Skip to content

Should I Start a New Business? I Need Your Input!

[wp_campaign_1]

Do you ever have business ideas that you think could be the next big thing? My friend and I often have extra cash sitting on the side for the next business opportunity. Many times we’ll chat back and forth throughout the month and critique our new ideas. Most of the time, we realize that there is a massive hole in our plan and we’ll just forget about the whole thing, but lately we’ve discovered what we think might be a great idea. In the next few months, we might just start a new business.

The Current Lease Business

Currently, people really have three main options to purchase cars. They can either buy a car with cash (which is getting less popular by the day), with a loan, or with a lease. With a car purchase, whether it’s with cash or with payments, the buyer is obviously hoping to own the vehicle free and clear at some point in time. What’s becoming more popular these days is the car lease. The buyers know that they will never own the car, but the lease offers them lower payments for a really nice car that they can show off to their coworkers and friends.

With a car lease, you have to put money down, and then make monthly payments (often for a flat two years). If your car breaks down and is not covered by the manufacturers warranty, it is up to you to pay for it. Another main stipulation involves the miles driven on the car. The standard miles allowed is 12,000 per year. If you go over this mileage restriction, then you owe the leasing dealership extra money for each mile you went over.

If you remain within the restrictions, leasing is an inexpensive way (seemingly anyway) to drive around an incredibly sweet car, but what if you could do it for much cheaper? Here’s where my idea comes in.

The Used Car Lease

The 2013 Nissan Maxima costs $31,000 brand new from the dealership right now. With a $3,000 down-payment, your lease payment will be $650 a month. That’s pretty steep! Now what if you were interested in the 2010 model instead? It basically looks exactly the same as the 2013, but that lease payment could be much more reasonable. With that same $3,000 down-payment, your monthly payment could be reduced down to $400 a month. This way you could still drive in style, but at a much lower rate! What do you think about that?

used car lease

The New Business

I have been urging people to buy vehicles with cash for the last three years, but there are many that just prefer to lease their cars because they can drive around in a nice ride and they can get a tax break on the payments. Since there are more and more of these people interested in leases, but can’t necessarily afford the brand new cars, I think it might be time for me to offer a used car option like I explained above.

On my end, instead of paying $31,000 for the brand new car to offer as a lease, I can find this car right now at below KBB rates for $11,000. I would then find an interested party to put the $3,000 down-payment on the car and make the $400 payment each month. After the 24 month lease term, I will have collected the initial $3k along with the additional $9,600 in lease payments, totaling $12,600. That’s $1,600 more than I even paid for the car, and it still has a value of $7,000 after those two years! That puts me $8,600 ahead on one vehile over the span of 2 years. It certainly won’t allow me to quit my job by leasing out one car at a time, but what if I could work my way up to 100? That’s a potential $860,000 over two years. I think I could survive on that.

What do you think of this idea? Do you think it’s a good one?

Make Money Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

22 Comments

  1. I think it’s going to be tough b/c people who overspend on cars might have a more difficult time paying you money. I’d do research on car payment delinquency first based on income and car price first. Let us know what you find!

    • I would have to start a formal business with a structure and parking lot, just like a car dealership. Would that change your mind on the possibility?

      • Hmm, not really. More important is delinquency rates and laws.

        • Makes sense. Thanks for the input Sam! I’ll keep my brain turning.

  2. In theory, it sounds like a great plan, but I would certainly check out the laws about what happens with payment defaults. Like with owning rental property, you have to be ready to go to court to get people out of your house and tenants have lots of rights. No idea about car owners. Maybe you can sneak off and retake the car in the middle of the night like the repo man, but I wouldn’t want to do that. Also, do you want to run credit checks on potentials buyers or get references? I love the idea of seller finance. Essentially, you are replacing the bank or someone like Lending Tree, but you have to make sure your buyer is a good risk and I’d NEVER finance to a friend or relative.

    • Right. I’m sure I would have to hire a repo team to get back my cars if the payments didn’t come in, but after what period of time can I legally do this? I have no idea. This would definitely be a good thing to look into. Thanks for the comment Kim.

  3. Doing it on a large scale might make sense, but doing it one car at a time sounds like it’s very risky. Similar to lending club: if 1 of 100 loans defaults, you’ve made enough from the other loans that it doesn’t hurt. But if 1 of 1 loan defaults, you’ll have a much more difficult time recovering.

    • Right. I would have to start small because of my limited initial budget, but I would like to have 10 cars on the lot at all times. After a year or so, I could have 20 cars out there earning me $400 a month each, which means $8,000 per month. With that amount of money coming in, I could easily buy another vehicle each month. At the end of 2 years, I would be able to start selling these off-lease cars and purchasing new ones at a faster rate.

  4. Don’t do it. Bad, bad, bad idea and you’re just asking for financial trouble.

    • Can you expand on that Jim? If I had the initial cash to start-up with 10 cars with a dealership setting, then would you change your opinion? See my other comments above and below for more clarification on this idea.

  5. Like Daniel, I think one car at a time does sound risky. I like the idea in theory, but don’t know if it will work in practice.

    • I wouldn’t plan on doing this out of my house with just one car at a time. I would get a business setting to operate out of. I’m definitely digging into this further. I think I might have something here.

  6. I don’t think it would work with one car. You need a pretty decent fleet and also quite some money to cover your losses, when people will ‘forget’ to pay for the car. Ideally everyone should play by the rules, in reality though it’s not that easy and you need to be covered to stay afloat should such things happen.

    • If I had 10 cars and only had a projected 1% default, then would you feel more comfortable about this idea?

  7. I really like the plan but I’m feeling like some expenses are missing and your net margin will be much less then you predict. If you have the money for a fleet of say 10 cars you will need a building and lot which you most likely will need to rent. You would need someone to run it (unless you figure to do yourself but you work full-time) so there’s another expense there. Also don’t forget about repo expenses, administrative expenses, and taxes on income earned.

    • Good points Joshua. My estimations on income are definitely the best case scenario. Yes, I would need to rent the lot and pay those repo men if my cars weren’t getting paid for. This will all come in time. The first step was just seeing if it was viable or not. I think the upfront cash needed is the name of the game, and right now, I don’t really have it. This idea may get postponed for a couple of years (patent pending! :))

  8. I say go for it. Make sure you follow all laws around this type of thing, and make sure you get the right type of insurance coverage to cover any mishaps that might happen. I know when you lease a new car they require you to have full coverage.

    You might even try offering some options to help people financially. What I mean is people leasing used cars are usually going to be a riskier type to lease a car too, but you can offer them things like lease forgiveness. If for some reason they can’t finish out the lease (like they lose their jobs) just bring the car back and you can let them out of their lease (still making a profit especially if you can lease the car out again).

    Another thing to look into is how long you would be able to lease a car for. You might only be able to lease the 2010 car to one person for 2 years and then you would have to sell it when it becomes less desirable as a leased vehicle. Don’t forget to include the costs of selling your older vehicles when making your plans and figuring out the long run of your business plan.

    • Ahh finally! Someone that’s championing my idea! I think it’s going to take quite a lot of cash up front, but could be a very lucrative business. Thanks for the pointers!

  9. In my experience, almost any new idea I come up with has already been considered by hundreds of other people.

    Not that you can’t come up with an original twist that makes the impossible possible!

    However, there are many unknowns in your plan – the known unknowns are obvious, e.g. payment collection costs, delinquency rates, etc.

    What will kill your business are the unknown unknowns. The things you don’t know enough about to be scared of.

    Find someone involved in leasing cars, and take them to lunch in return for feedback on your plan.

    If it’s bad, they’ll tell you.
    If it’s good, they’ll congratulate you.
    If it’s great, they’ll steal it. And then you know you have a plan worth doing!

    After all, competition exists because an idea is good. If no one else is doing it, there’s probably a very good reason, and you’d best do your research to understand why no one else is doing it.

    • Hi Jack. Yeah, while I haven’t necessarily seen a car lot that offers used leasing, I’m sure it’s an option somewhere and I am not the first person to think of it. But, with the leasing option gaining popularity in the last few years, I think it could be a very lucrative business to get into. Thanks for the advice about reaching out to someone that knows about leasing. It’s always good to learn from those that have already walked that minefield, right?

  10. Honestly I don’t know enough about cars or finance to be able to advise you on this one. I love your entrepreneurial spirit and with knowledge and confidence im sure you could make it work. It sounds like it would be a lot of research beforehand and a fair amount if work during. I have wish you the best of luck as you consider this opportunity.h

    • Thanks for the kudos Bridget! I’m starting to second-guess my idea for the moment, but if I am able to severely increase my starting cash in the next couple of years, I will definitely revisit this idea.


Add a Comment

Your email address will not be published. Required fields are marked *

Related posts