Can you make money buying and selling cars? The short answer is yes you can you make money buying and selling cars. Whether you are thinking about a small operator flipping cars as a side hustle or a large dealer group. There is a lot of money to be made buying and selling cars.
How much money can you make selling cars?
Franchised dealers
The top multi franchise dealers groups will have a turnover in excess of a billion and will be making hundreds of millions a year in profits. These large groups make money from car sales, servicing, parts sales, valeting and the sale of finance and insurance products.
New and used vehicle sales will make up a large proportion of these profits. But after sales, services such as parts sales and vehicle servicing will also be adding significantly to the bottom line. Finance and insurance (F&I) include products like wheel repair, paint protection, extended warranties, GAP insurance and car loans. These products usually only equate to a small proportion or revenue when compared to sales and servicing, but the markups can be massive, so their contribution to profits shouldn’t be underestimated.
New and used car finance is especially profitable and it’s not uncommon for the finance commissions to equal or exceed the initial margin in a car. Paint protection can be sold for hundreds and in some cases thousands with the base product costing only a small fraction of that. Servicing and parts sales are also highly profitable with high franchised dealer labour rates and most parts having at leased a 50% margin.
Volume is the key to success in this part of the market, with the large groups chasing ever greater market share.
But that’s not to say smaller or single garage operations can’t be successful. The revenue may not be on the same scale, but the lower overheads mean a more traditional set up can still be highly profitable. Profits can be vary due to product cycles and the reliance on one brand. But profits in the millions per annum is not uncommon.
Most of these garages offer the same services as the large dealer group and make money in exactly the same way. The garages are often located in a prime spot and are well established in the local area. and are often either privately or family owned operations.
Used car dealers
Successful used car operations can also be highly profitable. These are the sort of business you see trading from small garages and forecourts or lots. They make most of their money from car sales and finance, with additional profits again coming from upselling paint protection and warranties. But they lack the volume of both the dealer groups and single franchise operation.
Some larger used dealers have servicing and bodyshop facilities so are able to make additional cash offering related services. But they usually aren’t able to charge as high a rate as franchised dealers, so profits are usually lower.
That being said, profits can still run into the millions for large scale dealers but in most cases they are in the low hundreds of thousands. Most used car businesses are owner operated and profits often vary greatly and depend on the skills and experience of the owner.
Small one man band operations can also make big money. Most of these businesses run super low overheads and own the majority if not all of their stock. In a lot of cases the dealer will also own the freehold business premises that he or she operates from, making for a very good business model. Profits can run into the hundreds of thousands but in some cases they are sub 100k. But again this is largely down the skill and competence or the dealer.
Classic car dealers
Classic dealers make money in the same ways as a used dealer and again the focus is primarily on vehicle sales. But sales volumes are usually lower and the opportunities to upsell are further reduced, meaning finance, warranties, paint protection etc are harder to sell and profits from their sales are significantly lower.
However the relatively low sales numbers are more than made up for by the margins in the cars. These are typically thousands more than a normal used or new car, and in some cases run into the hundreds of thousands or millions. Meaning dealing in classics cars can be an extremely good business indeed, and in contrast to the rest of the market the stock cars are normally an appreciating asset rather than a liability. Profits are further bolstered as dealers are often very well established and own their premises and stock outright.
Lots of dealers also offer restoration and repair services and some also hold stocks of rare and unusual car parts. Classic car restoration are hugely time consuming and can cost a small fortune so is often highly profitable for the dealers doing the restoration. Specialist servicing and restorations allow dealers to charge healthy workshop rates and scarce and hard to find car parts can also be big business.
Find out more here – Buying and selling classic cars for profit.
Investing in classic cars
You can make large sums of money as a classic dealer, but you can also invest in classics on a small scale. We’ve written an article on the subject that you can find here – Investing in classic cars: Flipping vs Buy-and-Hold.
Car traders
The term ”trader” in the context of the UK motor trade denotes an individual who sources and buys used cars at below trade value and then sells (trades) them to a dealer or garage instead of retailing the car to the general public.
Trading cars can be a great business if you have the right contacts. It requires minimal cash outlay and can be a very profitable business. We have written an article about trading cars that you can find here – Car trading as a side hustle (with tips).
Car traders typically work on a small margin and aim to sell volume. Overheads are low or almost non existent meaning trading can be profitable.
Car flippers
Flipping cars as a side hustle or full time enterprise has the potential to make good money. Overheads are low and its an easy business to get started in. Most flippers sell cars are a side hustle whilst holding down a full-time job, but many end up flipping cars full-time once they’ve learnt the ropes.
Profits on small low budget cars are normal in the region of a thousand to two thousand, but can potentially be much more. You can find a beginners guide to flipping cars here – Car flipping business plan.
Importing cars
Importing cars can also be a great sideline or business, margins can be high as can demand. You can also make additional money from suppling parts. This business model is especially suited to Japanese imports which have seen a resurgence in resent years and the US market has opened up. Check out our article covering the subject here – Importing and selling cars.
Flipping supercar
Most car flippers operate at the lower end of the market. But you can definitely make good money flipping high end cars if you have the means. Investing can be expensive and sales are sometimes slow, but margins are good and it’s definitely a good opportunity to make money buying and selling cars. We’ve written about it here – Flipping Supercars.
Conclusion
Buying and selling cars can be a great business or a simple side hustle. Businesses vary in size and scale but most offer opportunities for significant profits. The motor trade isn’t always the easiest sector to operate in and has some obstacles to overcome in the near future, with increasing environmental pressures and the move to electrification, but these aren’t necessarily negatives, more opportunities to make even more money.
