Wholesalers have to establish relationships with dealers or run their cars through an auction. One of the benefits of wholesaling is you don’t have to work on weekends like dealers do. Some dealers lots are completely consigment cars. That way a dealer doesn’t have to put their own money into their inventory. A wholesaler will have several cars on a dealers lot for sale. Once the car is sold the wholesaler gets paid.
I personally don’t like selling to most dealers. I’ll always get more for my cars if I sell to the public than a dealer. Dealers are the biggest low ballers. I only sell my problem cars to dealers. A wholesale transaction is 100% as/is. If a dealer cancels a check for a car bought from a wholesaler, the wholesaler can attack the dealers bond.
Most wholesales bring cars to dealers that are ready to be sold with no reconditioning needed. If reconditioning is needed, dealers pay way less because they have to factor in reconditioning expenses, and profit margins. Wholesalers will make smaller profits than retailer dealers do so they have to deal in a higher volume of vehicles. The benefit to getting a retail dealer license in California is you can wholesale and retail. In some other states you need to get a wholesale license separately.
You don’t have to have an area to display your cars to have a wholesale license, making it easier to obtain. If you have a wholesale license, and sell retail to the public, you can get arrested if you’re caught. Wholesalers also have smaller bonds, than retailers.
Prices for vehicles vary in different states. Some wholesalers’ go to different states to buy, then they ship them locally and sell for a profit. Vice-versa, wholesalers will buy locally, and export to foreign countries where there is a higher demand for a particular vehicle. California cars are popular for export because there rust free. Used cars from third world countries don’t hold their value like California cars because the roads in third world countries are damaged. The roads aren’t fixed as frequently. There are plenty of potholes which damage the suspension. A car from California will sell for more in Mexico for instance, than a car that been used in Mexico for sometime.
Wholesalers also make money by doing consignment, and sell their vehicles on retail dealer’s lots. Wholesalers need to get to know a good amount of retail dealers to help them sell their cars. Every dealer has a niche and is successful with certain cars. A wholesaler may know a dealer who is primarily an electric car dealer. Wholesalers’ call those specific dealers if they have something they think they’d like.
Many wholesalers buy at dealer auctions. Generally these are wholesalers who need a high volume of cars. A wholesale car dealer who doesn’t like live auctions (Usually because of the loud noise) go to silent bid sales.
The majority of wholesalers buy trade-ins from new car stores. There is the new car stores that only deal with a select few wholesalers, and others that deal with a greater number.
Some new car stores have sales with a small group of wholesalers selling to the highest bidder. You have to contact the used car manager of the dealership to see if this type of process is offered at the dealership.
Most new car stores sell only to a select few of wholesalers that they’ve been dealing with for years. The wholesalers pay them under the table for the great deals their getting.
Either way, wholesalers will get the best deals buying from new car stores. Wholesalers buy vehicles from new car stores, and either run them through the auction, or sell them directly to dealers.
Adrian asks: Hello Greg, I live in SoCal and was wondering if I wanted to get a wholesale dealer license and operate from home and sell to other dealers its fine. I can go into private dealer auctions and buy cars for myself. Now what if I sold cars online with a wholesale license?
In CA you can’t operate from home if you want to get a wholesale dealer license. You have to get an office. There are plenty of cheap offices available. You can not sell to the retail public with a wholesale license. You can get in big trouble if you’re caught. You can sell directly to dealers, at auctions, do consignment, etc.