9/03/08

Through the Eyes Of the Bold, Part 3

Our third installment of opportunities for the bold! Take a deep breath, we're going for the gold!

Today I will talk about the grand and highly profitable opportunities on used commercial trucks. I know quite a number of commercial truck dealers and there are very few that I can think of right now that are serious about used commercial trucks and the profits that come from them.

I know why. It requires a certain mindset and it requires working at it. Very few used commercial trucks just coming waltzing in. Many people who are 'running' the commercial department don't have the authority to appraise vehicles and there is little motivation for them to go find any or so they think. Nonetheless, it is one of the best opportunities I can advise you to get excited about.

This deal is going to require that the person who is leading the commercial operation know how to and have the authority to appraise and buy used vehicles (ideal), or have an awesome and mutually beneficial relationship with an aggressive used car manager. By aggressive used car manager, I don't mean the one who gets the truck the furthest back of book that is possible, but one who gets the market opportunity and does what is reasonable and necessary to buy the units. Many commercial units go for over book, so trying to 'steal' them way back of book will not make for much of a used commercial department. I've paid as much as $3,000 over book and still made $3,000 profit. It requires getting the market, having some guts, vision and how you will market that truck.

The main thing to watch closely for is reconditioning. This can really add up if you don't look at them closely. Commercial trucks take more use than the average truck, so look at the tires, if you can look at the brakes. Brake rotors are very expensive on these trucks and since a lot now have disk brakes, you can easily see if the rotors are scored. When in doubt, figure it needs brakes. Look for seals leaking badly, differential whine, strong vibrations in the driveline. Road test each one and feel for its overall health.

Chances are you will spend more on reconditioning than most of your used stuff, but that isn't a problem if it was determined up front. Everyone benefits from more work. Pay particular attention to the exterior. It needs to look good. The body may need some reconditioning as well. Don't make it new, but make it look good. New tires and an old looking scratched up body won't bring the money in. Go the extra mile and get it right now. You might even see a great truck that needs a new body and I have done that as well. Check it out as well as you can. If there is time, put it on the rack and have your mechanics check it out. It will be worth the expense in the long run and it will pay you handsomely after the sale.

Where do you find them? One way is trades. Maybe you haven't been in the market, so you haven't been encouraging trades. There are a lot more trade opportunities than you might think. Another way is buying customers trucks. In the current market (and every other market for that matter) there are always some customers closing shop, reducing their fleet or whatever. Those are opportunities to make some nice buys. Of course, we want to buy them as low as we can, but we want to get them. The time to be the most aggressive is when you are on a trade and they are buying your unit.

Another avenue is auctions and wholesalers. I used to have two to four wholesalers looking for used vehicles for me all the time. They would call me from an auction floor 500 miles away to see if I wanted a certain truck and what I might pay. This is good. One caution. Make sure that you develop a trust relationship with them and that they are looking out for your best interests. Again, reconditioning can be a major factor and they need to support you in this. Better to pay a little more and get a better truck.

When buying used, be careful of how much you pay for 1 to 2 year old models. You will have opportunities to buy them, but you will have to pay less for these in relation to book value than the older ones because of how close they might be in pricing to the new past year models you might have or you might buy from other dealers. One year old new has advantages over the 1-year old used. Better to let the 1-year old used go if need be than to get too deep into it.

One of the best items we used to buy all the time were used Isuzu trucks. Many of them were ex-rentals, but were still great trucks. They usually bring a good return, especially if you really clean them up by giving them a quick, inexpensive shot of paint. That makes a huge difference.

Another way was I would buy the Big Truck & Equipment Trader and see what looked interesting that I might buy from a private party. That worked occasionally. I also bought from private parties locally. I put the word out.

Another way and a very good way was through other dealers. Many dealers in town or nearby would have a commercial trade come at them and didn't know what to do with it. I put the word out to all the other used car managers at new and used dealers that I was a strong buyer for good commercial trucks. They brought me many and I bought many of them. Win-win again.

I would be looking for my used truck portion of my operation to bring me about a quarter million in annual gross, plus a lot of revenue for service, body and detail. That will work!

1 comment:

Anonymous said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Susan

http://www.car-insurance-choices.com