Started a company - I have a few questions and welcome critiques - Used car parts

[C-Mart]

So I have been buying/selling car parts for years and after recently buying an E60 M5 to part out and making a good chunk of change I decided to take the plunge and make some investments that will allow me to scale.

 

I have a guy that is local to me that is my 50/50 partner, which is helpful as we have the same long term vision of what the company can be and we both have full time jobs. The partner wants to run this full time when it is making enough money, which is another reason the opportunity was so appealing to me.

 

The barrier to entry is very low in this field, but the reality is very few people do it properly. We are developing an inventory management system that automatically uploads our parts to eBay, Craigslist, and a website and keeps everything updated. IE if a part sells on eBay it is pulled from the website. It will also keep track of all of our accounting. Unlike most yards we bring a car in, test the parts we want to sell, completely part the car in a few days, and store all of the parts in a warehouse space, not outside and then we are on to the next.

 

We use eBay sold to make sure the cars we are buying are a good investment, which has worked so far. Despite being able to make decent money doing this, my goal is to have the company finance a commercial space, so it is as much a real estate play as anything.

 

Now to my question. Some of the cars we have considered buying do not have titles. Is there a place I can run the VIN prior to purchase to check to see if the car is stolen?

 

The stolen car thing is really my only big concern as I don't want to deal with the headache. That said I would love to hear opinions from others as well on the business as a whole.

[coltboostin]

1) Props! 2) Are you creating this inventory system yourself? Using a 3rd party? Or tweaking something that's already available? 3) https://www.nicb.org/how-we-help/vincheck

[Zx2guy19]

There are many others here equipped to handle your question, so I won't chime in on that.

 

But for what it's worth, I used to make a shit load of money doing this when I was a teenager. Like 40k when I was 17 haha...it's how I got started in real estate/flipping houses. There is a lot of money in this if you do it the right way. If you sell a part and it doesn't work, honor your customer and replace or refund. That happened to me a few times and I'd like to think I always did the right thing.

 

Best of luck dude. If you ever need an agent to help find you a commercial space, let me know.

[zeitgeist57]

Best of luck dude. If you ever need an agent to help find you a commercial space, let me know.

 

Isn't C-Mart out in Denver?

[C-Mart]

Colt - Ideally we find one that allows you to add/remove as many fields as you want that does excel exporting and importing properly. If we can find that, we will use an existing IMS so that we can API/macro our data into several different places without having to recreate the wheel.

 

Zx2 - Yes on refunding. A - we don't want to rip anyone off. B - we test all parts before removing. C - Things sell faster/for more with a warranty. I live in Denver, so I'll need to find one out here, unfortunately.

[cdk 4219]

No title is a big problem around here anyway. Around here you can’t do anything without title. Just because it isn’t reported stolen , doesn’t mean that there isn a bank lien or other legal loopholes. Doing this once or twice would probably not lead to anything bad, but starting a business with this greatly increases the odds of problems.

[Flyin Miata]

This is not a guarantee the vehicle is clear, but an easy and free way to get some peace of mind is through the NICB (National Insurance Crime Bureau). Most major insurance companies will report stolen VIN's through this database.

 

Free VIN search: https://www.nicb.org/how-we-help/vincheck

[C-Mart]

No title is a big problem around here anyway. Around here you can’t do anything without title. Just because it isn’t reported stolen , doesn’t mean that there isn a bank lien or other legal loopholes. Doing this once or twice would probably not lead to anything bad, but starting a business with this greatly increases the odds of problems.

 

I am parting the cars out, not reselling them whole.

 

The risk comes from unknowingly receiving and selling stolen parts. Thus far, we have just taken photos of their ID and done a bill of sale if there were title issues.

 

I'll keep this thread updated with progress/growth if anyone is interested. Our goal is to grow the company organically with profits. There is NO shortage of cars to make money off of.

[Lauren]

I did this heavily back in 2008-10. My business partner and I specialized in miatas and rx7's. We had a three bat shop and warehouse of storage. We also built customer cars

 

What type of building do you have now? We started with a flex space warehouse in an industrial part of town before getting our own building and having a showroom.

[brent1976]

I think this is a really good idea out here in Colorado. I found a 95 t-100 sr5 without a spot of rust on it that’s now my daily. It only took about an hour and a half to change all 4 ball joints and all 4 tie rod ends. I get shocked when I see 80s and 90s dodge trucks that are just worn out instead of completely rusted out like back in Ohio. Good luck, I think you might have found something that you can make some decent money doing.

[C-Mart]

I did this heavily back in 2008-10. My business partner and I specialized in miatas and rx7's. We had a three bat shop and warehouse of storage. We also built customer cars

 

What type of building do you have now? We started with a flex space warehouse in an industrial part of town before getting our own building and having a showroom.

 

Right now we have a 2 car garage with a lift for disassembly and storage unit a mile away with industrial shelving. The storage unit is $.62/sqft/month and warehouse space is close to $1.00/sqft/month. We have the ability to add more units at this price as we need it.

 

I think this is a really good idea out here in Colorado. I found a 95 t-100 sr5 without a spot of rust on it that’s now my daily. It only took about an hour and a half to change all 4 ball joints and all 4 tie rod ends. I get shocked when I see 80s and 90s dodge trucks that are just worn out instead of completely rusted out like back in Ohio. Good luck, I think you might have found something that you can make some decent money doing.

 

There is no shortage of cheap cars out here for us to work through.

[cdk 4219]

I am parting the cars out, not reselling them whole.

 

The risk comes from unknowingly receiving and selling stolen parts. Thus far, we have just taken photos of their ID and done a bill of sale if there were title issues.

 

I'll keep this thread updated with progress/growth if anyone is interested. Our goal is to grow the company organically with profits. There is NO shortage of cars to make money off of.

 

Again, Colorado may be different than ohio, but here in Ohio it is illegal to sell a car without a title. In order to junk a car here you must have a title in your name. Just because it isn’t reported stolen, again doesn’t mean it may not have legal issues. Without a title, even with a bill of sale, around here, it isn’t legal to sell or dismantle. If you don’t have a title here, scrapping the parted out shell of the car without title is illegal for the scrapper.

[Coaster]

My step dad worked at a junk yard for most of his life. At one point they got in a pickup and the guys doing the dismantling didn't check all the VINs they were supposed to.

 

They sold the bed to someone and when they took their repaired truck to get inspected the state caught it. Turned out the bed was off of a stolen truck and my step dad signed off on the paperwork.

 

It was a big legal mess even though the company paid for all the lawyers and had plenty of pull with the small town judge. Ended up going on my step dads record for 7 years before he could get it expunged.

[Jewtoys]

It seems like you will have to scale fairly large to make any real money, not to mention time consuming. Pulling all the parts, inventory,shipping,etc. Once you go legit, you will have even more expenses..

 

How are you obtaining the vehicles? As others stated, I would be very concerned with stolen goods.

[C-Mart]

Again, Colorado may be different than ohio, but here in Ohio it is illegal to sell a car without a title. In order to junk a car here you must have a title in your name. Just because it isn’t reported stolen, again doesn’t mean it may not have legal issues. Without a title, even with a bill of sale, around here, it isn’t legal to sell or dismantle. If you don’t have a title here, scrapping the parted out shell of the car without title is illegal for the scrapper.

 

Keep in mind, I have received some sort of paperwork and have run a carfax on every car I have bought thus far. My scrapper never asks for the title, but I always give it to him. Also, in the past 2 states I have lived, if the car is cut into 3 or more pieces they don't legally need a title, which is a bizarre law.

 

It seems like you will have to scale fairly large to make any real money, not to mention time consuming. Pulling all the parts, inventory,shipping,etc. Once you go legit, you will have even more expenses..

 

How are you obtaining the vehicles? As others stated, I would be very concerned with stolen goods.

 

Taking cars apart is not rocket science and hiring people in automotive school to do the work is easy and cheap. My two focuses right now are the IMS the process of photographing and logging the parts in said IMS. Once that is figured out accurate financial projections are a breeze. From what I can tell right now the margins are healthy enough where hiring people to do the disassembly, cleaning, photography, and logging still makes sense.

 

I am concerned about stolen goods as well, that is why I brought it up. Scrap yards have it figured out, so I just need to figure out how they do it. We mainly buy from people on craiglist who can't afford to fix their cars and we are very intentional about what we buy, but are starting to get into auctions as well.

 

Again to your point of scaling and making real money. Scaling is no problem. There is no shortage of cars so it is a matter of space and finding workers. As for money, the very conservative projection I ran when I was looking at renting a ~2500 sqft commercial space had us break even 12 months in with a ton of inventory on hand on a very small up front investment (buying a few cars) and reinvestment of profit from there. With our current hybrid model of the garage and storage unit(s), our monthly costs are laughably low and we are building up inventory and developing processes. At our current pace we are 1-2 years away from being able to finance an actual warehouse, which is Denver is a good business to be in at the moment.

 

My full time job is great and allows me to make outside investments. I am excited that this one has to do with cars, which have been a lifelong hobby for me, but I wanted to open this idea up to the group in case I am wearing blinders because of that.

[verse]

If you enjoy doing it, it sounds like a win win opportunity.

 

The business I started almost 2 years ago is on the verge of breaking even and I'll be able to soon quit my full time job to focus on our growth. Just make sure this partner is going to be there for the long haul. I started with 3 friends and I'll soon be the only one left. I'm currently working with some potential investors to help scale the company huge within the next 18-24 months.

[Geeto67]

The risk comes from unknowingly receiving and selling stolen parts. Thus far, we have just taken photos of their ID and done a bill of sale if there were title issues.

 

That is the primary risk but....

 

Just because it isn’t reported stolen , doesn’t mean that there isn a bank lien or other legal loopholes.

 

As much as it pains me to say anything nice about him, cdk 4219, is right. It's not just stolen but liens also have a risk. If a car is secured collateral on a loan, the person who "junks" it can get in serious trouble for devaluing or interfering with the lien-holder's right to repossess the collateral, but they may still repossess the vehicle - which means the lien-holder possibly can take the car from you and you are out the purchase money plus the costs of any labor. Plus if you have done irreparable damage to the car they might seek damages against you because you had a responsibility to verify that the car had no open liens before junking it. Some states have more protections than others so it pays to look up and know what your responsibilities are in receiving the cars. Start by talking to the local yards there and see what they say.

 

Only other thing I can add is make sure you are doing this in an area that is zoned for it and what your responsibilities are concerning fluids. Just because it is commercial doesn't automatically mean it allows auto repair/dismantling. Also, dismantle sites can become EPA hazmat sites pretty quick if you aren't paying attention, and the local EPA can hit you with serious fines for not adhering to waste disposal, or worse damage you do to the environment and the cost of cleanup.

[C-Mart]

That is the primary risk but....

 

 

 

As much as it pains me to say anything nice about him, cdk 4219, is right. It's not just stolen but liens also have a risk. If a car is secured collateral on a loan, the person who "junks" it can get in serious trouble for devaluing or interfering with the lien-holder's right to repossess the collateral, but they may still repossess the vehicle - which means the lien-holder possibly can take the car from you and you are out the purchase money plus the costs of any labor. Plus if you have done irreparable damage to the car they might seek damages against you because you had a responsibility to verify that the car had no open liens before junking it. Some states have more protections than others so it pays to look up and know what your responsibilities are in receiving the cars. Start by talking to the local yards there and see what they say.

 

Only other thing I can add is make sure you are doing this in an area that is zoned for it and what your responsibilities are concerning fluids. Just because it is commercial doesn't automatically mean it allows auto repair/dismantling. Also, dismantle sites can become EPA hazmat sites pretty quick if you aren't paying attention, and the local EPA can hit you with serious fines for not adhering to waste disposal, or worse damage you do to the environment and the cost of cleanup.

 

The reason I asked the question is because there has to be a way to check these and protect myself and the company. Scrap yards face both the title and EPA issues, but there are thousands of them across the country.

[Geeto67]

The reason I asked the question is because there has to be a way to check these and protect myself and the company. Scrap yards face both the title and EPA issues, but there are thousands of them across the country.

 

I had a buddy that used to work in a salvage yard in NY and they had a service they used to do "title searches". Ask the local guys who they use to do title searches and see what comes up.

 

As for zoning, the country auditor's site should have that information for free as to the zoning. You can ask some of the local shops about waste oil and fluids and who does it and how. Or you can go to a shop look at the sticker on the tank and call the company and ask them.

[C-Mart]

I am not super worried about zoning, Denver has some pretty industrial areas. Also, one of the things we want to do differently is having a surgically clean shop that disassembles the car as soon as they come into our possession vs cars that sit in a yard without the windows down open the elements or an oil cooler removed by a customer that is leaking the rest of the oil in the dirt. Collecting and properly disposing of the fluids should not be an issue.

[cdk 4219]

The reason I asked the question is because there has to be a way to check these and protect myself and the company. Scrap yards face both the title and EPA issues, but there are thousands of them across the country.

 

Yes there is it’s called a free and clear title. Scrap yards won’t touch a car around here without a title in the persons name