Transparency, experience necessary to succeed in the used car business
BEING UPFRONT about the condition of the cars in your lot is necessary to succeed in the used car business, according to an industry entrepreneur.
Nothing beats first-hand experience either, Roger “Rocky” A. Zambarrano said.
“Kailangan talaga sipag [You really need to work hard],” Mr. Zambarrano told BusinessWorld, adding this adds significantly to a seller’s knowledge of the market.
“Minsan magkakamali ka ng assessment mo, minsan hindi mo maveverify ’yung papeles. Minsan may biglang lalabas na sira ng kotse, so
kailangan mo aralin talaga [Sometimes your assessment of a car will be wrong, other times, you’ll have trouble verifying a car’s papers. Other times still, you’ll be faced with unexpected problems so you really need to study the business].”
Mr. Zambarrano handles three businesses — a meat shop, an antiques buy-and-sell, and a car buy-and-sell — although the latter is his bread and butter.
He started buying and selling cars as a college student in 2010 and now rents a lot in the Tandang Sora area in Quezon City where he has an average inventory of 15-20 cars.
Among his current inventory is a 2007 BMW, a couple of Hyundai Accents, and various Toyotas.
“I get the cars, I fix the cars that need to be fixed. I also do the selling — para wala ng ibang kausap ’yung tao [so the buyer won’t need to talk to anyone else],” he said.
BUYER PREFERENCES
Toyota Vios and Toyota Innova are the models that are most popular among used car buyers, says Mr. Zambarrano.
“Preferably, Toyota pa rin. Kahit maliit ’yung margin, ’yung volume, ’yung habulan [Toyotas are preferred. Even if the profit margin is low, you can compensate volume-wise].”
Japanese cars, in general, sell within one to three months, European cars, meanwhile, have a six to 12 month turnover.
Mr. Zambarrano says the profit margin ranges between 5-10%, adding that he marks up “if I see that matagal sa pintura or matagal darating ’yung parts [if I see that fixing the vehicle will take time].”
About 5% of his business is now also geared towards motorcycle enthusiasts, to address the need of the growing niche.
He started selling scooters during the COVID -19 pandemic because they were fast moving, but then switched to bigger bikes such as Ducatis because “the profit [for selling scooters] wasn’t rewarding compared to the work done.”
“Maganda actually bentahan ng big bikes nung [The sales for big bikes have been pretty good during the] pandemic until now,” he told BusinessWorld.
Mr. Zambarrano also said his business taught him how to take loss with grace, adding he learned this when sales of a particular model fell after a competitor lowered their prices.
“Our net loss was about P30,00040,000 per unit,” he said.
MARKET STATISTICS
The Philippine used car market was valued at $75.18 million (or P4.2 billion) in 2024, according to Mordor Intelligence, a market intelligence and advisory company. The market is projected to grow to $115.37 million (or P6.48 billion) in the coming five years — a compound annual growth rate of 7.4% in terms of revenue.
The Hyderabad-headquartered company said the preference for private transportation increased at the height of the pandemic when people became more concerned about personal health and hygiene. This created opportunities for the Philippine used car market, its 2024-2029 forecast reported.
Meanwhile, joint data from the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association showed that new motor vehicle sales reached 314,843 units from January to September 2023, growing at a rate of 26.9% more than the 248,154 units in the same period in 2022.
Rommel R. Gutierrez, CAMPI’s president, said the chamber sees a robust 2024 for the automotive sector, given expectations of slower inflation and a more robust economic growth trajectory.
“[Selling 500,000 units] is possible. We had 21.9% growth last year. It is near 500,000 units sold,” he said in January.
STARTING OUT
There already are a lot of players in the car buy-and-sell business, Mr. Zambarrano said, noting that there are six of them in his subdivision alone.
Aspiring entrepreneurs will have to weigh factors such as where to acquire cars (whether from bank repossessions, middle agents, friends), as well as the market they want to serve.
“How much you need as capital depends on what your market is. Maglo-low budget ka ba [Will you go low budget] or high value?” Mr. Zambarrano asked. “Siyempre, payo ko [Of course, my advice] for those starting out is to go low- to mid-range.”
Mr. Zambarrano, who grosses P100,000-300,000 per month, said it isn’t all about the money.
Be honest, he said.
“If you’re only thinking about the profit, it will not roll,” he told BusinessWorld. “Important sa business that you’re very honest sa pagbibilhan mo. Pati sa pinagbebentahan mo, kailangan honest ka [It’s important in business to be honest to both the person you’re buying from, and the person you’re selling to].”
“Lahat ng nakikita kong flaws, sinasabi ko [I disclose all the flaws that I discover],” he added.