Wrapping Up

You’ve probably guessed by now that this project didn’t work out very well. As of a month ago I called it quits on this venture.

I’m glad I gave it a shot though, it was a good learning experience and I didn’t want to look back several years from now and be able to say “you remember that idea I had, I bet that would have worked..” At least I know it didn’t, and I even know the reasons why.

The number one reason this failed? Flawed sales theory. My theory was that you didn’t need a car lot to sell cars, that you could advertise online (via the usual suspects, AutoTrader, Craigslist, etc) and generate enough interest to move vehicles. I figured that as much as I disliked small cars lots as a buyer that others must feel the same way and that they’d be more comfortable buying in a office park setting.

Yeah, not so much. Of all the calls I got (and there weren’t more than a few dozen) not a single buyer ever showed up to the office. I had people saying they’d be by, I even had people setup appointments to come by, but nobody ever showed. It seems that people just expect a car lot and when they find out you don’t have one they get jittery. That’s my best guess, I don’t have any hard data to prove it though.

Another reason it didn’t work? Lack of capital, or rather, lack of willingness to spend capital. Once I figured out the lack of a car lot was leading to failure there were two avenues I could have tried to turn things around. I could have gone upmarket and tried selling Mercedes/Porsche/BMW’s or I could have rented a lot.

The upmarket idea was that people wanting to spend 50K on a car wouldn’t be phased by the lack of a lot, and in fact in that market I would have brought the car to them for test drives and such. I suspect there is a niche there but there’s serious risk involved. First, the guy who is spending 50K on a used car could easily decide he’d rather just get new. Second, speed in selling is a bigger issue the higher the price of the car. Simply put, they depreciate faster and if you’re caught holding a car more than 2 months you’re likely upside down in it. And third, for legal reasons you have to close the deal in your office, not theirs. So while you can do all the test drives you want, eventually you need them to come to you or you’re looking at a potential legal nightmare. These three things added up to more risk than I was willing to accept.

As for the car lot, that was a no-go from the beginning. The whole idea for this biz was to do car sales without a lot. Doing a 180 on this would be just as much of a failure as closing up shop, and I’d rather close up than start hanging “SALE!” banners from light posts while cooking hot dogs for kids on the weekends.

It was fun while it lasted though, and I did learn a lot about how the auctions work. I kept my expenses as low as possible throughout this experiment so while I have lost thousands of dollars, I haven’t lost tens of thousands. I’ll count that as a win.

And when it comes time for me to purchase a new car for myself, will I find a broker or small dealer to get my next ride? Oh, hell no! While some of the people I’ve met doing this are trustworthy, the vast majority I wouldn’t trust at all. If I don’t buy new, I’ll end up buying at CarMax.

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