Fresh out of North Texas University in 1976 with a degree in biochemistry, Mike Beaver had a job offer from Mary Kay Cosmetics in Dallas. He instead opted to follow in the footsteps of his father, George Beaver, a used-car dealer in West Texas who opened the first wholesale auto auctions in Lubbock, TX, and Albuquerque, NM.

“Mary Kay offered me $800 a month, but I’d been making twice that wholesaling cars in college,” Beaver says.

He sold new cars at Pete Gants Pontiac in Dallas in 1976 and also ran several used-car businesses, but his big break as a franchised dealer came in 1986 when he struck a deal with Motors Holding to open Beaver Chevrolet in Denison, TX. 

Beaver says his used-car experience convinced him that segment can be a vital revenue source.

“We demand one-to-one used-to-new retail, because the margins and gross profits on new vehicles have eroded to nothing over the past 10 years,” he says.

Another business principle he adheres to: “I also forbid (employee) turnover.” That prohibition may seem unrealistic, especially in the high-turnover world of auto retailing.

But Beaver says his strength in used cars and appeal to salespeople’s self-interests attracts and retains highly professional employees who excel in all departments.

“When we go into a community and open up a store, we put most of our efforts into our used-vehicle volume and the gross profits that that volume produces,” Beaver says. “All the salespeople around town hear about this real quickly, so we attract the best in the community.

“We sell a lot of new cars as well, because these are professionals who have product knowledge and know the principles of customer satisfaction. I tell my salespeople, ‘I will let you sell used for you, but you must sell new for me.’”

While used cars are profitable, Espinosa says a potential higher cost of doing business stems from a new state regulation: If a dealership fails to disclose prior body or mechanical repairs it could be liable for three times the value of the vehicle plus attorney fees if the amount of that damage exceeds 6% of the vehicle’s retail selling price.

“We had to put things in place to take care of that, because we are still held accountable as the experts and (are expected) to reasonably know whether a vehicle has had any damage,” he says.

“Our reconditioning checks are very thorough and we use paint meters. If there are any red flags, more people get involved and, if necessary, we send it to a body shop because we want to have full disclosure.”

Dealerships’ jobs are made more difficult because they do not have access to certain insurance records that could help identify prior damage. “We only have access to Carfax and AutoCheck,” Espinosa says, citing two vehicle-history reporting services that aren’t fully comprehensive.

The New Mexico Automotive Dealers Assn. and several dealers have filed two lawsuits asking the state’s First and Seventh Judicial District Courts to invalidate the rule. 

When Beaver’s company decided to expand into Florida, it faced a daunting public- relations dilemma.