How to improve purchases at auctions for businesses or individuals who buy damaged vehicles for resale and profit? First, we need to know the difference between a good and bad opportunity. There are some basic indicators to reduce the risks and increase the ability to generate profits.
Recognizing a Good Buying Opportunity at Auctions
It is important to know the demand for vehicles you want to buy at the auction. This allows to assess the profits you can make after rebuilding these total loss vehicles. What may seem like an opportunity can quickly become a money pit. The first tip is to pay attention to recent vehicles with a stable market value. This will help avoid variations in your production deadlines.
Damage to the vehicle must be properly assessed to reduce the risks. A common trap is to rely directly on the insurer’s appraisal. Why? Because when insurance company appraisers reach a certain level of damage, they stop investigating and declare the vehicle a total loss. Often, they have not documented all the damage, possibly causing major surprises that could prevent the buyer from rebuilding the vehicle, the cost being too high. What to do? Leave room for surprises. If the damage is under the vehicle, for example on the engine cradle, it then becomes relevant to assess the risk and have a solution other than rebuilding. Expensive mechanical engineering is often a consideration when rebuilding a vehicle (Audi, BMW, etc.).
When looking at returns from a rebuilt vehicle sale, make sure that the parts you are looking for are available at the current price you want, and include, for example, advertising costs, transportation costs, tax and inspection fees to get the vehicle back on the road. Don’t forget the unavoidable verification with the RDPRM in Quebec or PPSR in Ontario. This could be your best investment as this verification will show if the vehicle has movable hypothec, which would become your financial responsibility if you purchase the vehicle.
Assessing the Resale Price Potential
You need to pay enough attention to the activity on vehicle auction sites and to consult general sales sites such as Kijiji, Auto Hebdo, Market Place, to anticipate demand and monitor the offer. Watching these sites can also help you get a good indicator of market saturation for a model, for example, it may not be the right moment to sell a model if several identical ones are already for sale. Fierce competition could make you lose profits. Of course, reference books such as the Black Book can often indicate price variation over time for different models, but they don’t necessarily reflect the reality. Buyers are increasingly suspicious when it comes to the vehicles’ history. Existing reports such as Carproof or other similar services can easily show previous history or claims. These can easily reduce a potential buyer’s offer. If a vehicle retains its salvage title, you should expect a loss of at least 30% of its current market value. In Quebec, this title is given to all vehicles that an insurer declares total loss due to a sinister. Other provinces, such as Ontario, have a less strict status definition for their files, so it is important to consider these options.
Production Delays
To prevent the depreciation of the vehicles you buy, avoid purchases when your waiting time before production exceeds your production schedule. For example, if you can rebuild ten vehicles a year and you already have a dozen in your yard, it’s probably better to wait before making another purchase to limit deterioration and depreciation of the raw material.
Working With an Established Clientele
Could you rebuild vehicles for partners and clients who have special requests? This type of agreement can greatly reduce your risk and stabilize part of your income related to vehicle rebuilding.
Complying With Standards
In all cases, comply with the rebuild standards set by automobile manufacturers and government authorities. Some vehicles may lose their warranty after a rebuild. New opportunities may even arise if we look at our legal environment.
For example, buying an Ontarian vehicle with no mention could be a good strategy to avoid the salvage title in Quebec. Although regulations allow for this type of transfer, it is important to ensure the maximum possible safety for future users of rebuilt vehicles.
Editing: Alexandre Rocheleau
Collaboration: Frédéric Miceli
Translation: Sophie Larocque
PS. Looking for a source of vehicles to rebuild? Look into a membership at ProgiPix Auto Auction.