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Automobile wholesaling business

Automobile wholesaling

To be successful in the automobile wholesaling business requires some basic understanding of what is involved. First of all a cash infusion of at least $100,000.00 is needed to secure the wholesale license and register with various auction houses. Next would be a good mechanical aptitude of how automobiles operate and how to troubleshoot for repairs in order to estimate repair cost and if it is worth the investment to make the purchase and repairs and make a profit. You will also need a comprehensive knowledge of how auction houses work and fully understand the bidding process. You would also need to have access to towing equipment to move vehicles from the auction house to your place of business.

Another requirement would be to register your business with your local governing body to make sure you are in compliance with ordinances for handling the storage of vehicles, the insurance requirements and safety issues.

You can also purchase trade in vehicles from local car retail dealers and need to establish a working relationship with these dealers so that you can keep a steady supply of vehicles to run your business. You will need a tool called a jumper box which is nothing but a tool to jump start a vehicle with a dead or weak battery. You can find this item at an automobile parts store or sometimes at a local flea market.

Please keep in mind that as a wholesaler you cannot sell to the public. You can buy from the public but you cannot sell to the public. You are only allowed to sell your vehicles at the auction only. Some wholesalers’ do sell to the public but it is illegal for them to do so but if they can get away with it they will.

As a wholesaler you cannot be involved in the financing, insuring or warranty part of the business. That part of the business is only reserved for the retail dealer. Retailing will be covered in later articles.

The wholesale business can be lucrative but it has its’ downsides. First of all unlike real estate, automobiles are classified as a negative equity item. In other words the value decreases rather than increases over time. As an example the typical automobile will decrease at an average of 8% per year up to the 100,000 mile or 10 year mark, whichever is first. So make sure you know how to appraise the vehicle before making the purchase otherwise you will lose profit and go out of business in a short period of time. Also the automobile business if filled with very unethical and unscrupulous individuals who will have no mercy on cheating you out of every dollar you have to invest. So as the saying goes “buyers beware” and watch out for the crooks for there are plenty.