It's no secret that the rules on the Ukrainian car market have changed quite significantly, and this happened after the adoption of new laws on preferential customs clearance of cars (we are talking about draft law No. 3251, adopted in 2016, and draft laws No. 8487 and 8488, which were adopted in 2018). The situation with "euro plates" ultimately led to the fact that this type of car purchase is no longer cheap and, therefore, not profitable. Today, not everyone can afford to buy a new car in a dealership. At the same time, buying a used car in Ukraine itself is quite risky and, overall, costly both in terms of time and money. Against this background, a new direction in the car market is increasingly developing in Ukraine – importing damaged but quite repairable and usable cars from the USA. This may seem strange, but nevertheless – even considering that we are talking about deliveries of cars from almost the other side of the world, during which cars travel tens of thousands of kilometers across oceans and seas, such a purchase is still very profitable.
While working on this article, we studied the work of companies that buy cars at American auctions for Ukrainian clients. There are many such companies today, and they offer very different levels of service. Moreover, in this case, we are talking not only about the friendliness of company employees. The most important thing is the guarantees, the obligations that these companies take on. We can safely recommend the company "Columb Trade", whose working principles we have already had the opportunity to get acquainted with. I am talking with the founder of the company, as well as with an expert on American car auctions, Vladimir Kovel.
- Vladimir, as far as I know, you previously worked in a similar direction in Belarus?
- Yes, I am originally from there and spent quite a long time selecting and selling cars from the USA in Belarus. There, this business began to develop earlier than in Ukraine. However, the scheme of this development is similar in both cases. When Ukraine adopted law No. 3251 "on preferential customs clearance", a "wild west" began here, figuratively speaking – few people understood how it worked. Low-quality cars were brought in, simply because managers did not know how to choose them correctly.
I saw a great opportunity in this direction of work and began consulting large companies, training their sales managers.
I developed and implemented my own training methodology. According to this methodology, if you devote only two days a week to training, then in just a couple of months an ordinary sales manager can be turned into a real professional in the field of car auctions.
- How does this professional differ from a manager who has not undergone training?
- The main thing is that a professional will purchase exclusively good cars, because he is trained to recognize them. A professional will also be able to verify the accuracy of information about the car, and will be able to obtain reliable information from various sources (for example, from special databases in the USA, such as Carfax or AutoCheck). It should be noted that it also happens that sellers may resort to various tricks to quickly get rid of a damaged car and make a considerable profit. It happens that a crashed car is put up for auction, which was touched up and then brought to the auction as a whole car. Then this car is delivered to a Ukrainian port, and only here does the client find out that everything in the car is far from as good as the company manager told him, and much will have to be finished and corrected. And this will require even more financial expenses.
Managers who have undergone my training know how to determine the most appropriate cost of cars, learn auction strategies and the principles of functioning of trading platforms, are trained to make winning bids, know how to identify fraudsters, and, finally, know how to make a purchase so that it is as profitable as possible for our client.
The most important point here is transparent pricing. Before we entered the Ukrainian car market, the principles of fair pricing in this business area were unknown here. For example, a 2016 "Volkswagen Passat SE" is ordered at a price of 22-24 thousand dollars, and at this price the car was ultimately presented to the client. The company delivered the car, cleared customs, repaired it, made a certificate, and registered the car.
According to my developed methodology, the manager tells the client at what price the car was won at the auction, after which all other calculations are made. And in the end, this changed the Ukrainian car market, the business model by which this market operates. Now people are already starting to bargain, they use the advantages of auctions. If a person won a car at a price of $7,000, but initially wanted to set $12,000, then his savings amount to $5,000. Previously, this difference was taken by companies involved in car delivery. Clients were never shown the real bids at the auction. They also added to delivery and fees, to repairs and other services.
I suggested that large companies train their managers to work as honestly and transparently as possible, which in the future will allow them to attract an even larger number of buyers who, of course, like such work. Such companies' sales went up precisely because of honest pricing.
- Vladimir, recently you took part in the filming of the popular TV show for car enthusiasts "Jedi", which airs on the 2+2 channel. As part of the program, you commented on American car auctions...
- Yes, I spoke, among other things, about honest bidding, and also about the fact that it is very important to get all the data about the car in order not to end up falling for fraud. I provide a link to this program.
- A layman's question: how is it even possible that delivering a car from America turns out to be more profitable than bringing this car from Europe or from Russia?
- The key word here is "profit". Today, when a client in Ukraine buys, for example, a new 2018 car in a dealership, immediately upon completion of this transaction, the car will automatically lose a third of its value. For example, if you buy for 30 thousand dollars, you will be able to sell it for no more than 23 thousand dollars in a year. Thus, you lose 7 thousand dollars just for one year of car use! And this is not even the whole minus, because there will also be quite expensive maintenance (after all, the car is under warranty) and many other financial expenses associated with the operation of the car. From America, we can deliver exactly the same car for 17 thousand dollars. At the same time, the buyer can drive a little and then sell the American car for more than he bought it – you can sell it for 21 thousand. In fact, today it is believed that buying a car is never profitable, but in this case, the benefit from such a purchase is obvious – it is a difference of 13 thousand dollars, which is very significant. And the income from subsequently selling such a car, amounting to $4,000, is a rather pleasant bonus.
If we compare purchases from auctions in the USA with markets in Europe and Russia, then here I can say the following. The pricing of new, non-damaged cars in the USA is absolutely the same as the pricing of such cars in Europe. For example, if you take a car on lease, then there are lease payments, and there is also a residual value of the car. Such cars are usually brought from the USA, they are bought at auctions such as manheim.com and cars.com, but they are bought less often than damaged ones. Purchasing such cars is much more expensive than purchasing cars from Europe, or approximately the same.
Our employees purchase damaged cars at insurance auctions, such as, for example, Adesa.com, copart.com auto auction, ebaymotors.com, iaai.com auto auction, npa.com and ove.com.
These are cars after accidents, with damage of varying degrees, or other damage, cars after an accident, hail or theft, after drowning in fresh water, or having experienced an incident after which a document is issued for the car that prohibits the movement of the car on the territory of Canada, the USA and Mexico. This helps the development of auction trading, as well as car exports. In 1982, the Copart auction arose, after which a real new era of selling damaged cars began.
If a car is purchased by a person in the USA, for example, on lease or on credit, then such a car must be fully insured from the very beginning of its use. And in the future, if such a car gets into an accident, the insurance company pays the bank that issued the loan the full residual value of the car. Under such conditions, insurance companies can lose a lot of money, they can even go bankrupt.
However, Americans are very enterprising people, they know how to "make money from money". Therefore, American insurance companies began selling insurance as securities – insurance options – on stock exchanges. Thus, companies shift the risks, their own responsibility for an insured event with a car, onto buyers of insurance options. The model works like this: if nothing happens to the car, then the one who buys the insurance option makes a profit. If an insured event occurs, then the value of the insurance option goes to zero. According to statistics, insured events (such as accidents, car drowning, etc.) occur with approximately 10-12% of cars out of all insured. Buyers on stock exchanges are people who have big money; they buy securities literally in packages. With the 10-12% insured events mentioned above, the losses of such buyers completely "dissolve" in the profit they receive from the remaining 90%. And in the end, everyone is happy. The insurance company gets the damaged car at residual, or even zero, cost, then this car is put up for sale at an auction at a very affordable price. Then we buy this car.
If we talk about comparison with Europe, then in the Old World the stock market is not as developed as in the USA. In Russia, this market is practically absent altogether. So insurance companies, after insured events occur, return money to the client, and they already need to restore the car at their own expense, putting it up for sale at a fairly high price to minimize their own financial losses.
- Tell us about the main risks that exist in buying a car in the USA.
- Such risks exist on both sides of the ocean. As I said earlier, in America there are fraudsters who slip inexperienced buyers a car that looks whole in photographs, but in reality is seriously damaged. The car may turn out to be a "dummy", or a "drowned one", may be practically a set of spare parts. A very common problem is the lack of necessary documentation, for this reason, importing the car into Ukraine and its further registration will be impossible. That is, you bought the car, but it is not realistic to export it, and, by the way, we help people with such cases. In fact, often the car can be exported, but this is a rather costly undertaking in terms of time and money.
Also, on the American car market there are unscrupulous companies that buy a car cheaply, put bolt-on parts on it, then paint it with a brush and eventually sell an unusable car as a whole one.
A big difficulty is if a car is bought from hand, or via craigslis.org, and then it turns out that the car has encumbrances, or is on credit, or its history is unclear...
- Has the story with "euro plates" strengthened the position of the business of delivering cars from the USA?
- I don't think so. I think it didn't affect us in any particular way. But I think that what happened in Ukraine was expected. And the conditions under which the state determined the customs clearance of "euro plates" are a mythical benefit. For example, a 2005-2006 car purchased for $2,500, after customs clearance and processing of other documents, already costs $5,000. At the same time, a person often buys a car with rolled back mileage, with many various defects. In the USA, by adding a little money, he could buy, for example, a 2014 "Ford Focus" with low mileage and very minor damage; he could buy such a car for $7,500. This is a much more sensible and much more profitable purchase.
It seems to me that the situation with "euro plates" should not have been allowed to get so out of hand, creating all this hype around it. It was worth explaining the rules from the very beginning, then everything would have been civilized, but now many people have suffered. Moreover, many of them do not yet understand the unprofitability of their purchases. It will take about a year for people to realize this. When the owners of purchased "euro plates" start selling them, assessing their losses after customs clearance, repairs, etc.
- Do you believe that the customs clearance laws No. 8487 and 8488 make buying a car in the USA more attractive?
- This is actually true. Currently, more and more clients are aiming to buy cars from 2015-2019, whereas previously cars from 2011-2013 were in great demand. People can already afford to take newer cars, as well as cars with larger engine volumes, and quite recently such cars were "unpassable" for the market of our country. In accordance with law No. 3251, adopted in 2016, motorists tried to buy the budget segment, these were cars with an engine volume of 2.5-3 liters, but today there are no such restrictions. Now it is already profitable to deliver cars even with a 5-liter engine volume. That is, a completely different segment of cars is coming from the USA, and you can now buy these cars quite cheaply. Already now, cars that belong to the "luxury" category have fallen in price by about 35%. And in a year, the cars brought here will be even cheaper.
The second part of the conversation will be published in a few days.
