Every cloud has a silver lining so they say. And that’s true even in a recession. Well here’s a big black cloud that could have a nice little silver lining for you… if you follow my advice.

If you’ve been into any new car dealerships lately you’ll know things are pretty grim. Sales have plummeted. The figures for March 2009 new car registrations were down 31% on 2008. Hardly anyone can get credit… even people who can easily afford to pay it back. All over the country there are fields and fields of brand, spanking new cars quietly gathering dust.
But what you might not know is that the second hand car business is a whole lot busier. Used car traders are doing brisk business. Their main problem is not finding customers… but finding enough of the right used cars to meet demand.

While new sales slump, here’s a way to make a great income from used car trading

In many places the used car business is actually booming due to the recession. People can’t afford or can’t get credit for new cars so they’re buying cheaper used ones. And then there are the people who’ve lost jobs with company cars, or who have had to hand back cars on finance which they can’t afford. They’re fuelling the demand for cheap used vehicles. Why, in some cases used car prices are actually RISING thanks to the demand… not falling as they usually do.

So if I knew a way you could cash in on this silver lining would you be interested?

Don’t worry… you won’t need to become some kind of Arthur Daley or Del Boy Trotter style dealer turning dodgy tricks and ripping people off. I know a way you can make a nice sideline income from used cars that is straightforward, clean and respectable too.

Interested? Read on and I will tell you what this is all about…

The 21st century way to make money from used cars

This is a project you can start part-time from home without any previous experience and only basic car knowledge. You won’t need a traditional car pitch or expensive showroom to operate from. (There is already a fantastic virtual showroom you can use that will sell your cars for you – more about this shortly.)

All you need to do is source suitable vehicles (I’ll explain exactly how), make a few checks on them, create a decent ad and then collect the money from your buyer.

You will need a little cash to get started, but probably not as much as you think. The best deals to be done today are in the cheaper end of the used car business – from under £5,000 right down to £500 or so.

If you’re a little cash-strapped right now try this: Think about selling your own car and buying two cheaper ones. Sell one and use one. Then sell the other and use the other. And so on. You can also offer to sell a customer’s car on commission. Ring round the cars for sale ads in your local papers and offer the seller the price they want for their car if they’ll let you sell it for them and give you 5% commission. Then sell it for them using the methods I will outline shortly. (They’ll never need to part with their car until you sell it, by the way, so it’s less risky than you might think.)

The great thing about used cars is that you can start small and roll your profits over into bigger and better deals that make you very good money indeed. This is one of my most important secrets.

What and what not to buy and sell

This is the single most important thing you must know about trading in used cars. Especially at the moment. The cars you should buy to resell right now are the cars most people want to buy right now.

OK, so most of us would like a new Ferrari. But let’s be honest, hardly anyone will ever buy one – especially in the crunch. So you need to be practical. Think humdrum. Think a bit boring. Think everyday makes and models at everyday prices.

First a few basics. Colour: Stick to ordinary, sensible colours. These are what most people want. Blue, red, silver and so on. Hardly anyone wants a brown or pea green car even if it is cheap. Age: Three to six years approximately. These are the cars that most people can afford but still have plenty of life left in them. Condition: Good. Don’t buy shabby cars to resell no matter how cheap they are. And condition is much more important than mileage.

Now some more specifics: You might have noticed there’s a recession on. So you need to think economy. Do not buy cars with high fuel consumption. Do not buy cars in a high road tax group. Last summer’s high petrol prices and road tax fiasco in the budget put the kiss of death on these. Don’t buy powerful supercars, convertibles or 4x4s.

This is a good site for checking out tax bands, fuel economy figures and other inside info: Parkers at www.parkers.co.uk.

How to buy cars at trade price… or less

Now let’s look at sourcing used cars to resell at competitive prices.

Motor auctions are a good place to get started. There is one great advantage of buying at auction – it is just like having your own trade supermarket. If, for example, you have a red Mondeo in stock and it sells quickly at a profit – and you get five or 10 enquiries for it – then it’s easy enough to go to auction and pick up an almost identical red Mondeo. In fact, before you even buy it you know full well that you’re going to sell it easily and even how much money it will make for you. Clever or what?

There are lots and lots of car auctions to choose from and sure to be some near you. Try this online directory for finding them: www.fleetdirectory.co.uk/auctions. My first rule is only to go to the well-known, reputable ones. You might pay a little more but you can be sure they are conducted properly. One very good piece of advice is to go to at least six auctions as an observer – not a buyer – before you decide to buy anything at all. You will very quickly find out how everything works so when you do decide to bid you can do so confidently.

Actually, there are no secrets about auction bidding although many people think there are. You don’t have to scratch your nose or point in a certain way to make a bid! If you’re interested in a certain car just stand right in front of the auctioneer when it comes into the hall then, when the auctioneer introduces it, stick your hand up. He or she will know that you are in the bidding.

Another very good way to source cars is this: Do a deal with local main dealers and garages who take cars in part exchange and offer to buy their part exchanges. Go through your local Yellow Pages (www.yell.com) and call up a selection of local garages. Ask if they have part exchanged vehicles for sale to the trade.

What usually happens is this: When they get a part exchange in, they contact all the small traders who have registered with them, ask if you are interested in buying the car and how much you will pay for it. The car goes to whoever makes the best offer.

The final method to try is advertising ‘Cars Bought For Cash’ in your local papers. This can work because the people who come to you usually really NEED to sell their car quickly and will, very often, take a low offer for it – often below trade price.

How to value a car so that you always make a profit

This is an important bit. When you’re buying cars you will need to know what it is really worth and what you can sell it for. There is a way you can do this without any fancy trade guides or any previous experience.

When you need to value a car this is what you do: It is what I call the ‘20/30 Rule’ and it works for just about any deal you care to mention. Go to the Auto Trader magazine – which you can get online at www.autotrader.co.uk. Find three cars being sold by private sellers that are as similar as possible to the one you want to value. (Obviously this is easy for a popular car like a Fiesta or Focus, but trickier for something rarer.) Don’t take any notice of trade ads as these are retail prices not private values.

Work out an average of these three prices as your base price. (Add them together and divide by three!) Once you have done this your economic buying in price will be about that average value LESS 20%. This will allow you to add up to 30% to the private sale price to find a reasonable retail sale price.

For example: If you find three similar cars for sale at £4,800, £5,150 and £5,250. The average of these prices is £5,066. So, you should buy in at no more than £4,052 and your target retail sale price would be around £6,585 so you would make a £2,533 gross profit on this deal which, once you’ve deducted your expenses, is about right.

Dealing with the red tape

Now trading in cars does involve a few legal ins-and- outs. There’s no getting round that. So let’s briefly go through these and try and keep everything as simple as possible.

MOTs. As you will know all cars over three years old must have a valid MOT certificate. Try and only source cars that have a minimum six months MOT. Most buyers will want at least six months and this will mean you won’t have to retest the car before you sell it. By the way, this handy little known government site can give you the past MOT history of any car you’re thinking of buying and flag up any faults you might not know about: www.motinfo.gov.uk.

Tax. It’s an offence to drive or even keep a car on the public road without having a tax disc. But if you buy an untaxed car and have to tax it to sell don’t think of it as money lost. Just put in your ad that the tax is extra on top of the sale price. Most buyers are quite willing to pay this, as they would have to pay out for it anyway.

Insurance. Your own private motor insurance won’t cover you for any cars you buy for your business. What you need is a special Motor Trade Policy. The best place to go for this is a good High Street insurance broker. This is a situation where face-to-face is better than using the Internet, as a broker will be able to tailor a policy to suit your own particular circumstances.

Safety. Always check cars you are thinking of buying from a safety point of view. You wouldn’t sell anyone a car that wasn’t safe to drive. (Quite apart from the fact it is a criminal offence.) The thing to do here is to try and set up a deal with a garage to do a safety check on possible purchases. An MOT garage is a good choice, as they will also be able to tell you if it meets MOT standards if necessary.

£10 used car checks… the bargain of the century! Fortunately, there is a very simple way to make sure you don’t buy a stolen or written-off car or one that is still on finance. Use a service like HPI or RAC Car Data Check – www.rac.co.uk/web/vehicle-checks/car-data-check – to do this for you. It only costs a tenner. It really is the bargain of the century.

Important. Never, ever claim that the mileage of a car you sell is accurate unless you know for a fact that it is (i.e. you have owned the car yourself from new). Otherwise you have no way of knowing, so don’t say that you do. It’s sensible to word your ads to make it clear that although you believe the mileage is correct you cannot and do not guarantee it. For example, ‘Mileage showing 65,321 believed correct’.

How to spend an hour or two on a car and increase its value by £300, £400 or even £500!

Once you’ve bought a car for resale you can do a few things to make it more saleable, and possibly worth more as well!

A couple more points you will find helpful first

Avoid buying cars that need mechanical repairs or body repairs. Not because you can’t make money from it. Lots of car traders do. But because there’s more money to be made in actually selling cars than repairing them, so concentrate your efforts on that. (Also, why get your hands dirty if you don’t have to?)

Servicing the cars you sell is a good value adder though. If you can find a good garage that will do you a basic service for less than £100 it will probably add £200-£300 to the value of the car. But here’s a good tip – don’t do the service until it is sold. After all, there’s no point in paying out money until you have to.

Always give the interior a thorough clean. If the seats are fabric (not leather) give them a thorough steam clean. It really is one of the best things you can do to make your car more saleable. A carpet/upholstery steam cleaning machine will cost about £20 a day to hire but can easily add £100 to the car.

Next to the exterior: Give this a thorough wash with a pressure washer and then polish it up with a very good polish. Use a good professional quality polish, such as Auto Glym (www.autoglym.co.uk). Again, this is a very simple way of adding a few pounds for very little cost, other than some polish and elbow grease.

Now… selling your used cars for the best profits

Once you’ve got your car and prepared it you can start to think about selling it. Now, there are various ways you can do this. You can use AutoTrader. Or put up a poster in the window which costs you nothing. But I strongly suggest you use eBay, or eBay Motors to put it more accurately.

eBay is a fantastic, online showroom for cars… which you can plug into for a very reasonable cost indeed. eBay Motors receives over three million visitors a month. And a car sells there every two minutes. Try finding any High Street car showroom that does that sort of business. (PS. You won’t!)

If you’re already an eBay user then you’ll know how it works. If not, go to http://motors.ebay.co.uk now. You can get all the information you need on how it works and sign up.

A couple of tips. If you’re selling cars as a business you’ll need to register as a dealer. This is the law as well as eBay policy. But if you are already an eBay user do use your existing account. This way you will be able to benefit from your existing good feedback.

Finding your own corner of the eBay ‘car park’

Now, there are one or two snags to using eBay. You see, eBay Motors is such a big market you can’t hope to tackle it all. Plus, some parts of it are a lot busier than others. But here’s how to solve the problem.

What you need to do is find a hot market. A hot market is one with lots of buyers, lots of sellers and a fast turnover of sales. The best way to find a hot market is to search for similar products to yours, decide which ones sell best and copy what they’re doing. Use the eBay Motors search tool to do this. Look at ‘Completed Sales’. Look in the number of bids column and at the prices achieved. You will know pretty quickly when you hit a hot one.

One of the things that makes cars easier to sell on eBay is that it’s very simple to find which category your car should be listed in – as the category is set according to the car make. Very conveniently, you’ll find that cars that are popular in the offline world are also popular in the online world too. So, for example, Fords are usually a hot market on eBay, while Daihatsu rarely is. Do a search to find the categories that have the highest numbers of auctions and that is where you should be selling.

Auctions or classifieds?

If you have a look at eBay Motors you will see that there are two ways of selling cars there – the traditional auction format or classified ads. So which is best to use?

Classifieds only got started about three years ago and now a majority of cars are listed this way. It’s basically just like putting an ad in the paper, except that you get national coverage. The big plus is it gives you some certainty as to the price you sell at. Problem is, some sellers ask for silly prices there – which makes buyers a bit sceptical.

Fortunately, you can still use the traditional eBay auction format. This is the one I would strongly recommend you use wherever possible. You see, it really fires the buyer’s imagination that they could get a bargain. And that stirs up interest and gets more bids which (usually) will get you the best price.

But this is important: Start the bidding as low as you reasonably feel you can. Low initial bids attract more buyer interest. Because the price starts at a level that is well below what most buyers are willing to pay more buyers will actually bid. And once a buyer has placed a bid it’s likely that they will bid again… leading to bidding competition that you can benefit from.

Use a minimum bid. Avoid reserves if at all possible. Reserves are a bit of a turn-off to car buyers. In fact, skilled eBayers often make a no reserve policy a selling point where possible. They openly advertise this by placing the statements ‘No Reserve’, ‘No Res’ or ‘NR’ in their listings. OK, you don’t want to risk selling your car for £1… but a minimum bid is a better way of doing this and also guides your buyers towards the likely selling price.

How to write a great Motors listing

One of the easy things about selling used cars on eBay is that there is a standardised listing template with what are called ‘Item Specifics’ which you can just fill in to give the buyer all the basic details. That’s very simple to do.

But don’t rely on this alone! Take the opportunity which is offered by eBay to create an extended listing, including as much extra information as possible about your car and add it on below the basic details. There are far too many listings on eBay motors that don’t have a proper sales pitch. (Usually the cars that do not sell or get poor offers.)

The first part of your sales pitch is the title, which should immediately focus a potential customer on your listing. On eBay, you’re allowed 45 characters for the title, so make the best use of them. If you get them to click on your listing, then you have won half the battle.

Try to make your title snappy and captivating. Don’t just state what you are selling. For example, let’s say you are selling a Ford Fiesta. Here are two possible titles:

Ford Fiesta For Sale

Shiny Red Fiesta For Sale – SPORTY – ECONOMICAL

The first title might attract a few buyers but the second would attract a lot more – buyers who are looking for something sporty and/or economical as well as a Ford Fiesta. It also gives them reasons to enquire further.

Now to some description. A good tip is to write this in a friendly, chatty way – as if you are talking to the buyer on a one-to-one basis. Here’s a good example of the sort of thing I mean here:

My Peugeot 106XT is a great reliable car. Ideal for a first-time buyer who wants something sporty but cheap to run. It is only group 3, so you won’t be spending all your dosh on insurance. It has genuine Peugeot alloy wheels, rear window spoiler, fog lights and sporty red carpets and seat belts! An expensive Bose CD player which the last owner fitted (great sound!) is included. Recent new brakes all round and a new battery. The car has tax until May and MOT until June – so nothing to spend for almost a year. Lovely to drive and practical too.

I would be glad for you to come and see how great the car really is before you bid – please e-mail me to arrange it.

Tip. When selling cars on eBay always invite potential bidders to come and view the car BEFORE they bid. Most serious bidders will want to. Sales made on eBay are binding so, if they win, they are obliged under the rules to buy the car even if they have not inspected it.

Essential… adding photos

When you are selling a car on eBay you MUST include a photo. Even better, include several photographs of your car – front, back, sides, etc. When browsing through listings often the photo is the first thing to attract potential customers. People are less likely to buy what they cannot see and may be prepared to pay less… while they are more likely to buy and pay more for what they can!

Photographs should be clear but should be taken so as to highlight the best aspects of your car. Make sure that the lighting and the positioning is correct. Most cars look better when taken from below rather than above. Use a ‘clean’, uncluttered background – such as against a plain wall or hedge rather than in a car park with a lot of other cars. If you have time, driving out to a nice country spot so you can have a nice view, lake or whatever in the background can also make a better pic.

It can also be a good idea to include a photo of any damage (eg. dents) which not only shows honesty but avoids problems later.

Finalising your sale

If you’ve bought or sold anything on eBay I’m sure you’ll have an idea of how it works. (Or if not it’s easy enough to find out by looking on eBay.) But I’ll just run through a few specifics for safe car trading on eBay.

First, use the PayPal system to take a deposit from the buyer. Ask for this immediately, or within 24 hours at most. A token amount such as £100 or £200 will do.

Don’t ask for the entire balance by PayPal. Ask for it on collection of the car. eBay are perfectly happy with this arrangement. Don’t take cheques. Take cash or a building society or banker’s draft – but check they are genuine before releasing the car. Asking the buyer to make a bank transfer is the best way of receiving payment. (If they have Internet banking money can now be transferred in minutes.)

One more thing: Usually you should ask buyers to come and collect from you. Avoid travelling to them, as these people tend to haggle over the price when you arrive. The exception to this, when you can offer delivery at extra cost, is if they have already paid the full price agreed.

By the way, whatever you do, don’t entertain any bid or sellers from abroad. The ‘I’m living in Nigeria, Spain (or wherever) right now but I really want your car and will pay you the asking price’ type of thing. Sure, they might be genuine but 99 times out of 100 it will be some kind of scam. Just don’t do it!

Lastly, feedback. Having good feedback is especially important when selling cars on eBay because people tend to look at it whereas they wouldn’t if they were buying something cheap. Here’s a good tip – use your eBay account to buy and sell as many other things as you can too. That will help build up your feedback rating.

More tips for successful car dealing

Always buy the best cars you can afford. You can make money on a 150,000-miler if it’s in good condition with a service history – but you’ll be lucky to make anything on a bruised and battered 40,000- miler with an unknown past.

Always buy stock as cheaply as possible. This is a much better way of making a good profit than trying to sell at the highest possible price.

Always be fair with the customer. You’ll get more repeat and recommendation sales/bids and feedback – and may even be able to sell for more as a result.

Think recession. Ordinary, day to day, used cars are the best to be buying and selling right now. (Forget that Ferrari… unless you are buying it for yourself!)