Making money on cars

I’ve got friends who regularly turn a profit on every car they buy.  One guy buys and sells early Fords, mostly Model A’s  he lives in Southern Minnesota and buys one car at a time and refuses to sell it unless all costs considered he’s made a profit.  

His usual approach is to get the engine unfrozen started and running then get the transmission , rear end  and brakes working.  He cleans it, washes it, and runs a buffer over it.  

Only rarely does he put tires on and when he does they are rarely new.  

Another buys British sports cars and does frame up restorations on the basic entry level cars like MG Sprite Spitfire etc . He’s got it down to a science. They leave his barn  looking good, running well, not show condition but a nice driver.

There is the Alfa guy, the parts guy, A Saab person etc. 

They  all have full time jobs and do this on their spare time ( well the parts guy doesn’t have a full time job but he treats it like a part time job) 

I’ve made my career in sales but I seldom make a profit when I sell.  I wonder why. 

Are they telling their respective SOs that they're making a profit or have you seen their accounts?

One thing they all seem to have in common is that they stick to a single make or a small set of cars. That'll make it easier to buy a bargain and make it easier to estimate the work involved.

I know guys who go to the Casino every week and they have always come out on top. And day traders who have a winner system...

So they say...

If they were really making much money at this, they would have quit the day-job no?

The "True cost" of this game includes not just time and materials, but time spent looking for, haggling, buying and transporting inventory. There IS cheap inventory to be had in both Model-A and Brit cars because they are dying markets, but the selling prices are also dying.

Not saying that you cant make money on flipping this car bracket, but it involves being at the right place at the right time and how much effort does it take to do that every single time? It eats hours of time.

I cant ( and wont) give away my 67 GT even though it is a nice car. But I can find all manner of people who will spend 35k restoring "Their" beloved MGB or other Brit abomination, who want me to do the tin on their project for more than I am asking for a finished car.

My analysis is that I can make this a self supporting hobby in my retirement years where I get to play with neat cars, meet interesting people and spend other peoples $$$ doing so. But surplus to put food on the table would require that it become a bigger legit operation with corresponding overhead and then I would be right back at work full-time running a business.

Pete

1. I know you know the old adage..." You make your money when you buy a house, not when you sell it."  Same thing with old cars.  That being said I haven't figured it out myself.

In reply to Ovid_and_Flem : 

I’m sure you’re right about buying at the right price.  But I also think it has a good deal to do about sticking with one set of cars. That way you know where to buy parts at a deep discount, how much is actually required.  Building up a stock of spares.  The big thing though is getting known for that car so if someone is looking for it. Your name is sure to come up. 

Plus I think it’s also about treating it like a business, sell only when you’ve made a profit and buy only when you know you can make a profit.

In reply to NOHOME :

Twice I started a business doing this.  Well I made some money but I quickly found out that people would pay me much better to do  what they couldn’t, or didn’t want to.   So I’d take their salary, commission, benefits, paid vacations, and  special award vacations.  

I never stopped messing with cars but now when I sold one there wasn’t any profit in it.  In fact usually lost a big chunk of money with each one My XKE  V 12 roadster race car I had receipts for over $45,000 plus all the little receipts I never bothered saving.  In addition I had about 2500 hours of work in it (52 weeks of 40 hours = 2050hrs) 

it sure looked nice but the check in my hand was only a little over $20,000 

NOHOME said:

I know guys who go to the Casino every week and they have always come out on top. And day traders who have a winner system...

My mother

So they say...

 

If they were really making much money at this, they would have quit the day-job no?

The "True cost" of this game includes not just time and materials, but time spent looking for, haggling, buying and transporting inventory. There IS cheap inventory to be had in both Model-A and Brit cars because they are dying markets, but the selling prices are also dying.

Not saying that you cant make money on flipping this car bracket, but it involves being at the right place at the right time and how much effort does it take to do that every single time? It eats hours of time.

I cant ( and wont) give away my 67 GT even though it is a nice car. But I can find all manner of people who will spend 35k restoring "Their" beloved MGB or other Brit abomination, who want me to do the tin on their project for more than I am asking for a finished car.

My analysis is that I can make this a self supporting hobby in my retirement years where I get to play with neat cars, meet interesting people and spend other peoples $$$ doing so. But surplus to put food on the table would require that it become a bigger legit operation with corresponding overhead and then I would be right back at work full-time running a business.

 

Pete

 

My mother used to do that,  the casinos would send a plane to pick her up any time she wanted.  She’d come home telling me about winning  $65,000 on one hand of poker and how she always came home with more money then she left with.  

Then oneMonday morning I stopped over at her house and she had all her bills spread out on the floor trying to figure out how to live on her social security.  The 13 million dollars she’d inherited from her last husband was all gone. 

I make money on cars and I'm opening a legitimate dealership, I'm hoping the legit dealer part will make enough to pay its own bills.  I typically make money on the cars I sell, but there are, thankfully, only a few times I've lost money on a car.  It's about knowing your market.  I have to this point stayed low end and typically make a couple hundred on a car.  It's not a big deal to me because I don't have a full time job that would take up time that people want to see the car.

In reply to Brian :

I think you’ve brought up two important points.  

First know your market.   The only way to know if you’ve bought at the right price and sold at the right price is knowledge.  It also helps if you aren’t forced to sell due to circumstances. That you have the time to hold out for the right price. 

The second part is return on investment.   If you can ask and wait for a fair return without the normal pressures of life getting in the way you are ahead of the game. 

There is another angle to this, and while it wont put money in your bank account, If you have to own a car, then it will reduce the cost of doing so. Kinda the same as making money.

IF, and this "IF" is the key, you are good at evaluating a car's overall condition and a shrewd buyer, you can buy just about any classic car that you want, drive it until you find someone who wants it more than you, and sell it at a point where you recover all your purchase cost.

Congratulations, you just got to drive an interesting car for some amount of time and it did not cost you anything. Go do it again. Compare this to the depreciation that most people eat on their second car and you realize that you are actually money ahead.

Now take your cash and go find another interesting car to purchase.

The best way to make money on the hobby is to broker for buyers and sellers. If you are tapped into the right grapevine, you can pocket some change by hooking up buyers and sellers or even just doing purchase inspections.

In reply to NOHOME :

So YOU'RE the reason CL sellers say "I don't need help selling."

I’ve always been the guy that falls in love with project cars, spends way too much time and money making them perfect, then eventually sells them at a significant loss. The best I can hope for is break even LOL

What you're describing about the guy who basically polishes up junky cars and flips them ... that’s just something I don’t have in me. I’ll buy an old car, completely redo the suspension, replace all the wear items, etc etc. But that stuff isn’t even on the radar for most people. Few potential buyers get excited about (or even appreciate) new engine mounts, wheel bearings, or subframe bushings. But, for me, that stuff is what makes a car viable as a driver. 

In reply to LanEvo : 

Thats my weakness as well, I fall in love and want it just so.  To heck with a budget, do it and do it right.  

But how can the average guy tell without completely taking it apart to verify your work? 

In reply to NOHOME :

 You make a smart point A reasonable who wants to use a interesting car can and should do exactly what you are suggesting.  

I don’t know why I’m not smart enough to take your advice

Well I've actually come out ahead on several projects; for a while a friend started referring to me as honest Tom's car sales. The key is making sure everything is working and NOT treating it like it's a Christmas gift for your Grandma.

If you can bring the paint back to looking good rather than respraying it then do that. If it's still within factory tolerance why are you replacing it? Replace only components that are bad, be it a sticky caliper or leaky gasket. Cracked dash = dash pad. Loads of people sell off they're stock tires when the by fancy wheels and low profile tires. You can get brand new sets for a song, it doesn't even matter if the wheels are the right pattern because for $60 you can get the tires swapped over to your rims. I once got a set of brand new Michelin light truck tires for $100 ($600 new).

If you're doing up a Ferrari or early 911 then you can do everything perfect and still come out ahead. If you're doing a 76 Celica it just needs to look nice and function properly. If the buyer likes the body style and everything works they'll buy it. The key is disclosing all the stuff you know could be better but still functions. Loads of people will pay 5-10K for a car that looks and drives nice rather than spend 10-20K on something imaculate. 

As for old racing cars it's easy to get completely stupid looking for that last 5hp or those last 3 tenth so. My Datsun is a 10 footer but I manage to get it in the top 5. I spend money carefully.

The biggest key is saving every reciept. I do that with the Datsun and the F500. 

I wheeled and dealed on stuff to pay for my racing and at one point probably could have made a living from it but man is it a ton of work. You have to hustle 24/7. 

frenchyd said:

In reply to NOHOME :

 You make a smart point A reasonable who wants to use a interesting car can and should do exactly what you are suggesting.  

I don’t know why I’m not smart enough to take your advice

Don't feel bad.,I cant be bothered to follow my own advice. I much prefer to build stuff from scratch at retail cost and sell the finished job at wholesale discount.

I've always thought if you do this for a living you need to have the skill that allows one to be objective about what's being done. So maybe it's a case of if you lack that skill it's a hobby if,you have it, it's a business.

If I actually bought lotto tickets and won the mega-super-duper millions I always thought I might fix up low to mid range classics because loads of people can afford those. I hate to see old cars sitting derelict. Of course that would mean dealing with people like my late brother who always made the "but I gotta get my money back out of it" comment. He'd constantly by with his heart and all logic thrown to the wind.

For my own cars I try not to invest more than about 15% over the cars value. I'm in the process of selling off some more bits for the Datsun and after that it will owe me about $7600. Worst case I could part out the really valuable bits for about 5K and still have enough parts to make the car a running starter car for 3K. I think the car would bring about 7K as is if I just wanted it gone. The Formula 500 owes me $4600 including the $1400 to have it shipped across the country. It would be easy to sell it off for 4K.

So I guess my motto is buy cheap ass cars because it's hard to invest big bucks in them.

In reply to NOHOME :

In  a perfect world I’d never sell any of my cars.  

Tom1200 said:

I've always thought if you do this for a living you need to have the skill that allows one to be objective about what's being done. So maybe it's a case of if you lack that skill it's a hobby if,you have it, it's a business.

If I actually bought lotto tickets and won the mega-super-duper millions I always thought I might fix up low to mid range classics because loads of people can afford those. I hate to see old cars sitting derelict. Of course that would mean dealing with people like my late brother who always made the "but I gotta get my money back out of it" comment. He'd constantly by with his heart and all logic thrown to the wind.

For my own cars I try not to invest more than about 15% over the cars value. I'm in the process of selling off some more bits for the Datsun and after that it will owe me about $7600. Worst case I could part out the really valuable bits for about 5K and still have enough parts to make the car a running starter car for 3K. I think the car would bring about 7K as is if I just wanted it gone. The Formula 500 owes me $4600 including the $1400 to have it shipped across the country. It would be easy to sell it off for 4K.

So I guess my motto is buy cheap ass cars because it's hard to invest big bucks in them.

 

Up until recently I never paid more than $300 for a project.  

When I went all the way to $500 I got one too nice to do what I intended to. 

A man after my own heart. Our 1200 was a $270 car,  which my buddy then poured another $210 into!!! Most of the coin went into a complete engine rebuild, the rest was spent on brand new tires.........high end 155/12s on sale at Pep Boys.

Over the years I've  changed my mindset on what to look for; I used put more emphasis on the mechanical bits (engine, tranny & brakes). Now I look closely at paint and bodywork as those seem to be the things that devour a budget in short order.

My fabricator has what's probably a $12,000 mileage computer in his Pinto Wagon; he etched his own circuit board and own LED light bezel etc. If he billed all the hours he'd spend on it I'm sure it would be in the tens of thousands.

In reply to AlisonRussell :

Maybe you should try canoes.

Maybe I'm doing it wrong, but fixing up cars and bikes is my weekend retreat I go to so I don't have to worry about making money. For me it is about spending some money fixing something up and driving it so I can enjoy a hobby and be truly proud of the results. I've probably lost money on most, but the reward wasn't monetary.

My perspective might be colored by two factors: I probably hang onto vehicles longer than the average GRMer, and my day job involves worrying about costs, selling prices, time invested, profit margins, and the like, and it is the last thing I want to bring into my relaxing weekend hobby.

I also have a friend with the same business and to tell you the truth, I was thinking myself to do so, it seems to be very profitable thing, however from the very beginning I don't have money to spend on a first [canoe], that's a problem. The other problem is in the fact that I'm not that specialist in the [canoe] models thing. I don't know anything about [paddling].

I hear Canoe sales are up right now. 

 I used to restore a car every 6-12 months for my own collection and can tell you that if anyone 'restored' a car to the same standards there is no way they would make money on it.  If they bought something without too much wrong with it they could polish it up, rectify the most obvious problems, and move it on before something major failed and make a few bucks at it, but unless they happened on a super car at an unbelievable deal, they couldn't expect to regularly make money.

Once in awhile you'd happen on a super money maker - a friend bought an Alfetta that the seller said had a thrashed clutch (which required engine removal etc.) When he got it home, he found a failed cluthc slave cylinder which he kitted for under $10 and sold the car on.  Just about eveyone that buys an old heap with stars in his eyes thinks he'll be 'that guy' but it rarely happens.

The others who said that specializing helps are right - if you build up a parts supply from older restorations and they can be used in future restorations, it sure reduced the parts bill.