Imagine 104 other people competing against you to buy a car. In a space that is only slightly bigger than a suburban home.
Sounds bad? Well for me I call it Monday.
Every Monday I head off to an auction where the personalities of my fellow dealers range from walking cartoons to Glengarry Glen Ross SOBs.
The guy who walks around the auctions with no shoes in 100 degree weather? He’s always there. Along with the man who is worth over $30 million and comes in a suit regardless of the killer humidity that surrounds him. That made man is busy digging for his own gold alongside a Coke machine, where he unabashedly is digging for the nuggets inside his nose.
Auto dealers are not a refined sort. We deal with a lot of good people, and we try to avoid an awful lot of bad people. At the auto auctions, we’re only trying to buy cars, and that often takes alliances among the brethren.
In one corner, a dealer named Jack will be busy spouting off numbers to another dealer named Jill. The two of them will make sure not to bid against each other. Even going so far as to stand next to each other so that the auctioneer knows that they have now become ‘brother in laws’.
I do the same. Rattle off numbers to my auction relatives, make myself visible to potential competitors, and pick my battles (not my nose).
My past experiences as an auctioneer help a lot, as do my relationships with those auction personnel who know me on the block. Those who knew me back when I worked on the auction staff at five different sales here in the Atlanta area have been given social equity and often times, opportunities at other auctions thanks to my relationships and goodwill with the general managers.
To cash in on this social equity, I offer signals. My signals for the auctioneers and sellers are common ones to the veterans in the business, and usually oblivious to those dealers who haven’t quite yet mastered the darker arts.
It begins with a fist. If I make a fist close to my body, that means ‘hold the bid!’. If the auctioneer had been chanting for a $4000 bid and I make that fist, he will take my bid at $4000 and offer the audience a $4100 bid price.
Sound harmless? Well it certainly is for me. Every auctioneer has a pattern of bid calling where his vocal intonations will change if he indeed has a bidder who has offered money. Except that this change is not always done. If the auction gets to the point where too many dealers are colluding together and as we say in this business, ‘sitting on their heels’, another veteran dealer will either start bidding openly or make the same type of fist I just mentioned.
If I happen to make that fist with good eye contact with the auctioneer, and no one else bids for another five to seven seconds, the hammer goes down and I may have exchanged my goodwill for a good deal.
That’s what happened today. A 1999 Volvo V70 with leather and all the options was purchased for all of $1000 plus a $135 auction fee. Yes the birds didn’t like it, the check engine was on, and I’m ordering a MAP sensor as we speak. But that unit can be financed for nearly $6000 in payments over a two year period. So long as I do my part in keeping it on the road, the family will make their payments. $700 down. $50 a week. 24 months.
I will usually have little to nothing left of the initial down payment. If I get $700 down, I’ll net maybe $200 after I pay for the repairs and the title tax. From that point onward, it will take anywhere from five months to ten months to break even on the deal.
But if I find the right buyer and handle whatever problems, small or big, that may come their way, I will usually come out ahead after that point. It’s hard for most people outside of the industry to fathom. But $7.14 a day for solid daily transportation here in the ex-urbs of Atlanta will beat the heck out of a $5 one-way only express bus to Downtown. My customers choose to get their freedom, and I get the returns that support my family.
This isn’t a quick and easy. The average paycheck to paycheck middle-class family needs wheels these days and in the ex-urbs, they drive an awful lot. Around 15,000 to 25,000 miles a year on average. To make all this happen for me, I need to make a few trades.
The auctioneer and seller need good bidders. I make that trade. The other dealers need alliances. I make that trade. The family needs a reliable car that usually gets driven quite a bet. I make that trade with a mid-three figure down payment along with a breakeven point that usually comes on average at the eight month mark.
In the end, I either find myself with a long list of good trades. Or a gaping hole in my cash flow, or an abused repo that may be worth more dead than alive.
The successes and failures all begin with investing in all the things I know as a long-time car dealer. Certain cars. Certain relationships. My entire business revolves around picking and creating certainty for everyone and hoping that they can offer the same.
From the certainty for those who are looking for a short term sale of an unwanted asset. To the certainty for the buyer of eventually becoming a long-term owner instead of a debtor.
There is a lot of risk that comes with pursuing all that certainty from beginning to end. But if you eliminate those certainties and do your homework in this business, the rewards are well worth it.