Buying Cheap Cars and Selling Them, Possible Business Model?

FrugalDealSeeker on 28/02/2020 - 09:22
Last edited 28/02/2020 - 09:34

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.

Automotive

Comments

    • FrugalDealSeeker on 29/02/2020 - 09:40

      that was my idea… some people just don't care. For example, my car is older than I am, got it for $2000 and used it for 5 years, it's not starting so you can have it for free as it's just blocking my driveway… and later turns out it was just a dead battery so you can probably sell for a 200% margin with RWC.

    • derrida derider on 02/03/2020 - 12:17

      "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."

      If you'd studied economics you'd know that this "asymmetric information" (to use the jargon) radically changes the way markets work (or sometimes don't), and was first identified in the market for used cars (see https://en.wikipedia.org/wiki/The_Market_for_Lemons )

  • photonbuddy on 28/02/2020 - 21:03
    +2

    I had a guy in my block of flats who did this.

    He'd buy shit boxes, rust buckets, etc. and spend heaps of time fixing them up. He was on a government welfare payment, so it wasn't like the roof over his head depended on his success.

    He'd often get through a car a week, and when selling, would spin a story about having lost the rego papers, and told the seller to just rock up to the registry and transfer it.

    He did some real dodgy stuff, but didn't much care … until he ripped-off the wrong buyer, who came back and jumped on the roof of his beloved rebuild-in-progress of a v8 commodore, and 2 other cars he had just listed for sale.

    Not saying OP will be anything like that, but just because people are buying cheap cars, doesn't mean they don't expect a good car.

    • FrugalDealSeeker on 29/02/2020 - 09:38

      yeah look, I won't compromise work ethic just to make a quick buck, but then again, it's easier said than done… and obviously when you are using this to put food on your table, integrity could get compromised if you aren't making enough so I get your point.

  • lette on 28/02/2020 - 21:51

    As someone struggling to learn her bloody giant, easy to manage diesel engine from before I was born, I don't think this is a good idea without some mechanical experience.
    You'll end up going two steps forward ten steps back with every little thing, from basic identification of parts, to diagnostics, all the way to solutions, sourcing parts and doing repairs. Every engine is a bit different, sourcing the manual may be difficult and then you have to decipher it and they're not all easily laid out. It seems easy when you think bout it, but every step is super complicated for an inexperienced person. What should take 10 minutes ends up taking 2 hours.
    If you do end up repairing and having it run you'll most likely have the nagging fear of "did I do it all correctly? Are we about to explode?" kind of feelings.
    The tools are super expensive and break easily. Waiting on parts takes weeks sometimes only to find out that wasn't the issue to begin with anyway.
    Also, I think it is TAFE you want for automotive repair.
    perhaps ask to do work experience at a smaller mechanics. That's what I've been doing to play catch up on my engine and I'm a 30 year old female. People love free labour, someone will take you.

    • FrugalDealSeeker on 29/02/2020 - 09:36

      Also, I think it is TAFE you want for automotive repair.

      As an immigrant, I tend to use TAFE, Uni, School, and college interchangeably but anyway, thanks for the advice, much appreciated. :)

  • Cluster on 28/02/2020 - 23:19
    +1

    Check out Hoovie's Garage on Youtube. The guy makes a living buying the cheapest example of a particular car, driving it around, and taking it to a local mechanic who fixes it or tells him how much the repair would send him broke. The whole thing is recorded and uploaded to youtube for millions of views.

    • lette on 28/02/2020 - 23:49

      Theoretically couldn't you do this just by test driving and asking to have a mechanic inspect the car without actually purchasing it?
      That's a decent business model if possible. Spewing I didn't think of it when I was testing yachts and paying 1k+ per inspection. Could have recouped some of that.

  • Kranbone on 29/02/2020 - 00:14
    +1

    I've been doing this as a side hobby and have generally come up well. Ironically I've friends who've transitioned from hobby to full time and they've not done so well.

  • FittyFitty on 29/02/2020 - 04:48

    In terms of selling bombs; pass - rather go to auctions and buy luxury write-offs, strip them of parts and sell them individually for ridiculous mark-ups (like headlights for $700, or badges for $300, or side mirrors for $800, engine parts for $X). Get into a flow and you'll do well; you get the picture.

    • berry580 on 29/02/2020 - 08:32

      There will be bound to be some sections of the car that cannot be sold. E.g. The car frame itself, damaged sections, etc.
      How will those parts he disposed? You might be able to just store it in your backyard if it's only 1 or 2 cars at the start and your mum/ dad doesn't mind. But you'll need a long term solution to it.

      • Jackson on 01/03/2020 - 21:59
        +1

        metal recyclers will take partial cars

    • FrugalDealSeeker on 29/02/2020 - 09:43

      Speaking of stripping for parts, I saw a bunch of ads for cars like $500. You could cover that price just by selling the wheels and headlights. However, what do you do with the remaining car? I don't think you can just toss it the nearest yellow bin?

      • TheBird on 29/02/2020 - 16:36

        Sell for scrap.

      • serpserpserp on 29/02/2020 - 21:12

        Yeah man you just put it on the kerb (but not your kerb…)

      • BreezyPalms on 01/03/2020 - 21:04

        Scrap metal companies will collect for free, i've sold a few whole cars to them for $200-250 ea just to get rid of them

      • picklewizard on 02/03/2020 - 13:43

        No car that has a used part value for wheels and headlights for $500 is being sold for $500.

  • drprox on 29/02/2020 - 09:08
    +1

    My colleague does this but I've seen him lose on his last 2 cars. I've no doubt he occasionally wins too but it can be hit and miss.

  • bazingaa on 29/02/2020 - 10:00
    +4

    If you are really going to do this, master one popular car model and stick to it, you will learn more about that car model in the process and it will be easier to fix, also you can buy a cheap doner car and use it for parts for others, I have seen some mechanics are doing this thing

  • danbal on 29/02/2020 - 12:42
    +1

    Buying and selling cars is a hit and miss situation. I know of one guy (retired) who buys cheap cars with problems. He fixes them to be roadworthy and sells them. He has less risk because he is retired and doesnt need constant cashflow to feed the family.

    I used to work in IT. But now I decided to start from scratch and become an apprentice truck mechanic. I am about to finish my cert3 this year. Probably similar to you, sitting in the office all day was mental torture. Attending meetings when a simple email would have done the same effect.

    Also, there is one other person in the workshop who worked in IT before. Its a big leap of faith. You need to be prepared to change your lifestyle spending.

    • FrugalDealSeeker on 01/03/2020 - 11:15

      You are exactly right… I am so sick and tired of daily sprint meetings, Trello boards, GitHub conflicts, and bugs and deadlines. The keyword here being deadlines. That's why I wanted to start my own business among other things.

  • Dienk on 29/02/2020 - 13:19
    +1

    OP ir you are into IT world try to do it with computers. I used to do this. Not bad at all. People use to sell parts deadly cheap.

  • LFO on 29/02/2020 - 13:35

    I met a VERY experienced mechanic doing exactly this.

    Buying cheap, fixing and selling for a profit. In particular he was buying and selling to overseas students and travelers wishing for "some kind of car" to move around. No expectations.

    He bought and sold a lot of cars. Made some little money. Not a real income. Not a changing career.

    If going that way, remember to get a special permit/plates on your state to allow driving unregistered cars for short distances. Like a "dealer plates" but a lot cheaper and more limited.

  • kbw on 29/02/2020 - 14:12
    +7

    I couldn't think of a worse fate than repeatedly dealing with Gumtree types over sub $5k cars.

  • frugalftw on 29/02/2020 - 14:55

    Car mechanics simulator 2018 would be a decent starting point.
    It can definitely work, but I would be very flexible on the outcome. Dive into the skills first, see if the mechanic work actually interests you. Once you have a good feeling about it, you will very likely be integrating the skills you picked up from IT to morph it into a feasible business. It's your unique combination of knowledge that will make your business stand out.

  • Bignudge on 29/02/2020 - 15:38

    Unless you're at the level qualifying to pass a blue slip on vehicles… I wouldn't bother tbh.

    There are lots of workshops/individuals scouting out "cheap" cars from auctions…. fixing them up to the minimum and selling it. Wouldn't make sense to get it fixed at a mechanic and blue slipped. If there was profit to be made… it wouldn't of made it to the auctions in the first place.

  • Herbse on 29/02/2020 - 15:51
    +2

    You can but your problem will be

    1. You will need storage place for the car/s and parts, tools. Most cars will take months before they sell.

    2. When buying shitboxes, you don't know what problems you're inheriting. Biggest headaches are overheating, head gasket, leaks, transmission issues.. most of which you might not see until you drive it for a while.
      You'll most likely buy a car that will cost more to fix than it's worth. Then you're in the red or be dishonest and sell it off without tell the buyer.

    3. Getting a roadworthy can be very tricky. Many mechanics use the roadworthy process as a way to make income and are stricter than they need to be with the rules and tell you to fix this and that so you'll leave it with them and make them money for the work. Where some places only tell you to fix what's needed and pass it when you do.

    4. You might be able to pick up a cheap deal, slap some makeup on it and sell for a profit. But if something happens within a few months, the customer will call you and threaten ACCC, ASIO and Bikies because they will feel ripped off. (Threads on here are proof of that)
      You will need to develop a thick skin to deal with these sorts of threats and complaints.

    5. Unlike selling small items where if it breaks, they might just let it go. Buying a car is a very personal and big investment for people. They rely on it for work, family and living. If you're the type of person to care. You'll struggle to sell an imperfect car that you've found has deeper issues but can pass a RWC.

  • TheBird on 29/02/2020 - 16:57

    I've done this in a couple other industries. One was full time for a number of years. I'm doing a couple of things at the moment. One is working, one isn't and we're about to try another one next week (fingers crossed).

    First of all, I know nothing about cars. When I go to a dealership, I'm the sucker.

    But in second hand dealing, the one lesson I've learned, people buy for the price they will buy it for. Some will pay more, others won't. there's always a price that the majority are willing to pay. In my opinion, that's your sweet spot. The sell price to aim for. You then need to work it backwards from there. Can you buy, include fix/upgrade/maintain, add-ons, include margin for your time/effort and still hit your target price? If so, it'll work. If not, it won't. The biggest lesson I learned is you have to buy at a really low price. I aim for 500% markup.

    The reason the one that isn't working is due to the market not willing to pay the price it costs me to bring the product to market.

    The more people competing (don't ask me what I do, I don't want competition) in your market (especially those who simply compete on price), the closer to your margins will be to zero unless you bring your own secret sauce.

  • Harold Halfprice on 29/02/2020 - 23:37

    I know a few people personally who buy and flip cars. One guy who is basically a backyard mechanic and fixes up falcons/commodores that he buys for cheap because the owners don't know how to fix it or can't be bothered. Won't touch repairable write offs. Falcons/commodores are a good car to buy/flip because parts are cheap and abundant.

    Another guy I know imports the odd collectors/classic car, from the US, in good condition - keeps it for his himself and drives it for a bit then sells usually making a bit of a tidy profit in the process. He's not doing it to make a living, he just loves his cars and knows where and what to look for usually.

  • funnysht on 01/03/2020 - 13:50

    My 2 cents

    honestly don't. This is like a business so there is a chance it could fail miserably.

    Also two things: You need to become a good mechanic (prob takes 5 yrs at least) and you need to know about small business.

    Instead you could invest the 5yrs learning a trade- especially easy to get an apprenticeship if you have plumbing/elct registered friends. At least most people don't go crazy chasing up few hundred dollar repairs, but you'll get angry car customers even if you try to honestly do a good job. Easy to do a honest good job fixing a pipe/locksmith than honest job in fixing cars in my opinion.

    I suggest the apprenticehip. At least the investment in learning is paid apprenticeship, rather than a gamble. Perhaps speak to 2nd hand car dealers and see what their opinion is. Side job could be uber as well.

  • 2ndeffort on 01/03/2020 - 13:57

    I once bought my son a car from Grays Online. When I went to pick it up there was a long queue of people pickign up 3 and 4 cars each, looked like they were already running your business model.

  • DASHCAM NOW DUDE on 01/03/2020 - 19:38
    +1

    This is literally what every used car dealer does…

  • Donaldhump on 01/03/2020 - 20:17

    You should go on dragons den

  • [Deactivated] on 01/03/2020 - 20:39

    I know many cars are good enough to be repaired but people here don't trust that a second hand car is good enough. They will not buy an old car for many reasons more than they will. Do your market research, maybe I am wrong and might find a niche. I would not be a higher paying customer thats all i know.

  • spacebanana on 02/03/2020 - 08:23

    I did this when I was 19-21 (about 6 years ago) and generally did quite well. I started with zero knowledge and just specialised on a specific series of car. I focused mainly on imported Japanese cars. I never lost money on the cars even with the mistakes I made that cost me money.

    Cars from early 2000s are not overly complex and I am sure you would be able to figure it out :)

  • 91rs on 02/03/2020 - 10:21

    I'd hate to know my lack of ability or skill-set contributed to someone buying a car off me thinking its all OK when its not and having something happen to them.
    Sounds like peoples lives are potentially worth less than you making some cash.
    The reason the used car market is such a terrible place to look for cars (especially cheaper stuff <$5k) is because of people like this, don't contribute to that.

    • Euphemistic on 02/03/2020 - 10:32

      Sounds like peoples lives are potentially worth less than you making some cash

      That may be over dramatising a bit. Unless you are messing with brakes with no idea or inserting self drilling screws into the floor above the fuel tank it’s unlikely to be a life threatening mechanical work. Sure, it could be expensive to fix your stuff ups but that’s hardly life threatening.

      You are right though, plenty of dodgy types filling gearboxes with sawdust and sticking silicon over leaks meaning that cheap car won’t last long before it becomes an expensive car, or scrap.

      • 91rs on 02/03/2020 - 11:15

        Written off vehicles in some states (NSW at least) are not repaired or able to be resold for a reason, a good one.
        This should be Australia wide!

        Brakes, suspension, electrical or fuel related DIY repairs could cause an accident that doesn't have to be fatal to F up someones life.
        If you're buying a car in that sort of price range (<$2500) and you're in a minor accident (lets face it they'd be mostly uninsured using the car for whats left of rego) where you're injured and you've lost your means of transport to get to work, or take kids to school or any other number of situations that could quite severely impact that persons life and ability to pay bills or look after family etc.
        Looking in that price range also indicates you've possibly not got the means to afford anything else or even replace it for some time.

        OP admits "I don't have the technical expertise to fix them myself" That's a nice big red flag.

        • Euphemistic on 02/03/2020 - 11:25

          Written off vehicles in some states (NSW at least) are not repaired or able to be resold for a reason, a good one.

          There was no mention of repairing written off vehicles in your post. Kinda agree though, except it is a massive waste to write off a car for hail damage, or damage which is merely cosmetic, when it is otherwise perfectly serviceable.

          Just because you wouldn’t buy a cheap car and you think it’s not worth insuring doesn’t mean that others do. Plenty of buyers recognise that and older car is worth having and getting third party property insurance.

          I do take your point about the OP not having a clue and wanting to flip cars. It takes a lot of learning to be able to know what is wrong, what can be fixed cheaply and what to walk away from. You can’t learn that from books. I’ll admit it is easier to diagnose problems now with the internet, but you still need hands on.

          Surprisingly there are a lot of people out there that can fix cars and aren’t trained mechanics. I’ve been doing it for years, perfectly safely. Saved me heaps in mechanics labour fees. I learned by doing. Something wrong, research the issue, but the parts, get the tools out.

          • apsilon on 02/03/2020 - 11:42

            @Euphemistic:

            There was no mention of repairing written off vehicles in your post. Kinda agree though, except it is a massive waste to write off a car for hail damage, or damage which is merely cosmetic, when it is otherwise perfectly serviceable.

            I agree to a point, these cars are an economic write off rather than anything to do with safety but I think the reason the law may have been changed is because these cheap hail damaged cars may have been used for rebirthing cars that are either stolen or that were written off for safety. Bit of a shotgun approach to the problem but it probably is the easiest approach.

            • Euphemistic on 02/03/2020 - 11:45

              @apsilon: Yeah. It is a sledgehammer to crack a walnut. Unfortunately side effect is that we increase waste. It’s even worse with caravans. What could be a perfectly usable van has a bit of hail damage and it can be never registered again. As someone who looks at things and sees potential to repair it is a bit frustrating, but agree that it has certainly helped with illegal rebirthing.

              At lest in NSW you can apply to keep the vehicle to repair and deregulated if you have owned it for a while. Would be a shame to write off a classic car to some light hail damage just because panels are too hard to source or to expensive to repair.

          • 91rs on 02/03/2020 - 12:00

            @Euphemistic: Take written off vehicles out of it and the point for repairs (dodgy) still stands.
            It is a waste on cosmetic write off's just because its too much to repair for the insurance company (same with vehicles where its too expensive to salvage or recover so its written off).

            I've had cheap cars and always did 3rd+FT insurance for any chance I'd hit another car worth more than mine (so every other car on the road).
            People often don't insure, threads here are proof of that. Even if its 3rd+FT that doesn't get you a car back if you're at fault or its mechanical failure etc.

            All for people learning things, especially hands on skills but not at the expense of others to flip and make coin.

            I do most of my own work unless I don't have the space, right tools or the time.
            Plenty are good hands on and aren't mechanics I agree, some aren't so good either!

            • Euphemistic on 02/03/2020 - 12:55
              +1

              @91rs:

              All for people learning things, especially hands on skills but not at the expense of others to flip and make coin.

              Yep. Thing is, without the skills you are quickly going to fail at flipping which is a good thing.

  • lostn on 02/03/2020 - 16:22

    my brother is a mechanic and does this as a side hobby. If you can spot a good value car that the owner doesn't want to fix and gets rid of it cheap but is actually easy to fix, you can make this work. He knows a lot of clients through his trade so he gets to see these cars and when the owner wants to sell, he'll buy it off them if it's the right price and it's easy to fix. If it's a big or expensive job, he won't bother. You can make a few thousand in profit if you find the right car.

    But don't forget that the government will also stick its hand out for a slice every time it changes hands.

  • [Deactivated] on 02/03/2020 - 17:07

    I know someone who does this. Not a career by any means , more of a hobby.

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