Herman School of Business
Mr. Opportunity is Knocking...
Over the next twelve months the following events will occur: GM, Chrysler and Ford will not be what they are today…there will be new owners, new management and a new business model, further, the credit industry must shift from the current model to decide who can be financed for a car purchase and who can not. Hello Mr. Opportunity!
People are already realizing that buying a brand new car every four or five years is an enormous waste of resources. My car is almost eight years old and still gets me from here to there at zero car payment per month while my attorney neighbor pays leasing fees on his Mercedes and his wife’s Lexus of well over one thousand dollars per month. He and his wife are wasting tens of thousands of dollars and while he was stockpiling excess income every year it didn’t matter, but with those excess dollars wiped out in the stock market crash he feels the pain of his excesses.
Losing money in the stock market or even a real estate deal happens in part because of the actions of others, wasting money on a car is primarily your own fault exclusively. Because, you have other ways to drive a car at far less cost. But where does this create Mr. Opportunity?
The time has come for a person to raise money exclusively for the financing of Used Cars. The crunch of credit issues is now squeezing the new car dealer financing entities to turn down qualified buyers who are now “run out” of the new car market. These people have never missed a house payment, never skipped a credit card payment, have sufficient income to pay a reasonable monthly car payment and will be forced to an action they may have never considered in their lifetime…buying a Used Car. There is an enormous glut of new car inventories now, but not enough buyers are clamoring for them For thousands less they can buy a car someone gave up on as the economy forced them to quit their leases, or get repossessed out of something they bought that was over their head.
But where is Mr. Opportunity in this mess? People are turning in cars at huge losses, the glut…which will last about a year or more…means Used Car Dealers can buy inventory at the lowest prices in decades. But the new breed of Used Car Buyer is a man or woman who have never done anything but pay New Car Dealer retail prices. They expect to see a price of thirty thousand plus without blinking. But those new cars a year later are now being wholesaled for half of that price…or less. Used Car Dealers can stock up on beautiful, well cared for, fully equipped vehicles, with very low mileage, at wonderfully low prices. The margin on a Used Car being sold today is not just creeping up…it is leaping up! This is the Perfect Storm for Used Car Dealers waiting for one more piece to their equation that will be the triple whammy and yield enormous profits…financing!
Money in the stock market is going down. Money in real estate is eroding. Neither place is good for your hundred thousand dollars in savings. I am of the mindset that if a fund were started with investors putting up fifty thousand or hundred thousand dollar chunks, that fund of let’s say one million dollars could be used to buy equity in a Used Car Dealership by financing sales of used cars to buyers who will be coming into that marketplace who deserve credit. While the new car world is upside down, this is THE time to grab market share of former new car buyers, now being shut out by a lack of credit…and turning them into lifetime used car buyers from this moment forward.
CAR MAX has proven that a Used Car Dealer can look like a new car dealer, and act like a new car dealer, and they have changed the feeling about Used Car Dealerships. The stigma of buying used cars has been broken and will disappear completely.
Why will this fund work? Why don’t banks just rush into this market? What is different about my plan and why should you invest in it? Because the money will buy Equity in the dealership! A percentage of the profits the dealership makes monthly will be paid back to the fund. You will share in the profit on the car sold…and get the interest paid by the car buyers paid directly back to the fund with every monthly payment. And by doing so, the one million dollar fund will “stretch” out the amount of loans that can be made because money will be coming back into the pot. If the fund gets a one-third equity stake and there is six thousand dollars of profit per car sold, then two thousand dollars will be paid back into the fund on every car sold…up front. The dealership will get a deposit from the buyer…that will help them buy cars along with their two-thirds percent of the profit booked on the car. This enables them to keep buying more cars, while sharing profits with their equity partner, the fund.
The fund would expire in two years and there will be a “hold-back” of some percentage for cars that will have to be repossessed, always a part of the industry. But for these next two years this model is certainly better than stocks, houses, or keeping the money under your mattress. Who wants in…email me.
- Posted: 10 December 2008
- Comments: 0
- Category: Business success