Profit margins on used cars

goochy

Its my dream to open used car garage - if i won lottery or had about 200k easily avail. would go for it. However i think my idea of margins on used cars are probably wide of the mark ! what got me thinking about margins on used cars is that theres a fairly large used dealer i know of - in business many years - which used to deal in fairly high value / high end and recent used cars but a few years ago changed to dealing in older vehicles mostly in 5k - 15k bracket ( executive , sporty , 4x4 . mpv and some family cars)

of course you could say its the recession but other dealers are still selling high end vehicles. i would say its more to do with profit margins as they are likely to be better margins on lower value/ older vehicles , they arent competing with main dealers and if a car struggles to sell you dont have to take thousands off the price . when talking about margins i am talking about for vehicles newly bought/ traded in not vehicles in stk. for long time or vehicles they want to see as quickly as possible.

if a dealer buys a car for 5k - services it and nct's it could he expect to get 7k for it ? if a dealer buys car for say 20k could he expect to get 25k for it ? but if a dealer bought a car for 40k i couldnt see him being about to sell it for 50k !

would be interested in someone explaining how profit margins work for dealers just for my curiosity !

Toyotafanboi

goochy wrote: »

if a dealer buys a car for 5k - services it and nct's it could he expect to get 7k for it ? if a dealer buys car for say 20k could he expect to get 25k for it ? but if a dealer bought a car for 40k i couldnt see him being about to sell it for 50k !

would be interested in someone explaining how profit margins work for dealers just for my curiosity !

i have no idea in reality, but i think you are going about it backwards.

it's all about knowing the car, how quick it'l sell and what it's worth.

like, for example if a 2010 1.6 diesel Golf, comfortline with 50k km's on it is worth €15k retail, you look over the car, establish you need to spend €1k on pre sale prep and you need to get €2.5k to make it worth your while in terms of profit and standing over the car etc, then you need to aim to pay €11k for it. it'd be easy with something like a Golf as people get hard as **** for them, so you know it would be a relatively easy, fast sale.

i guess on those same grounds, that's why dealers are reluctant to take in undesirable (large petrol engine etc) cars at all and if they do they want them for next to nothing, so as if and when it's sitting on the forecourt for 6 months they don't have too much tied up in it while the retail price is falling and falling.

ironclaw

In my view, entirely depends how legitimate and honest you want to be. If you can get a good car cheap (Stolen & Recovered, Minor Damage, CAT D, Estate Sales etc) then you can probably make some decent money on the side. I'd say if you had €10k to start, you could easily get the ball rolling. The issue is the amount of time you spend putting into the car and getting it right. If you could get a car for €5k, put €1k into it and get €7k on the sale, that's a net of €1k or €12k per year if you could do it every month. Now, declaring tax on that will cut down the bottom line, but you could easily pay a mortgage out of it and if you had a full time job on the side, its a nice earner.

An interesting experiment would be try do it every month with that as your time limit. Fire sale if its still sitting there. You loss, if any, would actually be fairly minimal if you applied a very lean business model. On the other hand, I know a good few people who might buy a pair of cars from the likes of CoPart in the UK, with the second paying off the first. It is possible and you can get some high end stuff with minor damage for a lot less than retail.

Voodoomelon

I always wondered, I take it second hand car dealers don't have to return VAT on second hand car sales?

pa990

goochy wrote: »

Its my dream to open used car garage - if i won lottery or had about 200k easily avail......!

Why not start small, buy a few cars and flip them for a small profit.

Plenty of people were doing it when the £ to € was at a good rate (not so much now)

All you have to do is pick up a bargain on DD or similar, get it NCT'd and move it on.
Start small, and you'll know whether its for you or not.

(and be prepared to have your time wasted with tyre kickers)

knifey_spoonie

Voodoomelon wrote: »

I always wondered, I take it second hand car dealers don't have to return VAT on second hand car sales?

Generally VAT is returned on the Margin so Make €1000 pay €1000 worth of VAT.

In the case where a its VAT Qualifying vehicle(Some EX Uk Company Cars) you pay VAT on the sale price.(minus VRT amount)

Atlantic Dawn

You need to factor in that the majority of the cars you will be selling you will need to take a trade in for so you only have half the job done when you sell a car. Some of these cars you take in will be absolute junk that you will either have to dispose of for scrap, sell on to someone dealing in very low value cars or spend money on to get it to a saleable condition.

Del2005

The biggest issue with selling 2nd hand cars is getting a good source, you want to start making friends with sales people in the garages which deal in cars a level or 2 above what you plan on selling. No point trying with cheap cars from DD or auctions as they are usually being sold there for a reason, you will make money but won't get a good business going. Also while looking at flipping a car don't forget to add your time into the costs, which is why I dislike Wheeler Dealers, as it's easy to sell without making a profit if you've spent a few days working on it and only factor in parts.