day job and I hope that car sales will be a fun hobby through which I can make a little money and pay off my debt a little faster. My goal is to make more then I could delivering pizza's part time which is the other alternative...

So if you look at it in the right light I guess Dave Ramsey has a direct impact on my car business. I'd like to subscribe to his philosophy and sell cars without offering financing. I don't care much if people get financing somewhere else I just don't want to be a part of it.

There are other ways that a good business person could use the Dave Ramsey debt free model to make some great money too which I hope to expound upon latter. Now if only Dave's advertising department would respond to my emails......

By the way you should check out Dave's website at www.daveramsey.com

Phil

To Be a Car DEALER!

I don't really know why I want to be a used car dealer. I hate car sales men with a passion. Mostly I just don't like the slime-ball I'm going to rip you off attitude that is present on most car lots.

Maybe it's just that I want to be noble and change the car sales world. Maybe it's my passion for cars. Maybe it's just that I want to make some money and I want to do it in an industry that is very interesting to me.

So I'm going for it.

While researching how to get a used car dealers license I couldn't find any blogs about the this process or the car sales industry in general. I thought that instead of watching American Idol and getting fat that I'd start a blog about my experience and where I'm headed now.

Phil