Those corner car lots how do they operate and thrive
#1
07-22-2016, 09:04 AM
Those corner car lots how do they operate and thrive
I guess some guy buys a lot somewhere that has a building and plenty of room for vehicles. Then he goes to an auction to get his inventory? Then he hires a mechanic and/or detailer? And he might get in-house financing.... I guess could do cash only or you finance with your bank but I don't see them making money that way unless there is an incredible mark up, besides I doubt a bank or credit union would even do it..... So then, not to be judgemental but I would presume most of the customers have bad credit so they rip them off with high interest but how does this work ie if the people have bad credit how does the little car lot know it will ever see another payment and especially if the car is a pos that will not want to be paid on. Doesn't seem like it would be worth the small car lots time answering beefs about about a litany of mechanical issues and doing repossessions.
Just curious about the real on these places.....
Just curious about the real on these places.....
#2
07-22-2016, 03:50 PM
I don't see it as being much different from a big dealer...
As far as inventory, yeah, they most likely get them at auction. When someone trades their older vehicle in at a dealership that won't want such an "old" vehicle, they'll probably send it to auction or just sell it to one of these smaller lots.
Then the smaller lot probably has a contract with a local garage, or maybe even one of the dealerships, to do the state inspection at the very least. Doubtful the corner lot will have any repairs done to a vehicle...I believe if an older vehicle gets traded in at a dealership, the dealership's service center will fix it up some and pass that cost onto the smaller lot (maybe?).
And then they probably have a contract with a mobile detailer to come by and spruce the cars up every now and then to prep them for sale, or send them out, or may even have someone on-site.
I would think the financing part would be similar to a dealership as well, just with different bank arrangements to allow for those low-credit customers (hence the higher interest rates at some of these places).
Not all the people that buy there have bad credit necessarily. Probably just looking for an older vehicle to kick around in a cheaper price than what dealerships offer. I don't think dealerships will put anything on their used lots that is older than 5 years or has more than 100K miles. Could be off with the numbers...I do remember seeing a 1998 Cobra on a Ford dealer's used car lot back in 2008. Maybe just because it was a Cobra though...I don't ever recall seeing anything else that old there in that timeframe.
Sometimes the corner lots can be better than what you find on Craigslist. "Bobs Car-o-rama" might be able to offer some kind of warranty, albeit very minimal, versus Mr. Smith's CL ad.
As far as inventory, yeah, they most likely get them at auction. When someone trades their older vehicle in at a dealership that won't want such an "old" vehicle, they'll probably send it to auction or just sell it to one of these smaller lots.
Then the smaller lot probably has a contract with a local garage, or maybe even one of the dealerships, to do the state inspection at the very least. Doubtful the corner lot will have any repairs done to a vehicle...I believe if an older vehicle gets traded in at a dealership, the dealership's service center will fix it up some and pass that cost onto the smaller lot (maybe?).
And then they probably have a contract with a mobile detailer to come by and spruce the cars up every now and then to prep them for sale, or send them out, or may even have someone on-site.
I would think the financing part would be similar to a dealership as well, just with different bank arrangements to allow for those low-credit customers (hence the higher interest rates at some of these places).
Not all the people that buy there have bad credit necessarily. Probably just looking for an older vehicle to kick around in a cheaper price than what dealerships offer. I don't think dealerships will put anything on their used lots that is older than 5 years or has more than 100K miles. Could be off with the numbers...I do remember seeing a 1998 Cobra on a Ford dealer's used car lot back in 2008. Maybe just because it was a Cobra though...I don't ever recall seeing anything else that old there in that timeframe.
Sometimes the corner lots can be better than what you find on Craigslist. "Bobs Car-o-rama" might be able to offer some kind of warranty, albeit very minimal, versus Mr. Smith's CL ad.
#3
07-22-2016, 10:44 PM
Most of the cars come from auction, the cars bought and put on the lot depends on what the dealership is catering to. There is a new dealer opening here next month, for example, that is going for the late model used crowd. Cars 2-6 years old typically, some still have some factory warranty left, but generally the are like new. They are able to offer financing in-house vie different lenders, but I'm not sure about the warranty. Their cars come from dealer trade in auctions, but they do not have a mechanic or detailer. The shop I am at will likely give the cars a look over initially, and may contract to do repairs, but we concentrate on diesel pickups. There is also a detailer leasing space in this same building, and he may contract with them as well. Overall it looks like a professional operation though.
A seedy corner lot usually buys cars for cash and sells them based on a monthly payment point, expecting people to fall behind and get it repoed. Then they just wash it, vacuum it, hang an air freshener, and put it on the lot for the next sucker.
A seedy corner lot usually buys cars for cash and sells them based on a monthly payment point, expecting people to fall behind and get it repoed. Then they just wash it, vacuum it, hang an air freshener, and put it on the lot for the next sucker.
#4
07-28-2016, 12:10 PM
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Good article.
How auto dealers scam customers with inflated loans
How auto dealers scam customers with inflated loans
Profit made in the finance manager's office
Consumers are much more savvy today about how to negotiate the price of a car, but industry insiders say shoppers remain largely ignorant about what to do when they walk into the finance manager's office.
While the consumer thinks the negotiations are over at that point, dealers know that a lot more profit can be made off the financing.
For starters, dealers routinely jack up the interest rate on a loan and split the profit with the lender. So if you qualify for a 4 percent loan, the dealer will say the best he can do is 7 percent. Half of the extra profit goes to the dealer as a "markup."
Buyers never know they've been charged more because the markup usually isn't disclosed. The Center for Responsible Lending calls these "kickbacks" and calculates that they cost car buyers $20 billion a year.
"Auto lending is the only major lending where this still occurs," said Chris Kukla, the group's senior counsel. "It's time for an end to it."
A similar practice was also routine in the mortgage business, where brokers would earn higher commissions for inflating the interest rate. This help put borrowers into loans they couldn't afford, and the Federal Reserve has now outlawed the practice.
Consumers are much more savvy today about how to negotiate the price of a car, but industry insiders say shoppers remain largely ignorant about what to do when they walk into the finance manager's office.
While the consumer thinks the negotiations are over at that point, dealers know that a lot more profit can be made off the financing.
For starters, dealers routinely jack up the interest rate on a loan and split the profit with the lender. So if you qualify for a 4 percent loan, the dealer will say the best he can do is 7 percent. Half of the extra profit goes to the dealer as a "markup."
Buyers never know they've been charged more because the markup usually isn't disclosed. The Center for Responsible Lending calls these "kickbacks" and calculates that they cost car buyers $20 billion a year.
"Auto lending is the only major lending where this still occurs," said Chris Kukla, the group's senior counsel. "It's time for an end to it."
A similar practice was also routine in the mortgage business, where brokers would earn higher commissions for inflating the interest rate. This help put borrowers into loans they couldn't afford, and the Federal Reserve has now outlawed the practice.
#5
07-29-2016, 07:09 PM
The "iron lot" guy will in many cases get enough of a down payment to cover what he has in the rolling pile of misery that he sells. The monthly payments are gravy.
One thing I strongly suspect a lot of iron lot "dealers" do is to falsify smog checks and other inspections.
And another trick seems to put an auto store recharge into the AC without fixing leaks. Works good during the test drive. Two weeks later you're cruising windows down......
I don't hate the poor, hardworking, honest used car dealer. Let me know if you find one and I'll show you.
One thing I strongly suspect a lot of iron lot "dealers" do is to falsify smog checks and other inspections.
And another trick seems to put an auto store recharge into the AC without fixing leaks. Works good during the test drive. Two weeks later you're cruising windows down......
I don't hate the poor, hardworking, honest used car dealer. Let me know if you find one and I'll show you.
#6
07-30-2016, 07:28 AM
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they also do "consignment cars" that come from a central staging lot. the corner lot manager calls the lot and says i need a load of cars swapped.
the truck rolls in and unloads. then loads back up with cars that have been on the lot for 30-60 days and takes them somewhere else to sit and try to sell.
and the consignment cars sometimes are salvage vehicles that have been cycled through a bunch of states to "wash" the salvage restriction off the title.
the truck rolls in and unloads. then loads back up with cars that have been on the lot for 30-60 days and takes them somewhere else to sit and try to sell.
and the consignment cars sometimes are salvage vehicles that have been cycled through a bunch of states to "wash" the salvage restriction off the title.
#7
07-31-2016, 06:09 AM
Living in the Hampton Roads area of Virginia, you'll see a myriad of the lots surrounding the military bases. "we finance all government employees and military E-1 and up"! They tend to prey on the soldiers / sailors returning from deployment with a pocket full of cash. They tend to stock the modded out 4x4's and the pony cars that anyone with any common sense knows has been beat to death.
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