The wholesale business is much like the Forex trading market. Many wholesalers operate like they are in the Wild West. Some don't even use a computer - instead opting for a cell phone and Rolodex. These "quick flippers" are not in the high margin business, but look for a smaller profit over a very short amount of time. For example, wholesalers in many cases will have a car sold before they even pick it up!
The typical margins that the average wholesaler targets is somewhere between $200 and $500, but many make as much as $1,000 or more. Where does this profit come from? The dealer. Dealers who sell their older units to wholesalers are basically trying to get out of the vehicle for what they originally paid, plus reconditioning expenses, floor plan fees, etc. In many cases, this doesn't happen. Who wins in this case? You guessed it - the wholesaler!
What if a dealer had more options for monetizing their wholesale vehicles? Would he sell the same amount of cars to the wholesaler? Probably not. What if the dealer could access a vast market of 1 million wholesalers or more within a 7-10 day period? He would more than likely move his wholesale inventory faster and with less hassle. Now, here's where it gets interesting... what if the dealer could sell his "added-value" services such as warranties and financing on every wholesale vehicle to this vast market of wholesalers? Essentially, the dealer would stand to make more profit per vehicle through "back-end" sales and thus reducing his wholesale losses, correct?
Stay tuned...
John "Derek" White
E Drive Autos, LLC
