Is Buying and Selling Cars Profitable?


Everyday almost everyone goes from point A to point B and one of the modes of transport is private vehicles a.k.a cars. Thus it is almost a no brainer that cars are one of the most sought after products in the buy and sell market. If you are a car nut or a business nut, or both, you might have wondered with all the used or buy and sell car businesses out there – is buying and selling cars profitable?

With some business savvy, buying and selling cars are extremely profitable. Credit: Ian Chen

Buying and selling cars is absolutely profitable. You can earn 50% or 100% profit in this type of business. The profit margin or the money you take home after all expenses factored in is dependent in how well you plan everything from buying the car, preparing it for sales and actually selling it.

If you would like to know more about the details on how profitable buying and selling cars can be, read on.

Sample Costs & Net Profit of Buying and Selling a Car

The business of selling used cars isn’t as simple as buying a second hand vehicle, listing it on the internet, selling it for 100% profit, and calling it a day; It involves serious planning, bargaining, repair expenses and marketing skills to keep you apart from other other used car dealers. Here’s a sample breakdown of the costs and net profit for a used car:

ItemPrice
Used Honda City E 1.5PHP 264,000
Cost of parts20,000
Cost of labor5,000
Interior & Exterior Detailing5,500
Advertising Cost1,000
Total CostPHP 295,500
Price SoldPHP 530,000
Net ProfitPHP 234,500
Profit Margin44%
Table 1: Sample profit computation for buying and selling a used car.

How to Search for Cars at Bargain to Buy and Sell

To keep your profit margin around 50% and higher it is imperative for a buy and sell car business to purchase stock cars at bargain.

Used cars are cheap when the owner is desperate to dispose the car, but of course you wouldn’t want to buy a cheap but almost unfixable car because it will drive up your costs to high and eat into your profit margin.

You can source high quality and 1-2 year old cars from assume balance or “pasalo” sellers. There are lots of groups on Facebook dedicated to this trade. Search for “pasalo” or “assume balance” on Facebook and join several of these groups.

Another great source of excellent condition cars are multinational companies with expat workers. When expats return home or are reassigned to another another country they don’t usually bring their cars with them, thus the company is left with disposing these cars. It is handy to connect with human resources, accounting or procurement staff of these multinational companies to get hold of these great bargains.

Is it Necessary to Replace Old Parts When Selling a Used Car?

The short answer is yes. Whether you are starting out and dipping your toe into the business or a full-fledged used car dealer, your reputation important is it will drive repeat business and referrals. Also, you do not want your buyer to go back to you just after a few days for a broken radiator or tire rod.

So if you are serious about doing a used car buy and sell business, you should not automatically discount replacing old parts that are near their replacement point.

Interior and Exterior Detailing

While it may seem like a frivolous business expense, interior and detailing costs should not be overwritten. Musky odors should of course be dealt with, as well as minor dents and scratches – you don’t want prospective customers asking for a hefty discount just because of these things.

You should then have a detailing shop that you have gained good relations with to be able to request deep discounts for future projects, or you could invest in equipment that will allow you to do the detailing on your own.

Online Advertising: A Must

Gone are the days of posting an ad on Sulit.com.ph and you will get tons of inquiries in a few hours – this isn’t 2008 anymore. Most used car dealers have gotten savvy and are posting on two or more online classified ads sites, which has driven up competition to a higher level.

You may opt to do it old school, that is by advertising them on buy and sell Philippines, or buying an ad space on Manila Bulletin. However, you will miss lost of selling opportunities the internet brings.

You should then invest in a website and learn digital marketing on Facebook, Youtube and Google. You will thank yourself later since you will not be at the mercy of the main online platforms.

Summary

In essence, a used car buy and sell business is profitable. The level of profitability is of course dependent on how well you plan out acquiring used cars at bargain prices, fixing them up and advertising them online at lower costs, considering that this market niche has become a highly competitive one since the last decade.

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