This is part of a three part series on buying your next classic car. This article focuses on dealer transactions. Check out the prior article on buying a car from a private party and auction house here.
People are used to buying from dealers. You probably bought your everyday car from a dealer. You show up to the new car dealership, haggle over features and price, get an extended bumper-to-bumper warranty, a couple of free oil changes, and you're home before dinner with the new car smell still clinging to your clothes. Although classic car dealers try to make the car buying experience as easy as possible for you, there is still a lot of due diligence needed to ensure that you are getting the car you think you are buying. To the non-car person, "You’re buying a fifty year old car. I don’t care how nice it looks."
Before diving into how you should approach dealers, there are the four business models of classic car dealers:
The Consignment Dealer:
If our car collector, Billy, is trying to sell his 1956 Buick Roadmaster convertible and walk away with $75,000, the consignment dealer may be a great option for him. First, the dealer gets an idea of what Billy wants for the car. If the dealer feels it is a marketable price and Billy is comfortable with the price, the dealer begins marketing the vehicle. The dealer charges a flat fee between $0 and $500 for anywhere between one and six months of marketing and storage of the car. Once the car is sold, the dealer retains between 10 and 15% of the sale price as their fee.
The NET Consignment Dealer:
This dealer works in a similar method to the consignment dealer in regards to time to sell the car as well as an initial fee to list the vehicle. Where the net consignment dealer differs is that Billy declares a price that he must get for the sale of The Roadmaster, in this example, $70,000. The dealer attempts to sell the car for an amount over $70,000. Any amount over this amount is the dealer’s profit and Billy gets $70,000.
Classic Car Dealers Who Buy Their Own Inventory:
If Billy has to sell his car today, because his kid’s college tuition is due, these dealers will cut a check on the spot. Billy will not get his $75,000, because these dealers offer a wholesale price. This is usually between 50-75% of the expected sale price of the car (in this example, $37,000-$56,000). When you need cash immediately, you pay for it by selling at a low price. The wholesale price is dependent on a myriad of factors including, but not limited to, the condition of the car, the dealer's own inventory levels, and the general demand for the car. These dealers take a lot more risk than the consignment dealer. If there is a mechanical issue with the car that they miss during inspection, they may have to fix it. If the car sits on their lot for months, they need to pay for the costs of storage, insurance and financing the car. If they buy a convertible in Maine in December and they plan on selling it soon, they will probably be dealing with an out-of-state buyer.
Advantages of Buying Your Car from a Dealer (Consignment or Traditional):
- Dealers have a reputation to maintain. If they sell too many bum cars, their Yelp, Google +, and other rating sites will hurt their business in the future. It is in their best interest to inspect the car and disclose any issues prior to selling you the car. You also can be fairly confident that you will be getting a clean title with the car.
- These guys are professional salesmen. They sell cars every day. If they don’t sell cars, they don’t put food on the table. They want to turn over their inventory as fast as possible. They don’t really care if Billy’s car sells for $84,000 or $85,000. What really matters is that they complete the deal so they can create space for another car. Just as you are negotiating with the dealer to get the price down, the consignment dealer is working on the seller to lower his sale price.
- Dealers have a very good knowledge of the market, specific car models, and trends in the industry. If you work with a good dealer, you will have the confidence in knowing a lot about the type of car you are buying.
- A good dealer will take great care in using video and photos to display the car online. Many of these dealers have a special section in their showroom for photographing these cars. This is great for the buyer because you can see a lot more shots of the car than you might have seen if you were buying from a private party. If you want to get a better view of a particular part of the car, often the dealer will send you multiple photos of the part or section of the car you requested. Dealers market their cars through radio, print, and tv ads as well as their website. This is beneficial to the buyer so that you can don’t miss a car that would have otherwise been stuck in the Tupelo, Mississippi Craiglist.
- When you deal with a private party, it is up to you and the seller to figure out how to get the car from the seller’s house to your house. Truck transportation is the typical way to ship cars. Shipping costs between $400 and $1,000 depending on distance. Dealers ship cars every day and are well versed in the intricacies of proper shipping. They also work with transporters who depend on future business from the dealer, so the shipping company wants you to be happy too.
- Many dealers will offer financing options to the buyer. Not everyone has $100k in the safety deposit box for that 1959 Cadillac, but they do have the income for the payments. Many dealers offer financing options similar to that of used cars. However, unlike that 15 year old Toyota, classic cars tend to hold their value so the loan is essentially backed by an asset instead of a pile metal headed to the scrap yard. There are a lot more classic car lenders than there were 10 years ago and many dealers are getting into the financing game too.
- Make all efforts to see the car in person. A $500 flight, rental car and hotel might be worth the cost for a car with a significant purchase price. In many cases, these car dealers are located near a major airport and the dealer will pick you up and drop you off at the airport, so your only cost is flight without the rental car and hotel.
- Even though the car is considered an antique, some used car dealers will offer a 1, 3, or 6 month warranty. As long as you’re buying locally, it is nice knowing that you have a bit of a safety net in the event something blows up on the car.
Disadvantages of Buying your Car from a Dealer:
- The price. By introducing a middle man, the net cost to you just increased anywhere between 10-15%. These dealers are not working for free and you will pay for the convenience of a shiny showroom, free coffee, and a good feeling about buying your car. 10% may not sound like much, but on a $50k car, that is $5k. What are you getting for that $5k and how much is your time worth to pay for this service? Only you can answer this question.
- Dealers do not always have the full service history of cars. Often the seller drops the car off on Friday and the next day the car is on the showroom floor with a 'For Sale' sign on it. A well-maintained car sold by a private party often has years and years of service and restoration history. A respectable private seller will tell you every ding and problem with the car, so you know what you need to do to get your car performing at the level you desire.
- Most dealers do a cursory inspection of the car. They don’t want to sell junk, but at the same time, they are not going to find every flaw with the car. With this in mind, you can feel more confident in buying the car without an inspector looking it over, but I still recommend you doing your own due diligence (i.e. hire an inspector) on the car.
- These guys are not really dealers. They are more of a marketing strategy for the private seller, but they often try to declare that they are dealers. They charge a flat fee of $250-500. The seller submits their own pictures and description to this company and they upload it to numerous websites. However, you often control what sites your ad will appear. They advertise their service as "we post your car on hundreds of sites." It is on car seller to talk to buyers, show the car, and close the sale.
Advantages of Using an Internet Marketer:
- A flat fee is charged for advertising your car on numerous sites. This can save you hours of your time uploading the same information to multiple websites. Aside from a flat fee, there is no intermediary to take a cut of your sale. Whatever you sell the car for is yours to keep.
Disadvantages of Using an Internet Marketer:
- You need to show the car, handle questions, and close the sale. It is difficult to follow up with these marketing companies if you are not getting the buyers' calls you were hoping to receive. These ad companies often say, "we did our part, your car is just overpriced. Try cutting your price." If you’re going to sell your car on your own, list it on several of the sites listed in this article. Some of the ads cost money, but at least you know where your car is advertised.