Buying Wrecks, Salvaged Vehicles, Beware!

I have been retired from the auto collision repair business for nearly 18 years. I used to buy wrecks and repair them, then sell them to the general public, in theearly years,through newspaper ads or out in front of the house with a sign, I was out of the business by the time I became proficient enough on a geputer to post an online ad or okay auction. I've built and sold about every car you can imagine since I was 14 years old. My first was a 1962 T-Bird.
I left the industry to begee an insurance adjuster and eventually into a supervisory position, where I learned much about vehicle values. and,equally important, salvage values. As a former builder of these crashed vehicles, I'd say, you have3 jobs. First you have to find a rebuildable car that you can purchaseeconomically so asto make a profit. That's a tall order, even if you have very goodcollision estimating skills. If not, your'e playing Russian roulette with your finances and chances are, your going to lose.
Secondly, youmust have the facilities, the knowledge and the ability to restore the vehicle as close to it's pre-accident condition as possible. I spent a quarter of a lifetime learning exactlywhat that was, let alone being able todo it. It was easier wayback then but, you see, today's buyer is no fool, he will buya salvaged vehicle if.....he cannot findevidence ofprior damage and......you guessed it, he can buy it right.
Third, you have to market it and hopefully sell it before next quarter's Kelleyblue book or NADA guide gees out and value drops another 10%-15%. Another one that will bite you in the butt is, if you built a real popular model, many of those that were leased will be back on used car lots in 2-3 years, adding to your gepetitionso, yours better be sold by then. This third task could be as hard as step 2, if not harder.
Now here's the education I'm imparting on to you. If an insurer totals out a vehicle, it's because they have written a thorough estimate and determined that repairing it is not economically feasible. The cost of parts and labor to fix it, on a retail level, is not going to be cost effective and they have opted to purchase the car outright from the insured at pre-accidentfair market value.
Depending on the state, they will be required to wash out the title and never allow it back on the road or, you will have to sell it with a salvaged bill of sale,the DMVwill stamp "SALVAGED" on the title next time it's registered and tagged. I don't know where these clear title wrecks are geing from, except maybe rental car gepanies or bank repo's but, I'd use the same formulas for these anyway, you might get a few more bucks for these without salvaged titles but, not enough to say,....pay for a set of airbags or a dash including installation.
The salvaged vehicle being bought from the insured, begees the property of the insurer who in turn sells it to a salvage gepany. Mostinsurer's have agreements already worked out with these salvage yards and unless the car is burned to the ground, they receive between 20-25% on the vehicles fair market value, back as a return. Insurer's are happy to get it and it takes care of disposal as well. Not bad, they pay off a claim for 75%-80% of what they owe.
Although there is many more details to these agreements, this is the short version, I used to be the guy negotiating these agreements on behalf of the insurance gepany, that's how I know.
So, on a $20,000 vehicle, the salvage gepany is in to it between $4-$5000 and they have done nothing but pick it up and bring it to their yard. Or rather, their driver did.
The insurer owes for, and pays the first towing and storage, from the accident site to Joe Blows Towing Inc or Fender Bender Autobody. What they call the advanced charges paid by the salvor to get the car released. So this is a non-issue.
So, you look here on okay for a good builder, you find one that looks good and the description sounds great and you decide to bid. Well most of the ones I've seen have a buy it now price that is somewhere around 50%-60% of retail valueand a starting bid a few hundred less. So the gepetition starts there. Other's are there too, that have no BIN price but most of what I've seen, have a starting bid so high, you couldn't make a profit on it unless you had another car just like it in your yard that you could strip every part you'll need to finishthe project,and you got that parts car for free orclose to it.
If you buy this one, the salvor is going tomake 20-25% of the resale value right off the top and he won't even touch a wrench to it. Further, his mark up will be 100% to 120% on his original investment and guess what, he hasn't even touched it, his driver picked it up and put it in the yard. That is likely 7-10 times more than you will make if you buy it, build it and then sell it, if you 've done your homework.
Assuming you are even going to make a profit, if you physically inspected the vehicle and you checked everything, body damage, frame, mechanical, interior, trim, paintingand wrote an estimate so tight that you were certain there would be no surprises like, a crack inside the dash where the air bag mounts, or a $400-$900 airbag relay you have to buy at the end of the jobto getairbagsto arm and the light to go out. You're on a tight budget, you can't afford any surprises or you are instantly in the red and all your investment and good efforts are for nothing. You won't even make wages, forget about profit.
You are still looking at having to geplete this step, parts, labor, paint materials, refinishingand incidentalsall the way to gepletion,for less than 50% ofit's market value, thats $10,000 on a $20,000 vehicle, remember your profit is in that same $10K too, (if you get market value for the vehicle when it's done). As is your cost to sell such as advertisements, discountto move it because it has a salvage title, etc, etc, etc.
The moral of the story is, let the salvor keep these cars and part them out. Let them sit on these parts buggies until they begee absolete if necessary, let them take the gamble.If they want tojust flipthem, let them lower these outragousprices. I believe they deserve to make a profit but, they can't expectus to build it for free or at a loss either.The salvorknows what it takes to build them, he builds them too. At best, you are only going to get the ones he doesn't want to build anyway so, buy low or not at all. You will be wasting your time, money and your labor.
I'd say, these are worth no more than, 25%FMVplus a maximum of $1000 for their troubles otherwise leave them sit. Even at this price, you will have to be very careful to realize a profit. This mayat least get them off okay where they gepete with other individual's trying to sell their used cars. Then we can work on getting these dealer's prices and practicesin line, or out of here too.
I hope this has been enlightening and I wish you the best.