CRA Business Profitability Explored
By Kelly Beaton
Using rental vehicles to survive slow times might be a winning strategy to generate work for your shop and generate an alternative income stream for your business.
In 2018, Mark Probst embarked on an experiment. Eventually, months of research left him with a conclusion: buying, refurbishing and selling rental vehicles can be rather valuable to body shops.
“I was like ‘Why don’t I give this a shot?”” the shop operator says. “It kept our (repair) schedule full and tight.”
A couple years ago, Probst, the owner of Probst Auto Body in Dieterich, Ill., stumbled across a company that sold wrecked Enterprise rental cars in weekly auctions. Noting that the vehicles were housed just three hours away from his business, the shop owner, who runs a shop with eight employees and an annual revenue of $1.5 million, saw a solution to an age-old collision repair problem. For shops that encounter occasional slow periods, Probst notes, buying, repairing, and eventually selling rental vehicles can keep a shop staff consistently busy.
Aaron Stinson, the collision shop manager of A&A Auto Body and Repairs in Lancaster County, Pa., agrees. In 2016, when his $2-million-per-year shop began buying and selling previously damaged Avis rentals, Stinson felt the work provided a great learning platform for younger technicians during lulls in the repair schedule.
Throughout some trial-and-error testing in recent years, Probst and Stinson developed a few tried-and-true methods for capitalizing when refurbishing rental vehicles.
First, Have Finances in Order.
Shop owners need to have cash set aside before making an expenditure on rental vehicles. Probst felt it was a worthy investment to pay cash for 11 rentals back in 2018 because most of the Enterprise vehicles he purchased (for between $10,000 and $20,000) were just 2-3 years old, with no more than 30,000 miles on them.
Probst Auto Body’s staff worked diligently, when they had gaps in their customer repair schedule, to restore the rental vehicles. They used proper repair procedures, used new parts, and didn’t compromise the business’ integrity. When they were done repairing the Enterprise vehicles, Probst was left with the possibility of sitting on thousands of dollars if he couldn’t sell the vehicles via his shop website, Facebook advertising, or on-site sales.
“When we’d get done, we’d have about the value of the (rental) car, without cutting corners,” says Probst, who also kept a few of the rentals to upgrade his shop’s loaner fleet. “And I’m not a car salesman. … But I looked at it like, my guys never run out of work this way.”
Study Your Market.
When shop owners gauge the merits of investing in and eventually selling rental vehicles, it’s imperative to do research, said Stinson, who oversees 15 employees. For one thing, it’s important to do due diligence, and make sure each rental has a clean title (which is typically listed on an auction site). In short, shop owners need to gauge how much certain vehicle models are worth to customers in their area.
Shop owners can research used-vehicle prices on websites like CarGurus, for starters. After all, used-vehicle prices can vary fairly significantly depending on market and factors like the time of year.
“Study it before you just go out and buy three or four rental vehicles,” says Stinson, a shop operator who possesses a dealer’s license and had success flipping rentals that were 2015–17 Toyota Corollas.
“Know the market, because certain cars sell better than others,” he adds. “I was pretty selective, and I usually tried to get ones where there was only one accident on them.”
Get Employee Feedback.
If a body shop’s staff isn’t on board with refurbishing vehicles, they can end up collecting dust in the corner of the shop for months on end. That wasn’t an issue in Illinois, where Probst’s technicians seemed to appreciate the steady stream of work those Enterprise vehicles allowed for. Most of those rentals had around $6,000 worth of necessary repairs, requiring an equal mix of parts and labor.
Quite simply, Probst’s staff loved working on those rentals.
“They loved it because, in the past, it would get slow and we’d scramble for work, and it was like ‘What are we going to do?’” Probst explains. Starting in 2018, “If we had an open slot in the schedule and couldn’t fill it … we would go ahead and fill in with one of our rental cars.
“Employees loved it because they were new cars and they were in and out quickly. And, it kept the guys busy.”
Develop a Game Plan.
Shop owners always need a backup plan to generate revenue. In that respect, buying and refurbishing rental vehicles can be an ideal option for shops during lulls in business.
“We don’t get slow often, but I don’t like the idea of sending my guys home without their 40 hours,” Stinson says.
Virtually all rental companies sell damaged vehicles, Stinson notes. And, when he buys rentals, he typically tries to make at least 20–30 percent on the repair portion of the deal, and another $2,000 on the eventual sale of the vehicle. In general, he says he typically makes a $4,000–$5,000 profit.
“If I had a $5,000 repair on [a purchased rental vehicle], I’d still shoot to make 50 percent of that portion on it,” Stinson says. “If you make $2,000 on the rental, plus the $2,500 you’re making in the shop, that’s a pretty good return.”
Probst’s “Plan B” in years’ past was to do traditional customer restoration jobs. However, those projects tended to get set aside when business picked up, meaning that, for months on end, vehicles in the process of getting restoration work ate up valuable space at his 7,600-square-foot-shop. And, other tactics for increasing his shop’s workload, like spending 3 percent of his overall budget on marketing, hardly guaranteed an increase in vehicles that rolled across his shop floor.
Conversely, repairing and selling late model rentals was a more effective process.
“Once we bought the rentals, the process went pretty slick,” Probst says, “as far as working them into our workflow. Would I do it again? Yeah—it was a nice filler.”
Article Credit to Fender Bender.
Have you considered refurbishing rental cars as an alternative income stream for your body shop? What other alternative income stream have you considered for your body shop? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.
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