Serious discussion... Cars as an investment?

While listening to the news blabber on about stocks and looking at paltry interest rates on CD's, I got to thinking why not use cars as an investment. Now hear me out here, I'm not talking about bagged up 4-mile as-delivered GN's, but normal(ish) cars. For example, buy a Miata for $1500, spend $500 fixing it up, and sell it for $2500. Do that 6 times a year and you've made $3000 in profit. Heck, even if you do it once a year it will totally outperform anything and everything in "the market".

So why not? Open a second account just for "investments" and start buying and flipping cars for a profit, rolling each purchase into the next one. Plus you can actually drive the thing while you own it, unlike a stock certificate or a pork future. I really think this is a good idea, especially considering my wife's 401K's "performance" in the last 5 years...

So who's with me? Retirement on cars?

For example, buy a Miata for $1500, spend $500 fixing it up, and sell it for $2500.

Are you including the cost of your labor in there? If you're doing it as a hobby because it's fun that's great, but in the end you may end up making as much money by getting a paper route.

This reminds me of the Wheeler Dealer discussions in months past. It sounds easy in principle... in practice, it's a bit more risky with a lot of assumptions on the condition and fix-up costs.

How many cars have you paid top-dollar for out of someone's driveway? If you are going to be honest about your process, you may want to stick with mainstream cars for people who need reliable daily transportation. The only way to sell that Miata is to claim it was your grandmother's and she recently passed and you don't know anything about it but you need to get $2500 to cover some funeral costs.

I had a neighbor who would do this. He had a friend who ran a used car lot and would buy cheap, solid Miatas at auction on my neighbor's behalf for a nominal fee. My neighbor would then drive them for a month or two, repairing and upgrading them as he saw fit, then selling them on via craigslist. It was a hobby and didn't make him that much money, but he always had a couple of fun cars in his garage. I wouldn't recommend quitting your day job, but I could see someone making a go at this with other niche cars - Vettes? E30s? P71s? Civics?

If it worked, you wouldn't see so many poor mechanics.

You can have a neat low cost hobby, but don't even dream of trying to make a living off the game.

In Ontario, we have to pay taxes based on the cost of the car. By the time you add the fees it took to transfer your car, it gets hard to make a decent mark-up; kinda like we expect the restorer guys to eat the restoration cost when they rebuild some old MGB.

Time, space, zoning, tax dodging and liability issues are all negatives to this game if you want to do it on any kind of a scale.

I've done it for years but have probably lost almost as much as I've made.

I have a basic formula for the cost of auto restoration - add up what you think it will cost you in dollars and time being very generous. Then double it. That should put you close to the ball park.

However, I have a friend who always makes money. He takes his time and finds under priced gems. For example he bought a half finished Triumph TR3 from a auto restorer. The customer had gone bankrupt so he picked up the car for next to nothing, finished the job and doubled his money.

In my experience it's easier to make money parting them. If you have space to keep parts, it's not hard to make $1000 profit on a $500 miata, it just takes time and lots of forum surfing.

If you look at the work as a hobby, then you can make a few bucks. I think of it as saving. I don't buy a new car, with a loan or a lease. It costs me some money to keep my cars in decent shape, but less than I'd spend buying a new car. And old cars like mine don't depreciate much. Shoot, the MR2 is probably worth more now than when I bought it.

My last couple of cars that I bought to flip came out pretty well (in reverse order).

• 93 Lincoln MkVIII, paid $250, spent $30 on a tire, sold it for $650 in 36 hours.
• 78 AMC Concord Wagon, paid $200, spent nada, sold it for $1000 in 10 days.
• 93 Plymouth Duster, paid $50, spent $280.94, sold it for $700 in 3 weeks.

Im not sure about Washington, but in Cinci, I think you are only allowed to sell up to I think 6 cars a year before you must have a dealers license and have a properly zoned shop/storefront...for the children, of course

4cylndrfury wrote: Im not sure about Washington, but in Cinci, I think you are only allowed to sell up to I think 6 cars a year before you must have a dealers license and have a properly zoned shop/storefront...for the children, of course

It's 6 here as well. That's why I'm thinking do 6 a year on purpose. The "profit" is your interest. You don't even need to work on the car, just find the right deal (like we don't all spend at least an hour on CL looking at cars anyways). Say, a Miata with a hardtop for $1500. Buy the car, sell the hardtop for a grand, sell the car for a grand. Easiest $500 ever. How long does it take to make $500 on interest in a savings account? CD? 401K? Stock dividends? Bond interest?

The difference is the labor involved, miata hardtop issue aside, you are comparing a job to an investment, an investment takes almost none of my time, and I get paid very little and make crap returns on my money, versus my job which to me is almost printing me money, except that I have to work and give up my time.

As far as the parting out, I have thought this could be a good job for a teen age kid. As an example, if I had a teen age kid and the space I could buy them a car (likely pick a marque and stick with it) then the kid parts it out. He learns cars and how things go together (in reverse.) The kid could also set up his own online presence and sell via forums, craigslist, ebay.
The hours are flexible and would work well with a school schedule. It could be a real lesson in running a small business.

4cylndrfury wrote: Im not sure about Washington, but in Cinci, I think you are only allowed to sell up to I think 6 cars a year before you must have a dealers license and have a properly zoned shop/storefront...for the children, of course

In MI its known as curbstoning & they actually have a reward for turning in curbstoners ;) KJ

Javelin wrote: While listening to the news blabber on about stocks and looking at paltry interest rates on CD's, I got to thinking why not use cars as an investment. Now hear me out here, I'm not talking about bagged up 4-mile as-delivered GN's, but normal(ish) cars. For example, buy a Miata for $1500, spend $500 fixing it up, and sell it for $2500. Do that 6 times a year and you've made $3000 in profit. Heck, even if you do it once a year it will totally outperform anything and everything in "the market". So why not? Open a second account just for "investments" and start buying and flipping cars for a profit, rolling each purchase into the next one. Plus you can actually drive the thing while you own it, unlike a stock certificate or a pork future. I really think this is a good idea, especially considering my wife's 401K's "performance" in the last 5 years... So who's with me? Retirement on cars?

You're alot better off buying antique furniture and artwork, it rarely depreciates, almost always appreciates, and as time goes on and pieces are lost, damaged, destroyed, the value of the piece can be vaulted into insane returns on investment...

WAY more money to be made parting out cars unless you're the luckiest sumbitch i've ever seen... (Like my buddy a few hours north of me. I've seen that kid make $3k profit in 2 days on cars. No idea how he does it.)

imirk wrote: The difference is the labor involved, miata hardtop issue aside, you are comparing a job to an investment, an investment takes almost none of my time, and I get paid very little and make crap returns on my money, versus my job which to me is almost printing me money, except that I have to work and give up my time.

I did exactly 0 work on the Concord, and spent all of 10 minutes on the Lincoln getting a used tire installed on a lunch break. So since you can only sell 6 a year anyways, it should give you time to seek out the "really easy" deals, right?

92CelicaHalfTrac wrote: WAY more money to be made parting out cars unless you're the luckiest sumbitch i've ever seen... (Like my buddy a few hours north of me. I've seen that kid make $3k profit in 2 days on cars. No idea how he does it.)

This is far more likely, I've got a friend who strips mustangs and anything that can be sold to the mustang crowd, their appetite is insatiable and they'll pay through the nose for parts.

Raze wrote:

92CelicaHalfTrac wrote: WAY more money to be made parting out cars unless you're the luckiest sumbitch i've ever seen... (Like my buddy a few hours north of me. I've seen that kid make $3k profit in 2 days on cars. No idea how he does it.)

This is far more likely, I've got a friend who strips mustangs and anything that can be sold to the mustang crowd, their appetite is insatiable and they'll pay through the nose for parts.

Been there, done that. Stripping cars is a job. You have devote many hours to it, deal with returns or bad press, and make sure not to piss off the wife/neighbors. Lots of money, but totally NOT worth the time IMO.

I'm talking easy money with little to no work.

You can make that kind of money without the labor part but its not easy.

Keep scouring CL for cheap deals. I bought an 89 S10 with a 5.3L and T56 tranny for $2000. I took it home, yanked the engine and trans, sold the S10 with the LS1 conversion parts for $1000, sold the engine for $650, and the trans for $800. I kept the LS1 carb intake and MSD spark box (worth about $700) but in the end, I made $450 and got $700 worth of free parts.

Keep watching for free cars with a title. Load them up and take them to the junkyard for scrap value... or if they have value, put a little sweat in it, get it running, and sell it for $500.

I've done it at varying degrees over the years. Average year I'll make $1000-$3000 on the side flipping cars. On my best year (single, lots of spare time) I made around $25,000

As has been said, best deal is to find transportation appliances that need a little work and alot of clean up.

Some examples 95 Neon, purchased for $200 with a bad brake line. Fixed line for <$20 detailed the hell out of it, traded for a 96 Grand Cherokee. Detailed GC and sold for $2000.

80 VW Rabbit Diesel purchased for $300, new glow plugs, clean up and a rattle can paint job netted $2500

"specialty" cars require really hunting a stellar deal or time into restoration. The real key is to not put alot of time or effort into anything if you want to make money at it so you have to avoid the cars you really want unless the deal is too good to pass up.

Example Friend gave me a lead on "an old bug" was a 64 Beetle very solid and rust free, not running in a semi private junkyard. There was also a 71 Alfa GTV there similar condition. Ended up buying the pair for $500. Did NO mechanical work, just cleaned off the years of junkyard dirt and mold and took good pictures. Sold the bug for $1000 and the GTV for $1100.

Its all about finding the right deals and being able to act on them right away (own a truck, trailer and have cash on hand)

Parting out cars generally pays off better, but its far more work. It takes up a lot more space, and if you do not live in the country or have a large shop, good luck getting your neighbors to not make a stink about it. To make part-outs work, you need to stick to one model of car and know it inside and out. I stick to DSMs, and it pays great but I know the game too.

Buying, fixing, and selling on cars can work. The ones I have had the most success with were also DSMs, as there are plenty of broken ones, and sometimes I would buy one for parts that was either not heavily modified or too nice to part out. Again, buying modified cars is key to making money at this game. Back in the day, I could buy a complete running and driving TSi AWD for around $1500, sell $3000 worth of aftermarket parts off it, put stock stuff back on it, and sell the car back for $3000 once I cleaned it up and fixed the small issues.

Regarding the max yearly limit on selling cars legally, don't forget your wife, mom, dad, kids, etc can all buy, fix, and sell the same number of cars.

Unfortunately, paying registration and taxes on all these cars so you can legally sell them and get the title in your name gets expensive and really cuts into your profit margin. You can always Screwdriver Transfer the cars if you plan on driving them, but in this day and age of mandatory insurance and automatic license plate recognition that can be a pretty big risk if you are not a slick talker.

Javelin wrote:

imirk wrote: The difference is the labor involved, miata hardtop issue aside, you are comparing a job to an investment, an investment takes almost none of my time, and I get paid very little and make crap returns on my money, versus my job which to me is almost printing me money, except that I have to work and give up my time.

I did exactly 0 work on the Concord, and spent all of 10 minutes on the Lincoln getting a used tire installed on a lunch break. So since you can only sell 6 a year anyways, it should give you time to seek out the "really easy" deals, right? Javelin: See, this is where the credibiity goes away. Had you done "0 work" on the Concord, it would still be around. At a bare minimum, you had to advertize the car, meet with at least one buyer and perform whatever paperwork is required.