Making Money from Vehicle Salvage - 100% profit margin

Making money from Vehicle Salvage - Copyright GTS Tuning 2010

Introduction

This blog is a redacted version of a pay per download file thats on the downloads section the www.kit-car-builds.socialgo.com website. The full guide shows websites and other top tips that this blog doesn’t. The £4 cost for the article is justified by the huge earning potential of the information held within it.

When a car is stolen/recovered or damaged in an accident the relevant insurance company makes a decision on whether its cost effective to repair the car or write it off. Its not only the physical repair costs that they have to take into account, its the cost of collection plus giving the owner a hire car etc. The result is that a lot of cars are written off for fairly minor damage. These write offs are collected by certain companies and sold on. Some go to the scrap yards to be broken for parts and then crushed for the the metal content. Other less badly damaged cars are bought by the trade, repaired and sold on.

This is where you can get in on the act and make good profits.

In my mind i believe that cars of under £2,500 retails value are likely to be written off for any amount of damage no matter how small. My own car had a book value of £2500 when i bought it for £400 as a Category D write off. It took me about 5 minutes to fix the wonkey front bumper enough so that from a few feet back you would never know it had been damaged.

Regulations

To stop cars being ringed and two cars made into one, the government introduced new proceedures to cover vehicle salvage.

Cars considered to badly damaged to be safely repaired are given a Cat B designation, and only council approved dismantlers are allowed to purchase these and break them for parts. They are not allowed under any circumstances to put them back on the road.

Cars damaged fairly heavily but not structurally are given Cat C status. These are allowed back on the road but only after an MOT and government test called a VIC, or Vehicle Identity Check. This is a short test and takes about 5 mintues for the VOSA tester to check the chassis numbers tie up and there is no evidence of stolen parts being used in the repair. The VIC check costs £41. Examples of the types of damage are dented wings, doors bonnets etc. You’ll need to apply for the log book when you tax the car, as the log books are held by DVLA for all Cat C cars.
Car with light damage will be given Cat D status and these are allowed straight back on the road after an MOT.

Cat C is the most common classification that you’ll deal with. Cat D cars are few and far between and tend to go for more money. You will luck in every now and then and find that for one reason or another the Cat C car you bought is actually registered with DVLA as Cat D and this is always a welcome bonus.

Where to buy Salvage Cars

There are several companies offering salvage vehicles. Most have an online auction process. Not dislike using Ebay, there will be a weeks pre-bidding on each lot, and then a short and often frantic auction one day a week. The price of each lot starts at where the pre-biddig got to, and you have a 5 seconds count down to place your bid. If no one bids against you then you win it. If someone else bids within the next 5 seconds countdown then, they’ll be another 5 second count down for the next bid. So on and so on until everyone has finished bidding and someone wins the lot.

I use the site is listed in the full guide and they have auction yards all round the country. My local yard has about 1000 lots for sale each week. You have to register with them before you are allowed to bid.

Each lot tends to start at a nominal price of £50 and bids go on from there. A car of retail price £1000 is likely to sell for £125, on top of which you’ll get charged about £50 of fees, which includes the charge for the company to pick the car from the lot and deliver it to you in their car park.

Repairs

If you choose your purchase carefully you should be able to do most of the repairs yourself. Swapping a wing or bumber etc. You should be able to find a local spray place that will paint panels or the car for you for not a lot for cash. I pay about £240 to paint the entire front of a car,and £90 for a single panel. They do a great job and turn them around within a few days.
I buy all my repair panels trade froma great company whose details i have detailed in the full guide, a Fiat Punto wing is £30-ish and they deliver for free next day direct to you, no minimum order.

If you are up for painting panels yourself then the full guide lists a good website for supplies. The 2 pack paint that you’ll need to use is hard to buy from local shops, and they want to see health and safety regulations etc. Online its not the same problem. Take care and follow the safety instructions though, 2 pack paint is nasty stuff although now i’m into using it and a bit more experienced its pretty straight forward to get acceptible results in a normal garage.
If you need to pull out dents in crash zones etc, then you can use lamp posts, and other cars with tie down straps to restriant them. I do it by hand and just rock the car against the restraint until its pulled out. Some people drive the cars in reverse in order to pull them out. I find that 90% come out easily by hand and its controlable. If you go to far you can always drive the car into something solid to push it back to where you want it. Its pretty brutal sounding,but, its effective and gets good results. I’ve a dedicated strapping point welded to workshop now for the job.

Financials

Practical example from my personal experience.

Bid £90 for 10 year old car with dented front wing. Book value £950, sell for £895 taxed.
Fees - £52, VIC - £41, MOT £50, Tax - £67.50, advert - £15 (online 2 weeks magazine 1 week)
New wing - £35, Painted professionally - £90
Total cost - £440.50 profit of approx. 100%

This 100% profit does seem to apply to almost all cars at salvage auctions. If you spot a car that you like the look of,and figure out the sale value, halve it, take off the costs to repair it etc, you’ll end up with a recommended bid price. 99% of the time the cars will sell for this predicted bid cost. All traders in this game are looking for the 100% profit margin, and getting it.
I tend to sell these sub £1k cars throuhg a leading magazine in 24-48 hours of advertising them. Quite often i repair them to order for the people who missed out on the car i advertised.

Further tips

If you download the full guide from the Downloads section of this website you’ll get some further tips for maximising profit.

Conclusion

Where there’s muck theres brass, and this still holds true. The recession has made these cheap slavage cars highly desirable. It's time you cashed in on it too.