Carmax gave me a plaque this morning for ‘outstanding service’ as a long time dealer.
I returned the favor by finishing second nine times at their auction. They made about $5000 from my upward bidding, while I didn’t make a dime.
So let’s take a look at all the vehicles I nearly bought. You would be surprised by all the ways I nearly make money these days.
The Carmax auctions always start with the ‘inop’ vehicles. These are vehicles that don’t run for any number of reasons and most rookies in this business will assume that they are worth more dead than alive. Mechanical issues, electrical weirdness, defective braking systems, and wrecks that make the cars undrivable.
I buy a lot of the non-wrecked cars because, often times, I know how to fix the issue. An Infiniti Q45 that has trouble getting into gear may need no more than a neutral safety switch. Then you have the sensors for early Accords of the early 90’s and Chrysler minivans of the 00’s.
Whatever I buy at the auction, I’ll read up on at the enthusiast forums that cater to that particular model. Eventually, as you make your way from the Audis and Acuras, down to the Volvos and VWs, you end up with quite an education. The local parts stores and junkyards also become your long-time best friends. But that’s a topic for another day.
Today’s first car was a 2005 SAAB 9-2x with a bad clutch and 105k miles.
One thing you will learn while going to the auctions is that the online pictures rarely do a car justice. This one was a beastly bastard in the flesh. Dents and scratches everywhere meant that the usual ‘wanna-be’ dealerships that buy second tier luxury brands, for those aspiring to BMW’s and Lexuses, were not going to touch this tired SAAB.
On the right Volvo, Subaru, unpopular Merc or Infiniti, these guys will fight tooth and nail with each other. However a crappy exterior condition and the tough marketability of a stickshift SAAB, meant that this car would likely go to a buy-here pay-here lot.
$1000 down, $75 a week for anywhere between 24 to 36 months will likely be the right financial formula for this car. I bid up to $2700 and, of course, someone else got it for $2750. I would have easily needed about $1000 to get it back into sellable shape so this wasn’t too bad of a non-event.
The next car for the inop sale was a 20 year old Miata with 191,000 miles.
It had one feature that makes it surprisingly more marketable in my neck of the woods.
An automatic transmission. I could easily have found good seats for it at one of my favorite auto recycling centers in Alabama. I also have a long-time friend of mine who is fantastic at removing major dents and scuffs from vehicles. The cost to get it all in good shape would have been around $600 or so.
The problem is that this car has electrical issues. Throw the fact that it wouldn’t start and couple it with an unknown maintenance history. I had to be conservative on this one. So it came to be that my $600 was outdone by a $650 counter and I sadly watched this vehicle, along with all the other inops, go to the hands of 100+ other dealers trying to buy vehicles at this sale.
We go back in the barn and it’s there that I hear a voice booming on the microphone.
“Stevie Lang! Come on down!”
I walk there and a nice two inch by three inch crystal plaque is given to me for ‘outstanding service’ at the auction along with one other dealer. I haven’t been the strongest dealer out there or the most prolific. But most dealers don’t make it to their 10th birthday at a given sale. At least in Georgia, only about 4% of rookie dealers will make it to their 10th birthday in the business. So I accept the honor, joke around about my new doorjam, and proceed to try to buy cars.
The sale starts out hot and stays that way through 118 vehicles. I see the 13th car, a white 2006 Chrysler PT Cruiser with 104k and an automatic, go on the block. It doesn’t take long for me to daydream of a time when these were a dime a dozen and cheap to buy at an auction.
Back in 2006, I bought the exact same type of car for $7000 even. It was a white, 2004 model with a stick and only 194 miles on the odometer. The same towel rack design on the dashboard. Same exterior and interior colors with the drabbed out grey seats and plastic dashboard. Same everything except for the transmission.
Later in that same sale I had also bought a 2001 Prius with 106k that had been dealer maintained every 3,000 miles and had been given a new big battery and tires. That car I bought for $6500 because the dealer had been too greedy and put the price at $12,995 on the windshield for the general public.
Back then the sub-prime market wasn’t as strong which meant that a guy like me, who operated as an all cash dealer, had plenty of opportunity to buy good inventory at the auctions. I took pictures of both vehicles at the auction, put them up on Ebay, and sold each of them for a profit that was north of two grand.
Those were the days. Anyhow, today this PT Cruise with 104,000 miles goes for $4600 plus the fees. This car will likely be sold at a buy-here pay-here that specializes in risky loans that has a strong credit partner. I see the dealerships in my neck of the woods stacked to the gills with these Chryslers along with a long list of overproduced and generally less popular inventory.
The next vehicle becomes my third ‘second’ of the day. As in me as the second highest bidder. A 2002 Buick Park Avenue in unpopular green that has been dealer maintained for most of it’s life. 159k miles, non-Ultra version which means fewer headaches from a maintenance standpoint.
I love these cars. But most of the general public hates em’ and identifies Buicks as gas guzzlers even though this is not the case with this Park Avenue. They can get close to 30 mpg on the highway and a lot of mature buyers love the leather seats and gadgets that usually come with them. I have financed several over the years and they always make the note.
However green is a cursed color in these parts. So I stop my bidding at $2100 and someone else gets it for $2200. In fact, that someone else is one of my big competitors at this sale. Even though we’re friends who have been brother-in-laws through many an auction (I don’t bid if he does), these days there’s too much competition to make that type of arrangement work. It’s every man for themselves.
A repossessed 2010 Cobalt that is as basic as the Model T is black goes for $7700 on the block, which means it sold for right at eight grand once the seller fee and transport is added into the equation. The Cobalt had only 55,000 miles. A lot of finance companies cover the lower mileage segment of the market. So I expect this particular one will be sold for very strong money, and then passed onto the finance company’s balance sheet once the new owner makes their first payment.
This is followed by a 1999 Lexus LS400 with 183,000 miles that was bought for $5800 (plus $200 auction fee). I have owned both vehicles over the years, and to be blunt, there is nothing to love about either one in my world. Only plenty to like on a sub-prime basis, and a five to six year loan term for the new owners. An older Lexus still symbolizes the good life for a lot of folks, and this one should be a good match for that aspiration.
The bottom starts falling out of the price at the auctions once you get into a certain mileage, condition and type.
A 2005 Kia Sedona becomes my next ‘second’ with 122,000 miles, plenty of scrapes throughout the exterior, and a ‘kids live here’ interior. That sells for $1700 plus the auction fee of about $125.
Minivans, especially those without leather seats or power sliding doors, have become the automotive version of leprosy at most car lots. The general public won’t touch them unless the magical brands that are Toyota or Honda are emblazoned on the vehicle. A Kia? Tough sell. This one would have likely been about $2500 to $2800 once you cleaned everything up and got the maintenance and repairs in order. I already have the Cadillac of minivans, an 02 Silhouette in black with a perfect interior, sitting at my lot for nearly six months. So no minivans for me.
On a purely trivial note, a 2006 Jeep Liberty Limited with an altered suspension and nearly 88,000 miles sells for $10,500. I like diesels. But this one strikes me as a pure fashionista play. One of the dealerships that has the word ‘Smart’ in their name is the high bidder, and I can’t help but think of the 28.8% interest this guy charges (plus a ton of fees) in place of the low prices he puts on Autotrader. The guy has more shell games than you can find at the sea shore and I’m sure this car will turn into a piece of paper that will be combined with others to form an automotive asset backed security.
This 1997 Honda Civic on the other hand with 150,0o0 miles needed nothing on the surface. Good paint. A clean exterior. However my $2400 bid was shot full of holes by two warring dealers who brought the bidding all the way to $3600 (plus fees). Dogfights are a dangerous reality in this business and every dealer gets involved in one at one time or another.
The winning bidder will likely need about a year to get his money back. However Hondas sell easily enough. So much so that even 20 year old Civics can yield far more on a finance note than this Civic did on a cash basis.
The near misses for me just kept on coming this Monday.
A 2008 Mercury Sable Premier with all the options, a perfect history, but 137k miles. I bid it up to $6600 and another dealer got it for $6700.
A 1996 Toyota Avalon XL with 171,000 miles and a roof. I bid it at $2200 and it sold for $2300. I should have kept bidding to $2500 but the car had more mechanical question marks than the usual.
A 2000 Chevy S-10 with a great body, alloy wheels, but based out interior with a regular cab. 144,000 miles. It went for $3300 plus the fee. You can shake your head at it until you spend some time in this business and realize that a lot of folks buy with their eyes. This one had eye appeal.
Finally, the one that made me pack my ass up and take a ride back to the county line. A 2004 GMC Envoy XL SLT with 229,000 miles and absolutely nothing of enduring value. $4700 plus the fee which meant about $5000 out the door. The Envoy sold to a dealer who specializes in a Latino clientele that simply eats these things up.
The car will be financed and the buyers will likely pack up another 100k between construction work and family traveling. You can hold your nose at an almost 10 year old GM interior but to a big part of Atlanta’s immigrant and suburban populations, these vehicles represent the Cadillacs of the modern day.
Once the Envoy was out of the barn I decided to take Carmax’s token of appreciation and head on home. I didn’t buy a single car this time. But at least I can relish in the fact that I didn’t lose any money either. Now about paying all those bills…
Do you buy anything from Carguts in SC? They are about halfway between Atlanta and Charlotte. We have occasion to buy from them some but have a good relationship with LKQ and use them primarily for non local stuff.
An interesting peek into another world.
Just curious: How would you suggest someone break into your field? Sounds like there’s money to be made if word gets out you make it honestly.
Steve has done a couple of articles on getting started (like this one and this one). To summarize: “start small, and be ready to lose money”
Let me be the first to say: Congratulations! These days, you’ve got to take ’em when you can get ’em. And you did get a nice doorstop, if I do say so myself.
Thanks for your continuing insights into the auto sales business – it is fascinating reading. Every time I visit the local Pick-n-Pull (which is not very often these days, esp. since owner Schnitzer Steel has apparently cancelled the half-price holiday weekends and managed to completely suck the value and fun out of the self-service junkyard experience) I walk around and wonder why so many cars that look like they should still be out on the road are sitting in there. Your postings help shed light on the answer.
Any tips on how you keep emotions from unduly influencing your bidding? I have great respect for those who can successfully do this, as I really struggle with it.
Write your maximum price down on paper, keep your hands folded into opposite arms, and once the auctioneer gets past your highest price, look away.
Can you please do a review on these era of Buick Park Avenues..I like these cars too!!!!! I would love to see a post about these cars 🙂
I had no idea that these cars sold for so much at auction. $5k for a nearly 10 year old SUV with 229k miles? $6k for a 15 year old Lexus with 183K on the clock?! Yikes. I see these going for about the same prices on Craigslist. I would assume that the risk of dropping that kind of money on an old car with high miles wouldn’t be worth the meager profit. Do people still pay asking prices at dealer lots? The stuff I try to sell usually goes for anywhere between 20-40% less than my asking price. but then again, I rarely pay more than $800 for a car that I’m going to fix up and sell. I guess sub prime, long term financing is the ticket to profits made off of these. I just wonder if a person buying an old, high-mileage Lexus or SUV would be able to afford the necessary repairs and maintenance long enough for the car to be paid off.
$5000 is what decade old vehicles cost these days. But look at the body, no rust or signs of hard driving. That GMC will go another 100K at least.
The days of buying a 10 year old car for $850 are long gone.
Another great article Steve, but could you expand on the comment:
“which means that it can be financed for very strong money and then sold to a finance company after the new owner makes their first payment”
Do you mean that the buy here pay here lot makes the initial deal then dumps the deal on a second party after taking their cut? I’m trying to figure out how the profit (and risk) is distributed here.
Exactly. Some finance companies will make an arrangement to take over the paper once the first payment is made. You will usually get a smaller check and part of the deal means following strict parameters as to who you can or can not finance.
Banks do that ALL the time. The one I used to work for would sell their mortgages about a month after closing, including my own–twice!
And then they downsized me a few years later. I’m done with working for banks.
The Lexus will sell for a 20+% loan at a BHPH lot, so there will be some $ made. It’s still “a Lexus” to average pedestrian, and status for future owner.
Cars that end up at “U-Pulls” are the ‘dime a dozen’ ones like 1998 Tauruses, Stratuses, or J-cars, that even low income buyers don’t want anymore, but still demand for parts. Any late 90’s Civic will get stripped bare, while the warn out ‘froggie’ Tauri will get crushed nearly whole.
LS400 $6400?. Your looking at $1500 in the Uk with that mileage even on a Lexus!.
The Miata $300 for parts with on auto.
If only I could get my hands on some LHD LS400…..
I almost didn’t read this because of the first photo.
Love the Sable, LS, Avalon, and of course that Park Avenue. My grandfather had one for about a week as a dealer loaner once when he was having work done on his Oldsmobile Eighty-Eight. He loved it and I think was considering getting one for his next car (which he sadly never lived to do). It was a really comfortable riding car with plush leather seats.
Just sold my 1998 Avalon with hi miles last week on Craigslist …and finally rolled it for $1500. Needed AC work, struts, horn, etc. etc. The sad thing is, I only got interest from flippers, mechanics, and the one person who finally bought – she was from Eastern Europe and just moved to the US. To her it was a luxury car, far better than what she had back home. To the rest of the buyers out there, they’d rather saddle themselves with a $400 monthly car payment at 25% interest at a buy here pay here lot. Where have we gone as a country when even people with limited $$$ and no credit demand a new(er) car with everything working and low miles? And are willing to pay half their income to get it?
Thats actually quite an achievement you flogged a used Avalon to somebody, Toyota couldnt sell them here new with a warranty .
The guy I bought it from a few years back practically gave it to me, then I realized why. Tough to drive a car without AC in a hot summer. But, even after 173k miles it still started and ran like it was brand new. Too bad nobody pays cash for beaters anymore and drives them until the wheels fall off, except for us folks on this board. Are we the only sane ones out there?
The person I sold it to got a decent deal considering all the mega crap that’s out there for $1500 on Craigslist – mostly cars without titles, wrecks, and cars that won’t pass state inspection.
This is not a particularly recent development. Back in the early seventies I had a job as an outside collection specialist for a third rate loan company; the type of place you went to for credit when your grandma turned you down. We had customers making 75-80 dollars a week signing up for $150 monthly payments. We had some customers whose payback was going to be $1300 on a $500 loan. People with poor credit have been making desperate choices for a long time.
Well, as Steve pointed out, Metro Atlanta nearly requires a car to get to most jobs. And working A/C too, if required to “look professional” and not sweat stained at a customer service job.
This hits home w/ me as I have been selling BHPH for 13 years..
I agree on the mini-vans, we have around 8-9 right now out of 45 vehicles. Some sit around for months, but we recently sold a 2001 G. Caravan after 2 weeks on the lot.
Most of my customers avoid them, unless they have 2-3 kids. Imports always sell even with 250k miles, and trucks are strong right now, always have people looking for one.
Found the article interesting, as I’m currently handling selling/buying situation for my sister-in-law. Having been given her mother’s 2012 Escape (at 93, mom quit driving), she wants to get rid of her 1996 Ford Contour GL. Four cylinder, five speed, cruise, A/C (works), AM/FM/cassette (cassette has never been used), power locks (works). No rust, cleaning up nicely, has all service records since new, all service been done at one of two Ford dealerships. 94,500 miles. And I know the car very well, having done all her little piddling maintenance’s on it for the last thirteen years.
KBB is $1300.00 (which amazed me, I figured in that condition it would be worth more like $2000.00). Given that I’ve been promised 25% of the take to handle the sale (she absolutely refuses to deal with anybody who’d shop Craigslist, is paranoid beyond belief); I’m seriously considering paying her the 75% and keeping the car for myself. It’s got a vibration above 70mph (not front end, just recently aligned and new tires), otherwise seems to drive fine. I’m going to live with it for a couple of days while I finish cleaning it up (hasn’t been washed in 2-3 years), and see how I feel about it.
Are you sure the problem isn’t the tires, either a poor job of balancing them or just the cheapest tires she could buy and they aren’t really round? Way too many tires are not round from the factory.
Maybe. Will be looking into that once I’ve decided to buy it and work out a deal. And Carol desperately needs a new, high end, laptop . . . . . . Tires are Tiger Paws (haven’t heard that model in years) which I believe make them Uniroyals.
Yes Tiger Paws are a Uniroyal model, however many of the Uniroyals are now really a captive WalMart/Sam’s club brand, are made to a price point and thus come from China despite the brand being owned by Michelin. So having one out of the four not being round wouldn’t be unheard of.
Yeah, I just recently got some el cheapo tires from Firestone, the Primewell brand. I thought it wasn’t balanced correctly but after two hundred miles, it settled down ok.
Along the Tiger theme from the 1960s – Esso (before Exxon) had a drawn tiger as a mascot and the advertising theme “Put a tiger in your tank”. Around about 1965 they had a orange and black striped tiger tail that you attached to your gas cap and it stuck out from your fuel door about ten inches or so. I can’t remember if you had to buy one or if it came with a fill up. They didn’t last too long as they got wet and faded and wind damaged. Happy memories.
From about 2010 until the middle of last year, I routinely (read: 4-6 per year) would flip older GM products on – and often from – craigslist. The criteria was pretty simple: any car late ’90s thru 2003 or so, with a 3.1/3.4/3.8, 150K or less miles, and a clean body (this is road salt country). Impalas, Grand Prixes, Grand Ams, Aleros, Regals, etc.
I did plenty of fender/hood/bumper swaps, and was always quick to grab an inop with flats, a dead battery, etc (show up with cash and a trailer!). Catch up the maintenance where needed, shine ’em up, make ’em look nicer than the average lot car. Slap on factory aluminum rims if it had steelies, swap in nice junkyard leather if there was even one rip or burn. The general MO was to have $1000-1200 in it, and sell it for $2000 cash… and it generally worked pretty well.
I’ve been out of the market for a bit now, and from your articles I gather things may have changed a lot in this short time. Is it really too tough out there to make such a strategy work today?
Good leather seats for older domestic vehicles are exceptionally hard to find in the Southeast.
Some of what you mentioned represents a good part of what is already done at my lot. I try to upgrade cosmetics whenever it’s possible, and having a large-scale auto recycler less than a mile away from me helps quite a bit.
When you upgrade the rims, clean the interior, and handle other quality of driving issues from tires to speakers, your overall turnover is far better in this business.
The issue you would have these days is two-fold.
1) Older domestic cars are no longer popular. Specifically, those from the 90’s are just incredibly difficult to retail.
2) 95+% of the population for these types of vehicles are not willing to pay for any form of ‘quality premium’. They reference whatever they found as the lowest price on Craigslist and try to dicker you down to that level.
The things that the general public is willing to pay a premium for are rarely the same things as what an enthusiast, or a knowledgeable consumer, would be willing to spend their money on. Most folks simply buy with their eyes these days. If I get more than one request a week to get a vehicle independently inspected, it’s a genuine surprise.
Good to know.
I know I’ve had success in the past with cars that are losers on paper, but shine in person (ie. ’94 Cutlass Supreme coupe, 3.1, clean body, leather, sunroof, 106K – replacement front clip, asked $2000, sold for $1800). My theory is – was? – that there’s always somebody out there wanting a car that “feels” new, but is on a tight ($2K-ish) budget and thus somewhat open-minded about year/make/model. That’s what made my plan work. But lately I get the feeling that those buyers may be disappearing.
Probably the main issue I’d face right now, though, would be supply. I suspect everyone is seeing some variation of this: anything that fits my model (retail for $2000-3000 while making $1000) and is 10 or less years old is pretty much nonexistent when shopping private parties, unless you’ve got connections out the wazoo. Thus, I’m stuck in time – the same things I’d have been looking at 4 years ago are still what’s available now, just with higher miles and more rust.
With my main line of work slowing down lately, I’ve been considering taking the plunge and getting a dealer’s license (total cost around $3000/year here – no small investment for me). That would allow me to get my foot in the door at some wholesale auctions, and hopefully help with the supply problem. But seeing things like that Park Avenue make me wonder if I could be barking up the wrong tree… after expenses, I’d have been lucky to break even on that car at that price.
All of my (somewhat limited) auction experience have been at salvage auctions, which I wasn’t terribly impressed with – as you might expect, the big outfits often drove the bids outside my comfort zone on anything worth having. My few successes weren’t worth the time spent inspecting and bidding each week. I’d hate to wrap up a bunch of money just to find out the local wholesale joints are the same way.
So… having said all that, what method (if any) would you suggest for a guy like me to get his feet wet in the auctions? Or is it even worth it for someone who isn’t already well established and well capitalized?
Steven, why do you dislike the LS400? Could you please elaborate?
With my SAAB’s insurance write-off being a very acute possibility, I am toying with the idea of finding one, although would look for something really pristine and of the 95-97 UFC20 type…
Thanks!
I don’t hate Lexuses at all. My in-laws now own two. My late father had one as his last ride, and I even have an IS parked on my driveway as I type this.
I just believe that Lexuses (Lexii) go for insane price premiums at the wholesale auctions. Here’s an article that I wrote about the SC400 of yore.
http://www.thetruthaboutcars.com/2009/02/capsule-review-1992-lexus-sc400/