I’m sure many of you have heard of the Lambrecht Chevrolet car auction (if not, see here; there are many other writeups on the web if you’re more interested). If not, in short, it’s a Chevy dealer that was in business for about 50 years; they closed down in the mid 1990s and didn’t sell off existing inventory (which dates from the 1930s-1970s). They recently opened up the dealership and are auctioning off everything. Turns out there are about 500 cars, most trade-ins, but many brand new (well, new at the time of acquisition by the dealership).
My question is, how could a small dealership like this have afforded to purchase and then not sell these cars? The entire dealership was a 3-person operation, including one mechanic. I’m not talking about the storage space (I’m sure that was relatively inexpensive, this being Nebraska), but the cost of acquiring the cars with no return.
The short answer seems to be that the guy who ran the dealership was basically a hoarder who thought the cars were going to be an investment. He was only holding back a few new cars a year, which was probably something someone who’s the sole owner of even a small dealership could swing.
Also, browsing through the collection it looks like there’s a small number of gems, but the vast majority of the old new cars are frankly crappy base model cars that didn’t sell back in the day for a reason. I’m betting that it didn’t really cost him THAT much to hold back, say, those five '64 6-cylinder 2wd pickups, especially after they’d sat on the lot for a whole year or two. And of course, most of the trade-ins cost him a pittance.
Worst part of holding onto those old cars was probably that if he’d sold them at a loss he’d have at least gotten them off the books… he could have flipped the money tied up in those a dozen times if he’d just liquidated.
…as opposed to what? Real Estate, Stocks, Bonds…
Stocks would be a great start, although I imagine it would generally be best for a car lot owner to flip the money back into more cars.
Normally your highest ROI when you specialize in one business is a direct investment in tools and merchandise for that business.
My point is just how painful it normally is for any business owner to see that he’s got inventory that’s just… sitting there… costing you money to keep, and that represents savings or borrowed money you had to tie up in that inventory in the first place.
In one report I saw, it was noted that Lambrecht quite regularly made large fleet sales to state and local governments, and other fleet buyers. Those cars never made it to the dealership, being shipped directly to the buyer. It made the dealership seem smaller than it financially was.