Buying Cheap Cars and Selling Them, Possible Business Model?

Hi all, recently I was looking to buy a car while doing so I noticed there were several cars at basically throwaway prices under $500 - $1000 mark, most of them were in working condition but obviously not roadworthy sold 'as is'. I don't have the technical expertise to fix them myself but I was thinking of going to Uni, pick up the skill, and try to do it myself. I am looking for a career change from my 9-5 IT job anyway.

Since I am quite new to Australia, I am not 100% sure how labor costs work in Australia (aside from the fact they are probably the highest). So my question is, is picking up the automobile repair trade, buying and fixing cars and selling them myself in a reasonably acceptable and roadworthy condition a profitable business? Has anyone tried it?

P.S. I understand there are too many variables in this, that's why if anyone has tried it, I would love to know your experiences in this area.

Comments

  • +104

    for a start you wont pick up the skill of automotive repair at Uni.

    • +12

      Maybe he can choose a philosophy major and read "Zen and the Art of Motorcycle Maintenance".

      • +6

        Could go to uni and knock off cars from the uni car park, strip them and sell the parts on Gumtree. That would be a far more lucrative business model for someone who wants to enter the bottom end of the car trade via university.

        • +2

          This is actually a very sound advice, try targeting high profile uni that have a lot of overseas students!

          • @Dotherightthing: Why? Wouldnt the local students likly own cars as they start learning from 16. International students either newly arrived or only here for a semester to a few years so might not need a car especially if they live on campus/cbd.

            • +4

              @Bryanalves: Local students do have cars but they range from bomb to good. Some international students are living off rice and arent driving good cars. However there is a small subset of international students who have very, very good luxury cars thanks to mum and dad back home.

  • +2

    Become an apprentice.

  • +1

    Good luck if you think you will learn the skills from a book. I watched 1 technician change an alternator in 90 minutes. Technician 2 did the same job in 15 because he knew the trick. It was the same car. Youtube is pretty good, but nothing like hands on experience. Having said this - Most mechanics do exactly this. My concern with your business model is what does "reasonably acceptable roadworthy condition" actually mean? It either is or it isn't.

    • Sorry, I meant, in a reasonably acceptable 'and' roadworthy condition, edited it now. If you take a look at a $500 car, you will know what I mean by a 'reasonably acceptable condition'.

      • Is that same 'reasonable acceptable condition' that some landlord's think is acceptable?

        If so, perhaps uber eats delivery might be more your forte…

        • No, I meant, something which you don't mind driving around for a $2000 price. Better than rat-eaten seats full of fungus and rusted bars spiking round.

      • If you take a look at a $500 car, you will know what I mean by a 'reasonably acceptable condition'.

        Sawdust in the tank? Bumper attached with Super Super Glue?

        • +4

          don't bother just go straight into the chokie

      • +2

        Good idea, here in Australia, everyone complains about migration but labour cost is very very high, such as Car mechanics and medical professionals. If you have interest, u r choosing the right profession. Instead of going to uni., u must go to TAFE and become an apprentice. In a couple of years plus, u will be able to start ur loving career. All the best.

    • It would take me 3 days, how depressing

  • +70

    Buying Cheap Cars and Selling Them, Possible Business Model?

    Yeah been around for decades, its called a 2nd hand car dealer…….

    • +15

      Backyard mechanic would be a much fitting term for what the OP is asking. The type of dodgy operators who would buy repairable write offs from auctions for peanuts and onsell them after fixing the damage with used/stolen parts.

      These are the sellers on gumtree who have multiple listings of lady-driven, low mileage old model lancers, Commodores, festivas, etc., etc.

  • +10

    If the world gave you $10 million today, would you still want to do a side hustle - buying & selling cars? If the answer if yes, go for it - you can make it work - you have found a purpose. If not, find that one thing you would love to do, give it value to someone else (and thousands more) who would find value - then make money if that is your thing.

    You do not need to answer my question however - just think about it in your private time and only you need to know the answer.

    • I will answer your question.. and it is exactly what you said.

    • +3

      I would still in ozbargain even if i got 10m.. shit.. i think im in the wrong industry…

  • +15

    You may be required to obtain a motor vehicle traders license

    https://www.consumer.vic.gov.au/licensing-and-registration/m…

    May be worth doing some reading as I believe you can only sell a number of cars before its classified as a business. Id also be looking at tax implications as well.

    • +5

      Was going to say the same thing. Similar in NSW.

      That aside dealing with all the time wasters, especially in the ultra cheap end of the market, would be soul draining.

    • Well, in a nutshell, as far as tax goes, I would only have to pay tax on all the money I have made after factoring in selling price - rego, rwc, parts, etc. which is fair, to be honest.

      • +1

        If you are selling 'bangers' the margins will be low so Id question if its even worth it.

      • +3

        Well, in a nutshell, as far as tax goes, I would only have to pay tax on all the money I have made after factoring in selling price -

        No you have to pay taxes on what the law says, not what you think.

        • +2

          But, won't my aforementioned expenses be tax deductible anyways?

    • +3

      Applies in WA too. You also have to provide a warranty for a period of time after sale.

    • or just have a few relatives that can buy and sell once you hit your quota, preferrably with a different last name than you

  • +41

    So, you want to take cars that are worth next to nothing, spend money on them, and sell them for more?

    There is a reason the car is being sold for $500… It's because its worth about $500. You will then sink another $1,500 into getting it up to saleable condition, only to have put a $2,500 price tag on it and be competing against people selling theirs for $500.

    Let me tell you from experience as a mechanic who buys, fixes and flips cheap motorcycles and cars, there is no way you could make it into a living. The margins are so low. People in that price bracket are the worst tyre kickers. Sometimes a vehicle may take between 6 to 12 months to sell. You will need a place to store them, and that costs money, you will need to be registered as a business, have a dealers license (and in some states a mechanics license), pay GST, pay rent, pay your own wages… The list goes on.

    A better side hustle would be to offer to fix those cars that people are selling, but not buying, fixing, stocking and selling them yourself. And you will need to complete and Automotive trade course. This will take between 3 and 4 years to complete at TAFE (not Uni). Not a big portion of your life, and it will be a skill you will always have if you move into different fields of work.

    TL:DR; Don't do it. You cant buy $500 shit boxes, fix them up and expect to sell them for $3000 if everyone else is selling them for $500.

    • Oh, okay… thanks for that advice. Super helpful! :)

    • A better side hustle would be to offer to fix those cars that people are selling

      The better hustle is buying written off cars that if were fixed body wise and roadworthy would sell for something decent second hand. ie. the luxury cars segment. There is a mechanic down the road from my house that basically does for a living (and has all his written off stock parked down the end of my street) he buys written off Audi's and mercs/bmw's etc. and fixes the body's so they look real nice and just gets the mechanics of them running again.

      • I don’t know how that works, because once a car is deemed a write off in NSW, it’s a statutory write off. There is no repairable write off scheme in NSW anymore that I am aware of, unless you owned the vehicle prior to the accident.

        He may be buying uninsured vehicles that are not written off, but with prestige vehicles, this would be very very slim pickings. Most of them are insured.

        The other issue is that even if they are interstate vehicles he is fixing up, the WOVR will still show it was damaged, destroying any resale value it had. Added to this is the cost of shipping the car from say, Vic. up to Sydney then back to Vic. For. VIV inspection. There would be almost zero margin in what he is doing, and so much time and effort for so little.

        • I'm not a car pro so would be interested in your opinon, but I believe there are some examples of where you can make money, but some are less than an ethical way to make a living. I will list them:

          1. Buy cars at auction and sell retail - nothing inherently wrong with this, but if you don't know how to check out a car you don't know if you are buying a lemon
          2. Buy sought after models second hand from gumtree/carsales etc. - After looking online for a while, I have seen some finds pop up on a saturday night and if you can get in touch with the seller and pay cash the next morning you could flip a car worth say 2k for 3.5k. It's not a big money, but some people don't realise that their car may have started appreciating. Also maybe buying sought after models that have started to have some paint fade, and then learning how to fix those areas and detailing, heaps of people doing this on youtube with decent results
          3. This is the dodgy one: buy cars off people who've just broken down, gone to a mechanic and been quoted 3.5k for an engine rebuild, when your mate (insert name of foreign origin here) can get a second hand engine and drop it in for 1k. The reason I say this is a bit dodgy is because I've seen it happen a couple of times where a friend had a pristine vehicle, blows a head gasket and then the person advising them (NRMA/mechanic) buys it off them cheap. It'a a major conflict of interest, but there are people doing it.

          Having said that, I agree with you, it's most likely something like this could never be more than a side hustle, and you would have to love fixing and flipping cars, but I do think there are lots of cars that are unloved by their owners that still have lots of life in them.

          • +3

            @Jackson: Sure, I'll pass on some opinions…

            1: Sure. I think this is my preferred method. I buy a lot of bikes from auctions and break them down as wrecks or, if they are good, spruce them up, go over them, make them road worthy and sell them. Auctions can be a good place to buy reliable enough cars and flip them, if you get a good deal. (I have seen cars go for way more than what they would sell for privately for some stupid reason, but patience is a virtue.)

            2a: Gumtree/Facebook is an avoid area, because it's usually an offloading ground for busted-arse shit heaps. You have to have a reasonably good mechanical sense about you to shop for cars on these two places, BUT!, you can find the odd gem among the turds.

            2b: Carsales is the time wasters paradise. So many idiots on there trying to sell their car for waaaaaay above market value. There will be 8 examples of a particular car at dealers for $14,995, and some idiot will have their dungheap on there for $19,000, with no warranty, no after sales service, no back up, etc… ie: there are no deals on Carsales, just mostly over charging dealers or dreamer private sales.

            2c: It's like anything. Great deals can be spotted anywhere. The trick is to know what you are looking for, what the market wants and getting the two to match up. It's about waiting for that needle in a hay stack. Watching for vehicles that have been advertised for a long time. My last car I got $3,000 of the guys asking price because he had not gotten a single call in 3 months he listed the vehicle and was sick of it being at his house and just wanted to get rid of it. Knowing. Watching. Waiting. Pouncing.

            3: The game played on hard mode. I have done this a few times on motorbikes. Blown engine, not running, accident + no insurance wrecks, etc. etc. Unless you can get the car VERY cheap, any margin in it is soon eaten up in parts and labour costs. It is A LOT of work for very little margin. You might buy a car that has a value of $15,000, but has a blown engine, so you get it for $9,000. You then sink $3~4,000 into it to get it running, to sell it for a profit of $500.

            If you want to get into flipping vehicles, start with bicycles. They are easy to work on, parts are cheap, don't take much storage and are easy to sell. Then move up to motorbikes and scooters. Slightly harder to work on, but still easy, parts are cheap and you can easily store 4 or 5 in a standard garage. Then, once you have that down, try out a car or two, and see how maddening it is working on and trying to flip cars.

  • +1

    I know someone who does this.. He has had lots of cool cars, buys them fixes them up sells them on..

    • +1

      Well, I am sure he is targetting a little higher spectrum of the market… I was going towards the lower end. I would go there anyway if I could fix cheap ones myself and at least cover my costs long enough to be confident with those investments.

      • In NSW Registration & compulsory insurance (Greenslip) on pretty much any car is approx $800-1000 pa… if you are buying a sub $1K car with decent rego (rego = short for registration + greenslip), you are basically getting the car for free.

        If you take a $500 shit box with no rego and want to register it, you need to get a blue slip (very detailed and more stringent Road Worthy test) before it can be registered again. IF the rego only recently expired it needs a pink slip (roadworthy check).
        Then if you spend $500 on parts /labour and sell if for $2K you might just break even… but there is so much risk that you wont even break even, why bother.

        It would be worth familiarising yourself with what they look for in the pink slip check…. as repairs can be costly. E.G. They look at tyre tread, cracks on windscreen, brakes, general roadworthiness etc… If any of those items need attention you will be up for some serious $$ in parts

        Might be better to target a more expensive end of the market with a bigger margin?

        In NSW I think you can only trade 4 cars a year as an individual (from memory) otherwise you need a licence, to get a licence you need to have a yard to store them (or a property in a council that permits the storage of motor cars on private property for commercial use)

        • a blue slip (very detailed and more stringent Road Worthy test)

          No it isn’t. A Blue Slip is just a pink slip with the added VIN validation portion. It is in no way “more stringent” and the only thing “more detailed” is the fact they need to validate that the VIN is ok to be registered and this is simply because there are no plates on the vehicle or current rego papers.

  • Lots of costs. Not a lot of profit. Maybe good as a side business or hobby.

    The hard part is selling quickly at max price.

  • +3

    I do/did this for cars that weren't $500 shitters. I get lateish model things with major faults, and repair them. Eg, timing belt gone and bent valves, not running for unknown reason, blown head gasket etc.

    As someone said, uni isn't going to teach you, neither is Tafe. Tafe will give you an idea of the theory, but that is very different to practise.

    • But did you make a good living out of it?

      • of course he has, he's on ozbargain :) on a serious note, I'd be interested in hearing from @brendanm about if you ever picked up a late model lemon and it bit you?

        • +2

          Haha, it was always a side hustle for me. Generally paid me at least $200 an hour.

          The one car I regret was a 2013 Captiva V6. Put a nice later model engine in it, then find stereo doesn't work, has a noisy wheel bearing etc. Only had 100k km on it. Ended up just sending it to auction and made $200 or so for a lot of effort.

  • Why not do it with repairable write offs instead? Hail damage + Respray/fix = Profit!

    • +2

      People don't want to buy repairable write offs.

      • People will for the right price. If it's a $10k model or the same thing at $7k but a repairable write-off, many people will look into the write-off.

        • Not in my experience.

    • In some states, NSW for example, these write offs can no longer be registered, even for just hail damage. There is an exception in the case of hail but you have to own the car at the time it was damaged.

      • In some states, NSW for example, these write offs can no longer be registered

        That is why all cheap cars selling in NSW that are registered in QLD you should walk a mile from.

      • In some states, NSW for example, these write offs can no longer be registered, even for just hail damage.

        Then by definition, it's not a repairable write-off. If it can't be registered, it's a statutory write-off.

        • Write offs that can be repaired, ie repairable write offs, only apply in NSW if you own the car for lie 90 days prior to the damage. This is to allow an owner to keep and repair a ‘special’ car.

    • -1

      When car get written off, type of damage does not registered.
      So when people do a vehicle check before purchase, they probably think its a written off due to structural damage.

      • +1

        The type of damage is registered. For hail it comes up as storm damage, so people will be worried that it's been flooded.

  • +8

    You are better off learning to do plumbing or be an electrician. These guys make more money than a uni degree and get to work whenever they like.

    • +2

      Having worked in the electrical trade, this isn't necessarily true. Not all sparkies are making the pay people perceive.

      • +1

        That is why you no longer work in the trade. Same with all trades. Some call it luck, some call it hard work, some call street smarts, some just make excuses.

        There are people making $1m a year but got zero assets because they recycled all their cashflow through the casino.

        • +5

          I don't know whether it's a coincidence, but I know 3 ex-electricians and 0 current electricians.

          I've been left with the impression the job must suck.

          and as for working where they like, if you like working in crawl spaces and sewers then I'd totally say go for it.

          • +3

            @SlickMick: What, you don't think working in a 60°C roof space would be great fun?

            • +1

              @brendanm: That is what you have an apprentice for ;)

              Most guys that don't make it as sparkies have the personality of a door mat, skills are not in line with what they charge, never make it past the 1 man 1 van setup.

    • Just not true. The average tradie makes considerably less than the average professional on the ABS figures.

      That all tradies are raking it in and that a uni degree is not worth getting economically are one of the many popular memes that are in fact flat out wrong.

      • Averages and statistics. We know how that works don't we?

        You can't count Bill Gates to push up the statistics for those who finished uni. Or Steve Jobs while he was alive.

        All that we know is whenever an electrician / plumber turns up and completes the job it seems like they are making pretty good hourly rate and likes to be paid in cash. Driving around in flashy utes and has a jet ski or a tinny to go fishing.

        • Except both Bill Gates and Steve Jobs are well know college drop outs.

          • @The mikky: read again

            You can't count Bill Gates to push up the statistics for those who finished uni. Or Steve Jobs while he was alive.

            • @netjock: You are kind of implying that they are being used to inflate the statistics.

              And if you want to say people are using those people for the statistics, can you provide some fact as to where this is the case ?

              • @The mikky: Let me explain. (University graduate salary statistics) You cannot count on Bill Gates and Steve Jobs to push them up (implying they never finished uni).

                • @netjock: So why bring them up ? No one said they were using them for statistics.

  • "Buying Cheap Cars and Selling Them, Possible Business Model?"
    Well it will work with anything not just car, right? buy cheap and sell

    even maybe:
    Buying Cheap wife and Selling Them, Possible Business Model?

    • +5

      I know you are trying to be funny. But your punchline is human trafficking which is probably the furthest thing from funny.

      • Silence, object. No topic is off-limits.

        • No topic is off-limits.

          Well at least be actually funny if you are going to go there…

  • There are mechanics making quite a bit of side-income doing dodgy things with luxury vehicle write-offs.

    But as a home mechanic hobbyist, it's prohibitively expensive in my area to have a spare garage to fix up a single car, let alone 5. The fine for parking an unregistered vehicle on the road in NSW is $686, same as for driving. Most of these backyard operations are performed in literal backyards of outer Sydney. And in a few housing commission parking lots of inner Sydney.

    All the wreckers in Tempe seem to have vanished as well. I think people realised they can make more money selling land than operating businesses on them.

    • Same shit in Melb; nothing quite like getting excited over an ad for a bargain AMG C63, then finding out it's an assymetrical wonder in a Broady backyard…

  • +5

    Years ago a friend and I used to sit at work scrolling through the Trading Post trying to find 'clangers'. These were cars or boats that were being sold reluctantly. The ads usually went something like this: "For sale. 1972 Monaro restoration project. Wife is forcing me to sell as she's pregnant with our 7th child. 90% complete restoration. Car comes with extra spares. Rebuilt engine, new transmission and brakes. New leather seats, full wiring. Have all receipts. Have spent $22,000. Will accept $4,000".

    • +7

      Have spent $22,000. Will accept $4,000

      I reckon you've effectively summed up the business model (for most) right there.

    • +4

      7th child? Back seat of that Monaro would be pretty worn out.

    • Wife is forcing me to sell as she's pregnant with our 7th child. 90% complete restoration. Car comes with extra spares. Rebuilt engine, new transmission and brakes. New leather seats, full wiring. Have all receipts. Have spent $22,000. Will accept $4,000".

      that example though!

  • +1

    It's not too hard. There are many books about flipping cars, maybe check your library? My friend did this for many years. I think the most he would make is 15k a year by himself and no tax. He would need other people to sell some of the cars for him as you can only sell five in qld without a license. He had a friend with a dealer license and used to go to dealer auctions. That's were the money is, these cars were well below market value to start with. You can go to the normal auctions to see what the prices are.

    • +2

      Similar in nsw. Limit to how many you can buy and sell in a year before you need a dealer licence.

  • +1

    been watching all those old wheelers dealers episodes? you need technical expertise, know friends to fabricate / source parts / find deals. also tv ad revenue lol

  • +3

    Worked with a bloke who did that.

    He'd buy a $500 shitbox, spend another $500 on tyres, battery, filters etc and then sell it for $1000.

    He'd be rather chuffed when he sold it for double what he paid.

    Yeah…

    • You haven't factored in Rego, RWC and transfer fees. Also, you lose about $2/day in rego at least in Victoria for each day you don't sell.

      • +10

        I didn't say he was a smart bloke…

        • -3

          …I dunno, you say he was doubling his money.

          • @[Deactivated]:

            he was doubling his money.

            Indeed he was. Apparently it was explained to him without it sinking in, maybe he was going to make up for it in volume.

            And we all worked at Toyota, lol.

            Who on earth is negging you, some people just don't understand the car business. Or their humour detector is broken, a common problem on OzB.

            • @D C: Did he ever realise and give up? Were you assembly workers?

              Dunno about those downvotes, I don’t think I’m very good at internetting, sometimes what I think is obvious sarcasm, is less than obvious to others.

              • @[Deactivated]:

                Did he ever realise

                Not that I know of. Odd bloke. This was in the accessories dept (sourcing, ordering etc), not swinging spanners around.

                Negs are funny, look at this cavalcade of negging losers: https://www.ozbargain.com.au/comment/8390669/redir. Lolz.

              • +1

                @[Deactivated]: From experience I can tell you that you should always mark humour or sarcasm with a "/joke" or "/sarcasm" marker at the end, even when it seems very obvious to you that you are trying to be funny. There are always people who - to put it kindly - have a very different sense of humour and so will take it seriously.

                • @derrida derider:

                  and so will take it seriously.

                  Those people need to get a life. Probably the same people as the tedious grammer nazi's.

    • +2

      He'd be rather chuffed when he sold it for double what he paid.

      Bro I just made double my money! Drinks on me tonight!

  • +1

    So you want to make a small fortune… from a large fortune?

    • -2

      from a large fortune?

      *on top of the existing large fortune

  • Backyard telsa mechanic might have a future.

    • +1

      No chance

  • One of my uni fellows actually ditched his post graduate course and became an automotive recycler some 15 years ago. Haven't met him for a while but think he'd be way better off than many of us who ended up completing the course. BTW I'm fixing/servicing my own cars from last 8 years and learnt a bit about cars. IMHO, the hardest challenge is to be able to differentiate between a good old car (which only needs battery, tyres, and filters to run) and a lemon or else every man and his dog out there would be doing this.

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