Beat Depreciation and Sell Used Cars for Big Bucks!


May 23, 2018

Used car salesmen don’t exactly have the best of reputations. On TV and in movies, they’re usually portrayed as fast-talking con men trying to fool people into buying old, crappy cars. But in the real world, used car salesmen actually provide a valuable service. And that also applies to used-car flippers such as myself.

Selling crappy cars isn’t good for business. A legit used-car salesman and flipper will only sell decent-quality vehicles. Because that’s where the money is. The buyer gets a great vehicle, and I get paid. Win-win.

I’ve been selling cars on CarLotz, a consignment store for used vehicles. I made really good money this way. If you’re interested in selling used cars for a good profit, read on. I’ll be sharing my experiences, as well as some tips on how to maximize your earnings!

How to Beat Depreciation

You’ve heard the classic story: a car loses a large chunk of its value the moment you drive it out of the dealer’s lot. Its resale value drops further as the car’s mileage increases. It’s a pretty common belief, but I discovered an interesting way to beat depreciation.

A proven way to beat depreciation is to resell a leased vehicle. This is how it works:

A leased vehicle is a bit like renting a vehicle long-term. Think years, instead of months or weeks. But unlike rentals, a leasing company will give you the option of buying the car after the lease period.

The selling price of the car is called the set-and-done price. And the interesting part is, that price has already been predetermined, even before you sign the lease papers. That means your car will hold that particular value. And because the car holds its value, may actually be able to sell your car at a profit! It may seem counterintuitive, but this increase in value is due to low new-car inventories and tight credit.

Let’s say your leasing a car with a set-and-done price of $10,000. Towards the end of your lease, you can put the car up for sale for, say, $12,000. That way, you make a sweet $2,000 profit! It may seem counterintuitive, but this increase of value is due to low new-car inventories and tight credit.

Let’s say your leasing a car with a set-and-done price of $10,000. Towards the end of your lease, you can put the car up for sale for, say, $12,000. That way, you make a sweet $2,000 profit!

The market for used cars is pretty hot right now!

What if I don’t have funds to buy the car?

That earlier scenario assumes that you actually have the money to buy the car first. If you don’t have the funds, you can even try selling the car while it’s on lease. The buyer can either pay the $10,000 to the leasing company, and hand you the $2,000, or they could hand you the entire amount and you process things with the leasing company.

Obviously, this requires a bit of trust between the buyer and you. I suggest being upfront about the set-up and updating the buyer every step of the way. I’ve done this several times, and it’s isn’t as big a deal as it sounds.

Is This Legal?

In case you were wondering, yes this is very legal! And since it is legit, you’re probably wondering why the leasing company doesn’t just sell the car at $12,000. Well, a leasing company will have the economics of scale and volume on its side. The company can afford to sell at a lower price, because it more than makes up for it in volume.

Take my leasing company, for example. They have literally hundreds of cars. It would make better business sense for them to sell more cars at $10,000, rather than jack the price up to $12,000 and risk lower sales volumes.

You, on the other hand, do not have the ability to sell large volumes. So you sell your car at $12,000 which would still be a good deal for the buyer. Everyone wins!

Other Costs

There’s more to selling a car than, well, selling the car. You’ll also have to consider the costs of promoting your sale (either online or through paid ads in a local paper), and of accomplishing a bunch of paperwork.

It’s also recommendable for to undergo some repairs and maintenance before putting the car up for sale. Car buyers are much smarter now (thanks to the internet) and know what to look out for when buying used cars. If your car has a pre-existing condition that you can’t afford to have repaired, it’s best to fully disclose it to the potential buyer. But you’ll have to be willing to bump the price down a bit.

It’s a lot of work (imagine what it’s like for car flippers such as myself who routinely sell several cars at one time!). And there’s no guarantee you’ll even find the right buyer.

You have to think of this as a business. The car is your merchandise. You’ll have to put some time and funds into selling it But when it does sell, it’ll be worth it.

In fact, this is how I became a professional car-reseller. I had such a great feeling of accomplishment after selling my first car that I decided to do this full-time.

CarLotz: An Easier Option

Like I mentioned, selling a used vehicle is hard work. If you’re looking for an easier option, you’re not the only one. When I started doing this full-time, I got swamped with paperwork and phone calls (many of which weren’t even legit buyers) I started looking for a more cost-effective way to sell used cars.

And that’s when I discovered CarLotz. They’re based in Virginia, and I usually passed by their lot during my drive to my old office.

CarLotz is a car consignment seller. Car owners bring their cars to CarLotz, and the company does the selling. They handle all the labor-intensive (and sometimes irksome) aspects of selling a used vehicle. They handle DMV paperwork, meet customers, and close the sale.

Associated Fees

Of course, a service such as this won’t come for free. CarLotz charges to two types of fees.

First, you’ll have to pay an initial fee of $200. This covers a car wash to make it presentable, consultation with a mechanic, photographing the car, and advertising it on various used car websites. Doing these things on my own, I can easily spend over $200. So I was totally cool with that fee.

When your car gets sold, they will get a $599 cut from the sale amount. In total, you’ll be paying $800. It may seem like a steep price, especially if your projected profit is only around $2,000.
But in my opinion, it’s totally worth it. Since I’m not pushing papers or talking to buyers, I can focus on the part I enjoy the most: sourcing cars for reselling. And that, in turn, can translate to more earnings for me.

What’s Selling these Days?

Most used car selling platforms will tell you that there’s a market for just about any sort of car, form that top-of-the-line electric car down to a beat-up vintage car. While that’s true in theory - even a total wreck can be sold for scrap iron - some cars sell better than others.

In my experience, electric and hybrid cars are the top-sellers. Brand-new electric cars are pretty pricey, so you can expect a lot of people will be looking for bargains in used car markets.

Trucks and SUVs are still good sellers, but a decreasing number of people seem to be buying them. I think this points to the changing attitudes of car owners. Fuel efficiency and environmental factors are major factors they consider when buying cars. And it’s not just for altruistic reasons: electric cars give you considerable fuel savings.

If you’re thinking about becoming a full-time car flipper, keep that in mind. People’s attitudes change, and you need to keep up with them.

The Verdict

Selling your leased vehicle is a legit way to minimize, or outright prevent, your car from devaluing!

It takes a lot of work to sell a used car. If you’re looking for a more convenient way to go about it, consigning it to CarLotz is a legit way to make the process easier.

Give these two methods a shot. If you make good money on your sale, you may want to consider becoming a used car flipper! (Just don’t do it in the same city as me)

CarLotz Screenshots

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Your Turn

This review is based on my own experiences selling used cars and finding ways to minimize depreciation. Have you sold used cars? What models did you sell, and where did you sell them?
Did you get good returns on your investment?

Let’s hear your stories!