Selling and financing a used car

[glowdotGlock]

This goes along with my other post of self employment. I have bought and sold several used cars and trucks over the years to make a few bucks but I am wondering how I would go about financing to someone. How to cover my ass as much as possible. Let's say I purchase a $3,000 car and sell it to someone. I would take $800 down and then let them make payments at let's say $75 per week for 60 weeks (14 months). That would put me at about $2,300 in profit over the term of the loan. I would offer a small incentive for early payoff. But I am wondering is it legal for me to even do this not being a business. To have 3 or 4 vehicles out at one time. And if I am able to do it how could I cover myself as far as loss? If they were to default what would my rights be pertaining to going and retrieving the vehicle?

[No_0ne]

Legality would be pretty much determined by the local laws regarding business licenses and such.  One potential problem is sales tax collection, the Dept of Revenue in Tennessee is very intense about that.  As for non-payment, I imagine your only real option is small claims court, be prepared for long, protracted deferrals if that happens.  The IRS will also be interested in your new "hobby" as well ...

[45guy]

I know several people in the buy here pay here car business. They have done very well. The down payment required pays for their cost in the car. The payments are all profit. You will need to be prepared to repo some cars. You must have your contract in really good order. Buying the cars really cheep is the key.

If I wanted to start a business I would look at ANY of the service businesses. I can tell you no matter what you choose. Showing up when you say, doing what you say when you say it will be done and doing a good job at a fair price you will have all the business you want. Keep in mind this is a marathon not a sprint.

[10-Ring]

I think to make good money in the car finance game you really have to extend credit to high risk people.  You're dealing with clunkers so like 45guy said you are even on the vehicle when they put the down payment on it.  If they don't pay you either have to go through the trouble and risk of doing a repo yourself or pay someone else to do it. 

[glowdotGlock]

I know several people in the buy here pay here car business. They have done very well. The down payment required pays for their cost in the car. The payments are all profit. You will need to be prepared to repo some cars. You must have your contract in really good order. Buying the cars really cheep is the key.

If I wanted to start a business I would look at ANY of the service businesses. I can tell you no matter what you choose. Showing up when you say, doing what you say when you say it will be done and doing a good job at a fair price you will have all the business you want. Keep in mind this is a marathon not a sprint.

This is what I am thinking. I might do it once or twice for some people I know of and see how it goes. I am not the one to rip people off but these lots provide a service for the "credit challenged". I have never bought a vehicle that way but there is some money in it.

[Alleycat72]

The down payment would be what you have in the car. The payments would be all profit.

So you have $1500 in a car.
Guy puts $1500 down and makes $100 a month payments.
I believe that it's illegal to make duplicate keys, but it's done.
If payments are not made, go get the car.
If the car is not recovered, you haven't lost much.

[NextExit]

Check with the state, but I believe that if you buy/sell more than 10 vehicles in a year, you need a dealers license.  I think you need one anyway.... how are your customers going to test drive the cars?  You need a dealer plate on it and insurance.   And yes, be prepared for repos and the damage done to your vehicles.  When I lived in Illinois, I had a friend that ran a "buy here, pay here" lot and I did a couple repos for him.  Not fun.  Prepare for the worst if you have to repo (busted windows, slashed tires, parted out sitting on jack stands)  As for your payment contract you might find one at Legal Zoom or Google "loan agreement" or "promissory note."   Best of luck :up:   And don't take trades!! When I put my car on Craigslist, someone offered me a dog and an x-box. :rofl:

[Fourtyfive]

Liability here is your biggest enemy . If your name is on the title and they have a wreck you can be sued.

I am assuming your not signing over the title till the last payment ? Edited January 4, 2015 by Fourtyfive

[2.ooohhh]

Check with the state, but I believe that if you buy/sell more than 10 vehicles in a year, you need a dealers license.  I think you need one anyway.... how are your customers going to test drive the cars?  You need a dealer plate on it and insurance.   And yes, be prepared for repos and the damage done to your vehicles.  When I lived in Illinois, I had a friend that ran a "buy here, pay here" lot and I did a couple repos for him.  Not fun.  Prepare for the worst if you have to repo (busted windows, slashed tires, parted out sitting on jack stands)  As for your payment contract you might find one at Legal Zoom or Google "loan agreement" or "promissory note."   Best of luck :up:   And don't take trades!! When I put my car on Craigslist, someone offered me a dog and an x-box. :rofl:

 

It's 5 cars per year then you need a dealer license, but it's more than just applying for a license. You'll need to meet all the requirements, which can get expensive.

 

http://www.tn.gov/regboards/mvc/documents/DealerApplicationandRequirements.pdf

[NextExit]

It's 5 cars per year then you need a dealer license, but it's more than just applying for a license. You'll need to meet all the requirements, which can get expensive.

 

http://www.tn.gov/regboards/mvc/documents/DealerApplicationandRequirements.pdf

Wow!!! I didn't think TN would be that restrictive! :stunned: 

I'd rather buy cars that need work, fix 'em up and sell.  Can't make a living doing that but could supplement my income.  Beside, being a shade tree mechanic wouldn't give me enough time to fix/sell more than 5 in a year anyway.  ;)

[monkeylizard]

The down payment would be what you have in the car. The payments would be all profit.

 

This. Plus after a repo, they get to sell it again. Some of the cars on those lots get sold 3, 4, 5 times or more. Since the cost is covered in the first sale, every payment collected and every future down payment is pure profit.

[peejman]

This. Plus after a repo, they get to sell it again. Some of the cars on those lots get sold 3, 4, 5 times or more. Since the cost is covered in the first sale, every payment collected and every future down payment is pure profit.

Agreed. This is the only way I'd consider it.

[oldogy]

I've often wondered how this works out long term.  I would figure a $1500. car is going to need some repairs, perhaps big repairs and maintenance.  So the question becomes, how can someone who must purchase a car this way afford to maintain it or repair it?  Then you have the person who drives it into the ground and walks away.  And then there is the insurance. Do you require liability and collision?  I've sold a few vehicles over the years but always insisted on cash. The buyer found his financing through payday loans type arrangements.  Holding paper on a car is tough game IMO. Not for the faint of heart.

[Shug]

In God we trust! Everyone else pay cash......With out a dealer license you might have a problem with insurance for your investment. I understand you will require them to provide it. But I don't know how you would force them to. If your going to go into financing autos for people you need to figure out how to cover yourself. 

[Dirtshooter]

I have a friend back in Ms. that has a dealership and also some small lots and in case you don't know about it they have a gps unit to track the vehicle and can turn off the car if they quit paying for it. I don't know how much they are, but they don't have to go hunting the cars anymore!

[tennesseetiger]

Unless you are starting a business I'd recommend against letting somebody pay you monthly/weekly for a car...it can get really complicated and ugly really quick. Very good friend of mine owns a buy here pay here car dealership in Louisiana and he makes an absolute killing but he deals with the scum of the earth and has his own repo team. I think you'd be better off just flipping cars but thats just me.