Making a Buy

Making a Buy from an Individual

A great way to make money with your dealer’s license is to scan the want ads in your local newspaper on a daily basis. You should always have subscriptions to your local newspapers, regional newspapers, and free classified ad newspapers. Many newspapers also offer online versions that you may be able to scan early in the morning, well before the paper hits the street. Newspapers are an excellent resource that allow dealers numerous buying opportunities. You should scan these papers every day so you will be ready when a great buy is advertised.

You should also keep an eye on Craiglist.org and eBay at all times. You can view your local buying opportunities on Craigslist.org or view your local market on eBay by searching within a certain amount of miles from your zip code. Always know vehicle pricing so when you find the great deal, you’re the first to make the buy.

Sometimes an owner thinks the vehicle they own is worth more than it actually is. They may have a sentimental attachment to the vehicle and want to sell it for much more than it is actually worth. You can probably find the same vehicle at a dealer only auction for several thousand dollars less. You can find deals every day in your newspaper, Craigslist.org and eBay. Just make it a daily habit of viewing these excellent buying resources.

Blank Titles

When you find a good deal in the newspaper or on the Internet, the first thing you want to do is contact the owner and ask if the vehicle is titled in their name. I cannot stress the importance of asking the individual if the title is in their name.

If they say something like “Yes, I bought the car seven years ago. I paid it off and have the title here in my name”. That is great. That is what you want, now go make the buy. If the customer says something like “No the title is not in my name, I bought it from my neighbor. The title is in her name but you can just come over here and buy it from me”.

Many times the individual who advertises the vehicle is not the person whose name appears on the front of the title. This person has bought the vehicle from a relative, neighbor, or friend then asked them to sign the seller’s area on the back of the title and leave the rest of the purchaser’s information blank.

This transaction is illegal in every state.

The title they have is called a “Blank Title” because the purchaser’s information has been left blank. It is also called an “Open Title” because the title has been left open.

If a person does not hold a current dealer license, they are required to pay sales tax on every vehicle transaction. If someone without a dealer license purchases a car, then sells it without paying the sales tax, they are breaking the law. They have skipped paying the sales tax on the vehicle, so these titles are also known as “Skipped Titles”. The seller may try to convince you to come over, buy the car, then fill out the buyers information like you purchased the car directly from the person whose name appears on the front of the title even though that person is nowhere to be seen. They may also tell you not to worry because they buy and sell vehicles with blank titles all the time.

Don’t ever complete a deal with a blank title no matter how tempting it may be.

Expect to find people that attempt to sell you a vehicle with an illegal title on a regular basis. You may be tempted to fill in the buyer’s information on the title, making it appear that you bought the vehicle from the person whose name is on the front of the title. But it is never worth losing your dealer license because of one fraudulent transaction when you will make tens of thousands of dollars with legitimate transactions. Possession of a blank title is illegal in all states. You have broken a law the moment you take possession of an incomplete title. If you are caught with a blank title on a first time violation you could be charged with a misdemeanor and will probably have your dealer license suspended. If you are caught with a blank title on a second violation, you could have your dealer license revoked permanently and will now be charged with a felony!

Any person that tries to sell you a vehicle with a blank title is acting as an illegal dealer. The person trying to sell you this vehicle has not taken the steps that you have in order to operate a legitimate automotive dealership. You may also have someone purchase a vehicle from you and ask you to leave the purchasers information blank. This is also an illegal transaction. You must always fill out a title completely on each and every sale.

You will work hard to obtain your dealer’s license and you will work hard to maintain your dealer’s license. Don’t lose your dealer’s license by supporting the business of an illegal dealer! Only purchase your vehicles from licensed motor vehicle dealers or from the person whose name is on the front of the title.

If someone ever tries to sell you a vehicle with a blank title, step away from the vehicle.

Making the Buy

When you have established that the vehicle title is in the name of the person selling it, then set up a time to view the vehicle. Always arrive right on time and try to bring cash. Cash is a dealer’s best friend. Cash offers will cause many sellers to accept an offer well under their asking price. Before making an offer, be sure to inspect the vehicle and ask the seller if the vehicle has ever had any problems, while paying close attention to the seller’s reaction. If the seller hesitates, looks around nervously, and says something like, “no, huh-uh, no, no, huh-uh, it’s never had any problems, nope” then he or she may not be responding honestly and could be aware of a hidden mechanical problem. If the seller answers your question with a confident “No, I have never had a single problem with this car since the day I purchased it, it has always ran great”, while looking you directly in the eye, he or she is probably telling the truth.

It is always a good idea to take the vehicle to a mechanic before making an offer. This is also great way to find out if you could have any significant repairs that will dip into your profits. As you become more experienced you will be able to check the vehicle’s condition with a test drive and “kicking the tires”.

If you have established the vehicle is titled by the person selling it and the mechanical condition is good, then you are ready to make an offer. As stated before, cash is a dealer’s best friend. Some sellers will not take a personal check or a check from your dealership. Many sellers will either insist on payment in the form of a cashier’s check, or cash. If possible try to bring cash because everyone takes cash. When making the offer, let the seller know that you are a dealer and you fully intend to resell this vehicle for a profit on your lot. Mention what you will have to do to make the vehicle retail ready, without making unnecessary negative comments about the vehicle. This is the seller’s personal car and negative comments about the vehicle can be taken personally by the seller. Just say something like “You have kept this car in excellent condition, but I will need to put on new tires, fix the broken tail light, and install a new stereo to bring it up to retail selling condition”. Then make the offer. Just say “I can give you eight thousand five hundred dollars cash, will that work for you?” Then say absolutely nothing. No matter how tempting or how long a silence follows your offer, don’t say a word. Let the seller respond first. This gives the seller time to think about your offer and hopefully accept it. This statement does not invite a “No” answer from the seller such as does the obvious “Would you take 85?” Make sure to state your offer in the full amount of “eight thousand five hundred dollars cash”. The answer you look forward to hearing will be “Yes that will work for me”.

If the seller states that your offer “Will not work for me” ask seller what price they are expecting to receive. If their lowest price is much higher than what you are willing to pay, then thank them for their time. Always be courteous, give them a big smile, and shake their hand firmly. Before you leave, write down your offer on the back of your business card and tell them your offer stands for 7 days. Explain to the seller that in 7 days your offer. Very often you can get your offer accepted after the seller has had time to think it over for a few days.

If the seller says something like “There is absolutely no possible way in the world I would ever think about selling this beloved car of mine for less than the $10,000 price listed in the paper” then there is a good chance they may be firm on that price. When this happens, always leave a card with your 7 day offer, be as polite as possible and leave on a positive note by telling the seller “I would like to wish you the best of luck with the sale of your car and I invite you to call me at any time if there is anything I can do for you. Have a great day”.

If you don’t get the buy on the first try, you have left a positive, professional image in the mind of the seller. They are not going to forget the respect you paid them and the compliments you made on their vehicle. The seller will remember your demeanor and will contact you before they call an individual that did not treat them with a positive, professional attitude.

Always remember that as a licensed motor vehicle dealer, you are going to be the professional. Your customers will look to you for knowledge and information. The more you know about your state’s laws and regulations, the more cars you will sell and the less likely you will be involved in any type of future litigation.

Making a Buy from another Dealer

A large part of many dealers’ business is buying and selling vehicles from other dealers. This is known as wholesaling. Some dealers hold what is called a “Wholesale License”. A dealer with a wholesale license is only allowed to sell wholesale directly to other dealers, they are never allowed to sell to individuals. A person that holds a “Retail License” can sell retail to individuals or wholesale to other dealers. A retail dealer can sell retail and wholesale but a wholesale dealer can only sell wholesale.

Years ago wholesaling vehicles was a very profitable business. A wholesaler would buy all of a retailer’s trade-ins or unsold vehicles, mark them up, and then sell them to other retail dealers. Sometimes a wholesaler would buy unsold vehicles from a retailer, sell them to another wholesaler, who would then sell them to a second wholesaler, who may sell them to a third wholesaler, who would then sell them to a retailer. This would effectively drive up the price of each vehicle because several parties had taken a profit on each sale. By the time a retail customer purchased the vehicle, they may have paid an additional $2000 or more because the vehicle had changed hands through wholesalers so many times.

A person holding a wholesale license is not earning the income a wholesaler made even ten years ago. Wholesale auto auctions have become much more aggressive in the last few years and they are using marketing tactics aimed directly at retailers business while reducing the business of the wholesale dealer. Many wholesale auctions are offering to pick up several vehicles from a retailer’s lot, run them through the wholesale auction lanes for a small fee, and then return them to the lot if they do not sell. This new service being offered by many dealer auctions is basically eliminating the need for wholesale dealers. The fees for a vehicle that does not sell in the auction lanes are minimal, usually around ten dollars. The fees for vehicles that change hands through several wholesalers can run several hundreds or even thousands of dollars.

These aggressive tactics by the wholesale dealer auctions are not only taking away the business from many wholesalers, they are actually dropping the average prices of retail vehicles. I am not saying this is a bad thing, but it is making it much harder to survive as a wholesaler while making business easier for the retailers and effectively driving down prices for your customers.

You will still, however, be able to make money by purchasing and selling cars directly to other dealers.

With a dealer license you can do “Reassignments” on the back of a title that allows you to purchase or sell a vehicle to another dealer. Most state vehicle titles allow three or more dealer reassignments on the back of a title. The back of a title normally has a first assignment box that allows you to sell the vehicle to another purchaser, whether it is an individual or another dealer. Under the first assignment box, you will see additional boxes that my say “Reassignment by Registered Dealer”, “Dealer Sales Information” or something similar depending on what state title you are working with.

When you have an active dealer’s license in your state, you are allowed reassign the ownership of the vehicle to another party, whether it is an individual or another dealer.
When you buy, or “reassign”, a vehicle from another dealer, you will complete the reassignment section of the title at the time of the sale. You must always complete the title at the time of the purchase from another dealer.

Always follow your State guidelines concerning dealer reasignments.