Buying and selling cars can be a solid investment opportunity, with used cars being the preferred medium. Typically how it works is that an investor finds a great deal on a car, performs any necessary maintenance work and then flips the vehicle for a profit. While this can be a very hands-on investment, it can also deliver a strong investment yield. Think of it like flipping houses, and if your passion for cars out weighs your passion for real estate, then why not make money doing what you love?
The beauty with investing in cars is that you can spend as much or as little as you like getting started. For example, an investor with only a couple hundred dollars, can quickly double their money in just one sale. The whole process can be done same day if you are efficient, allowing you to swiftly increase the size of your investment capital.
Alternatively, if you are an investor with hundreds of thousands to spend, there are high-end vehicles that can be bought and sold with more generous profit margins. The business model is perfectly scalable, and is only limited by your resources, and available parking spaces. And with companies like Instant Credit Auto Sales, it is even possible to arrange financing to help facilitate your car purchases (see Instant Credit Auto Sales FAQ).
The majority of families nationwide own at least one car, and many families have two or more, making the market for them extremely liquid. This means there is always a market for the cars you are selling, and if you choose the right models and price competitively, it can be the start of a profitable, successful business.
Of course, this depends on how well you can judge your market, as well as the strength of the deals you are able to secure on both sides of the transaction. A cheaper buying price matched with a more expensive selling point is the best model to push for.
As with real estate, when you are buying cars for investment purposes, don’t buy the car you want to drive, you need to ensure you are picking makes and models that speak to your target market. If you live in a family area, don’t go buying two-seater sports cars. Instead opt for cars that are already selling locally. If you aren’t sure what’s selling, just look around you and see what people are driving. Cars tend to sell because of their functional benefits, so opt for the low-cost, functional family market if you are looking for a safe demographic to sell into.
As with any other investment out there, you should never buy a car without doing thorough due diligence on it. Especially with used cars, problems are not always visible with the naked eye. If you don’t uncover a major issue until after you’ve already made the purchase, you could be in for a painful investment.
You should always insist on test driving the used car, as well as getting it inspected by a trusted mechanic, before you buy. If you happen to be a mechanic, you already have a great start. If you aren’t mechanically inclined, however, that is the first person you need to recruit to your team if you are serious about this type of investment.
After you locate your car and get it ready to sell, you will then need to market and sell it. The best strategy is to take an active approach to marketing your vehicles. Too many car sellers simply stick up an ad and wait for the phone to ring. Get out there and promote your vehicles if you want them to sell. The Internet, as well as local classified adverts are great places to start, but don’t just settle for those options. Don’t be afraid to think more creatively and to pitch for promoting your vehicles as far and wide as possible to find the right buyer more quickly. It is also possible to sell your vehicles on consignment at certain dealerships, but that tends to eat away at your margins. If you are able to locate a great dealer, though, that give you a good deal and sells cars quickly, they very well may be worth the extra cost.
Buying and selling cars can be an exciting line of business, and for investors with knowledge of the industry, it’s possible to generate significant returns on investment. At the same time, it is also possible to lose money if you get stuck with the proverbial ‘lemon,’ so make sure to do your homework on every used car you invest in.