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Car counselor

Lifestyle/Technology | Mike Lacy demonstrates an Ephesians 2:10 model of selling used cars

Issue: "Profiles in effective compassion," Sept. 26, 2009

Before the federal government's Cash for Clunkers, the Texas state government through its own auto stimulus program gave money to car buyers who replaced a clunker with a more fuel-efficient new or used automobile. Like its federal counterpart, the Texas program required dealers to submit reams of paperwork and then wait days or months to get paid.

Mike Lacy, 50, has been selling used cars for the past 10 years in Austin, Texas. He told me it didn't take him and his two partners long to figure out they couldn't afford to wait 60-90 days to be paid: "We don't have that kind of cash on hand." He isn't the stereotypical used car dealer who tries to sell an iffy vehicle to a gullible buyer. Lacy is a car locater: He finds a particular car for a particular individual.

Here's how the business works: Customers hear about Lacy through one of the five credit unions with which he works, or through friends, or fellow church members. Once they contact him, he begins "car counseling," where he finds out exactly what they want in a car and how they'll use it. "I do as much car counseling as I do car purchasing," Lacy said. "They might not be ready for a car, or maybe they need to save more money."

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Lacy advises his customers to "finance as little as possible for as short a time as possible." He adds, "There's nothing wrong with saving up for something for a year. You don't have to have it yesterday. . . . I tell people about the total cost of ownership, including gas, insurance, maintenance. We figure in depreciation and can do it for any make and model."

Once he's armed with information, Lacy hunkers down at his computer, searching the sales for cars that meet the needs of his customers. In Texas alone, 10,000 to 12,000 used cars are auctioned every week at large factory sales throughout the state. Most of these cars are coming off leases, which means they have low mileage, have been cared for, and are clean.

In any single month he's working with 10 or 12 customers: "That's searching, car counseling, inspecting, making ready, detailing, delivering. More than 12 a month and my customer service begins to wane." One place he searches is the catalog for the Dallas auction, where 4,000 cars, all makes and models, are sold each week. If his customers want a Mercedes or a Lexus, he'll go to the monthly high line sale.

The Dallas sale begins at 9 a.m. and goes until 1 p.m. or so. Lacy or one of his representatives goes the day before to check out the cars he's identified from the search engine. He inspects them to make sure they are clean, haven't been in a wreck, or belonged to smokers. He takes pictures and emails them to potential buyers along with details about the cars. And he tells buyers, based on experience and the record from the four previous sales, how much (within $200) a car will cost.

If a buyer likes a car, Lacy gets ready to bid. The Dallas sale is an auction on steroids. It's arranged in 15 lanes, with two blocks in each lane, moving 30 vehicles every minute. If a dealer bids higher than Lacy expects for one of the cars he wants, he lets it go. There will be another auction and another car, if a customer can be patient.

Lacy calls his business model both "low-risk" and "high touch, high people." He has little overhead (he works mainly from home and the credit unions) and a just-in-time inventory. He doesn't own any cars that he has to unload on a buyer. His buyers are pre-approved for loans by their credit unions, so Lacy knows before he bids that the customer can afford the car. Only when the customer gives approval, and that's after extensive counseling, does Lacy bid on the car. It all operates on a handshake.

Lacy says, "Have I ever signed a contract with somebody that they must buy this car? Never have. It's always been a handshake. Do they ever change their mind? Yes they do. Maybe 7 out of 100 times there's a financial catastrophe that happened in that time. Maybe they get cold feet, or there's been miscommunication, or they change their mind, or they find another car and don't tell us."

When that happens, Lacy finds himself with a $15,000 or $20,000 asset he didn't expect to own. Since he only buys good, clean cars, he usually can sell it to another wholesaler or at auction for no more than a small loss. The point Lacy makes is that the buyer is never at risk.

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