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Sunday, 31 January 2010

Choosing a price bracket

It may be that when you are starting out as a motor trader your choice of price bracket may be dictated by the amount of available funds that you have. Once you have started to trade however you should have a supply of money with which to source stock. The beauty of trading from home is that you have the freedom to have a very wide price bracket unlike most dealerships. Even now I will happily trade a £500 car one day and a £20,000 car the next. A profit is just that. A profit. 

You will find that the large dealerships refer to stock as metal. They really have no emotive interest in what they sell. They are just interested in shifting units. I'm guessing however that most independent traders do actually have an interest in cars/bikes etc. They are more than just metal. If you wanted to sell units you could have chosen to trade pallets or fridges or washing machines.

So lets assume you've got a few thousand to spend. What value of cars/bikes/vans should you be looking at? To be honest, that is down to personal choice. There have been times and I'm sure I'm not alone where I have spent thousands on a car and actually made a loss. Equally so, I have spent just £500 on a car and made £1500 profit. 

In fact recently I bought a classic TVR 350i. The car had been off the road for 5 years, It was fibreglass and so hadn't rotted but the interior was appalling, it was in need of a full re trim. The engine hadn't been started in 5 years either. The whole car was covered in green moss and tree sap. It was a sorry state when we went to view it. The car was owned by someone that we knew and it cost me £500 but I knew that there was a big following of these cars and so I took a punt on it. 

I often buy with a friend. We bought this one together, paid a recovery guy to collect it and got it home to my friends house. We made a list of what we needed to do. It wasn't a long list. We had decided that instead of restoring it we would simply get in running, clean it up the best we could and advertise it as a restoration project. Once we had assessed the car over a cup of tea and a cigar we made the following list:

  1. Mini Service including oil, plugs filters
  2. Get the engine to fire
  3. Steam clean the chassis and the underbody, 
  4. Wash and Polish the body work, door edges, glass
  5. Vacuum the interior
  6. Clean the hood
  7. Remove the wheels and check the brake operation.
  8. Investigate the pop up headlight that wasn't working.
We spent a FULL (albeit enjoyable) 8 hour day on this car. Both of us got dirty and got stuck in. I'm not hot on mechanicals so my buddy took care of the service, headlight etc. and I cracked on with the valeting duties.  

After 10 hours it looked superb (see photo) and started, The engine luckily was sweet with a typical TVR V8 soundtrack. I put it on ebay using a tried and tested method (I'll tell you my ebay secrets another time) I was brutally honest about the car, I listed it with 12 detailed photos showing just how bad the interior was and the thing went ballistic. We literally had people fighting over it, In the end we chose to end the Auction early and made a sweet £1500 profit for just 1 days work! most of all, It was enjoyable as we were working on a lovely piece of British Motoring history.

Normally if this were a regular car then I wouldn't have got so involved, I would have paid for a service, a valet and took pictures and then advertised the car. This was nirvana, an enjoyable days work and a £1500 return on a £500 investment! superb.

As a rule I have always tried to work to the following formula as a MINIMUM

  • On a car that cost less than £500 then try to double your money but at least go for £250 profit
  • On a car costing £1000 - £5000 then try to make at least £500 profit. 
  • On a car costing £5000+ then try to make 15 - 20% profit.
There will always be exceptions, some good, some bad. As I mentioned earlier, I will always consider dealing in any price bracket as long as there is a margin. As long as you are buying right then the worst scenario should be a break even or a small loss. 

When you are dealing with regular run of the mill cars you have to be aware that because you trade from home you need to be considerably cheaper than the dealers. You will always then appeal to the cash buyers. Generally the people who need finance will always go to a dealer and will end up paying over the odds, in return they'll get an extended warranty, a cheesy smile and a phone call every 12 months asking if they want to upgrade. 
You need to be buying at the right price in order to beat the big guys and still make a profit (We'll cover this in later posts) Alternatively, if you deal in niche markets such as the classics that we've described here today or 4WD or just white vans etc you stand more of a chance of getting a little more money. 

I hope this article has been a good example of turning a big profit from a small outlay. It's all about preparation and presentation! A car well presented is a car sold! 

Until next time......

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