Hammer Time: Finding A Cheap Ride

Saturday, June 30, 2012

Hammer Time: Finding A Cheap Ride

Most auto auctions will have an 'inop sale' right before the regular sales begins.

Inop sales consist of vehicles that don't run for one reason or another. It could need little more than a battery or a fuel pump. Or it could be that the electric system is fried, the engine is toast, and the car is truly worth more dead than alive.

You always take a risk when buying these vehicles. On the worst side of the equation, the car becomes crusher fodder and is sent to an auto recycler for its impending death and dismemberment. About 30% of the vehicles I get from these sales wind up as either junkyard scenery or Chinese raw materials.

However if the repair is something simple and cheap… you win!

Last year I managed to get a 1996 Dodge Intrepid with only 28k miles for $400. A couple hundred in repairs, a no reserve sale on Ebay, and I was looking at a surprising $2800 profit.

Over the years I've had Subarus that were cheaper than the average monthly finance payment. Old Volvos that found a second life with a new enthusiastic owner, and now, a 1994 SAAB 900 S that… well…

I can't figure out what to do with it.

On one side of the equation, an old beater always appeals to the 'cheap' side of our personality. A 'good' cheap car? Even better.

Good.. cheap… and Saab? That's a tall order. But lo and behold, there it was in all its Swedish glory.

This particular Saab received more thorough and intensive car than 90+% of the older vehicles at the auctions. You name the part, it works and I have about $6000 worth of maintenance records in the glovebox that back-up the prior owner's almost sadistic level of loyalty.

Poor guy.

Even the central dashbarod display that is usually de-pixelated by the time most Saabs hit the decade mark, is picture perfect. I managed to get this car for only $300 plus a $40 auction fee. It was an absolute steal that appears to be as mint as an 18 year old can be.

I was lucky. No doubt. But experience in this business has also taught me one important reality of finding good cars on the cheap.

When it comes to getting these types of vehicles you have to pretty much, "Hit em' where they ain't."

An 18 year old car from a defunct automaker, base model, 5-speed, in the saddest shade of unmarketable gray represents an awful lot of ain't in this business.

Ain't gonna move fast off your car lot.

Ain't gonna be drivable for 80+% of your customers.

Ain't gonna be coveted by most of the other remaining car shoppers.

What also helped was that the inop sale took place far away from the 60+ dealers who regularly attend the sale. Only two dealers other than me watched this vehicle get sold.

It was one of those right place, right time deals. Heck the brand new tires alone were worth close to $200 used and the rest of the car could be crushed and parted out for far more money. As I started the vehicle up and looked around, it was obvious that it was well kept. No obvious engine sludge. No interior stains at all. Not even the typical wear marks that come with an 18 year old runabout.

Given that the name of the vehicle is almost synonymous with expensive repairs, the two other dealers didn't even give it a second glance.

The auctioneer 'held' my bid at $300 (I put a fist to my side showing that I would hold him at that price). One of the other dealers started yelling out "$200! $200!" while laughing with his dealer friend, and about seven seconds later the car was mine.

All it needed was a clutch and a shot of freon.

A $65 tow. $160 for a new clutch on Ebay. $215 for installing it. One $10 can of freon. A $5 car wash, and it was as good as an old Saab can pretty much be.

So my $300 statue of a car is now an $800 fully mobile beater. Which is great, except that it's still an 18 year old base model with 180,000 miles.

Who wants it? Well, maybe me. I could sell my 2001 Honda Insight for $5500 and drive the old Saab until it transforms itself into a piece of highway landscape architecture.

Would it last 10,000 miles? 20,000 miles? 50,000 miles? As it is I'm only driving the Insight 5,000 miles a year. The economics of ownership heavily favor the Saab… unless I decide to make my Insight the equivalent of a family heirloom.

Since it's a 5-speed Saab I'm probably looking at about $1800 retail. So my opportunity cost in keeping this Saab is only about a third of the Honda.

Alternatively, this car can be financed and I could get a bit more than that retail price. But I think I would be pressing my luck given that an old GM Saab simply can't take much abuse.

So what's the best decision if you only drive, say, 5,000 commuting miles a year?

To keep a well maintained, cheap, orphan car that you have little money in?

Or to drive a more valuable, better engineered hybrid, that will inevitably require an expensive overhaul once the hybrid battery runs out?

Keep in mind I'm talking strictly about commuting miles. There is little joy in Atlanta traffic.

So what says you?

If some distant relative bequeathed a beautiful beater on your driveway, would you use it for your boring tasks and 'cash up' that late model car you drive right now?

Decisions… decisions…