Greentext

First of all, most new car dealerships that appear to have a used car lot too, are actually two entirely separate businesses that have no real connection. This is largely due to how used car lots work and collect bad inventory over time. They all go through a 3-5 year cycle where a new manager is hired with all of their cronies and third party services tagging along. After a few years of buying 10-15 cars at a time at auctions, they collect enough bad buys that won't sell to where they drown from a lack of turnover and cash flow. This cycle is due to how no one gets to drive auction cars before bidding. The cars are all boxed into a lot. Some will let agents take the keys and start the cars, but many won't because of the potential hassle and volume of inventory. Keeping keys sorted with lots of cars is a chore, especially when fobs or cars may be dead or not functioning. Mix in some careless upper middle class pretentious SoB of a Buyer and it is a train wreck.

Most auctions consist of a bunch of fools where three quarters of the agents present did no homework and did not look at the cars in advance. All they do is try and gauge those that actually may have put in an ounce of effort, and then only bid on the same cars as that person. If you're intelligent and marked as such, the auction becomes a complex game of strategy. You've got to convince the rest that they have you figured out, and use it to your advantage. You might need to place bogus bids on junk cars just to have a chance later at the ones you want. Like I said, it is an insane clown show. You're going to get stuck with one of those bogus bids at times and take an absolute junker back to the lot. You know it is going to cost you your job in a few years time, but hopefully it is worth it for some really great cars you snag from the ruse.

When the used car dealer stops making a profit, the owner will file for bankruptcy, and liquidate the entire inventory. Then a new manager is hired and the cycle continues. That new manager is just some smooth talker from across town that just got fired from the exact same scenario somewhere else, and so the game of duck duck goose continues.

Sometimes the auction agent is the manager, sometimes it is an assistant or few. The finances and planning of the used car lot is what these folks are all about. They do not take kindly to anyone forcing them to take inventory they did not seek out themselves. Like I could never pick up a Craigslist car and hawk it to this kind of lot. I could only do that with the very small used car lots where it is an owner operator with real reserve capital. Most of these tiny lots, or rather around half of these, are actually exporters that are primarily acquiring cars to sell in places like the middle east. They last long term as businesses because all the junk cars they can't sell end up getting exported to places where anything can be fixed extremely cheaply relative to the car's local value.

This gets into the actual way trade ins work in most large lots. Some dealers have a large enough space and enough trade ins that they will offer a first pickings like situation for the adjacent used car manager to buy cars ahead of auction. Usually though, the volume is not sufficient and it is poor time management. The general manager will just sell the car at auction, and in some cases the used car manager may even buy the car at said auction. You see, these two people are like rivals in many cases. The general manager is often some old used car lot manager that escaped the auction cycle. Getting them to agree on a fair wholesale price is just a nuclear war begging to light off. Instead these guys are usually kept separated on opposite sides of the building. The sales persons are more like independent pick pockets or thieves where the new and used car managers are two competing pawn shops, but the opposite flow of merchandise.

Then there are the exporters. Many larger lots will sell all of their trade in vehicles either to an auction house or to a large exporter. This saves a ton of time over doing anything piecemeal, and more importantly, it allows them to take in junk trade ins with no real value and still get them off the lot. When the best vehicles are kept, the auctions and exporters will not accept the junk too. This leads to most lots filling the service area with inventory which then results in a different kind of nuclear war with a service manager and team, which are often also a separate business. If done piecemeal, someone will need to handle selling the lowest end junk to a scrapper and might even need to pay for that service.

Lastly, buy here pay here lots are by-far the worst and most sleazy. Many of those are not even making a profit off the sales cycle. They are actually making their money from selling the defaulted loans after repossessing the cars. They sell the same cars dozens of times to people that have no means of paying for them and no chance of getting a car from somewhere else. This happens in states where the law is ambiguous about how cars must be auctioned after repossession, and that amount applied against the existing loan. These dealers buy the cheapest junk at auction without a care about the condition of the vehicle. Their goal is only to buy the car for as little as possible. Because of the ambiguity of the law, this amount they originally paid is always the amount applied against the repossession and defaulted loan no matter how many tines they sell the car to someone off the lot. They barely get the thing running, but are willing to go to extreme lengths to purchase the cheapest car possible. They actually compete with the 3rd (4th-9th) world exporters for rocks that might roll with a little polish.

It is rare for the real owner of a large lot to expose themselves to the risk involved with a unified business where actual trade ins stay under one business entity. These are much more picky about what they take for trade ins. It also means the capital backing the operations is much larger than is typically the case, and they are capable of fiscal planning that is at the decades scale. At that scale, return on investment and stability come into question.

The new car side has major challenges that make this difficult too. The manufacturer actually dictates a lot of the inventory of new car lots. They don't really have a choice. They just get sent loads of cars and have to figure it out. Many must lease separate storage lots off site because they get sent more cars than they could possibly showcase. They have no room or infrastructure to deal with piecemeal trade ins. They are dealing with a hundred cars you see, and 100-500 more you don't.

Anyways, that is how it really works.