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…