Oscar De Oca, DE OCA MOTORS: Auto Repair Shop and Dealership
Background
Oscar De Oca owns DE OCA MOTORS. He runs the day-to-day operations and started working full-time at the business after college in 1988. Oscar’s father started the business in 1975. It is an automotive repair shop and a used truck and van dealership.
DE OCA MOTORS is located at 3827 Firestone Blvd in South Gate, CA 90280, and it has been an integral part of the South Gate and greater Los Angeles community for over 50 years.
Interview Transcription
Edited lightly for clarity.
Kieran: Thanks again, Oscar, for joining me today. First, do you want to introduce yourself and your business quickly?
Oscar: My name is Oscar De Oca, and my business is called DE OCA MOTORS. We are an automotive repair shop and a used truck and van dealership.
Kieran: Can you give us more background on the business? How did you get started with the business, and how long have you been running it?
Oscar: It's a family business. My father started the dealership in 1975. I was only 11 years old at the time. He started it with $10,000 of borrowed money in a small shop with only a few cars. He'd bring the cars home, and we'd help him detail them. During high school, I worked at the dealership in the summer in the sales department and with the mechanics. After college in 1988, I started full-time at the business. I was a general manager and have been running it since then.
Kieran: What services do you offer?
Oscar: We only offer two services. We sell trucks and vans in front and have an auto repair shop in the back and across the street. We have a total of twelve bays. Now, more of our customers are fixing their cars rather than buying new ones. The auto repair end is more profitable.
Kieran: What are the most popular services you offer in the auto repair shop? What are customers coming to you to fix?
Oscar: People bring us their cars for oil changes, brake pads, tune-ups, and two to three complete engine repairs per month. We'll subcontract the transmission work to another repair shop. We drop the transmission and send it out to a repair shop. Then, they'll send it back, and we'll reinstall it. We do most of the work in-house, like suspension work. We don't have an alignment machine, so if we have to replace parts in your suspension, we'll take it to the alignment place. We don't install our own tires. We used to do that, but it's easier to send it out. We just take off the tires and send it to the tire shop. They mount and balance them, and we just put it back on. We do our own brake lights; we turn our rotors and drums. We are general auto mechanics and don't do much electrical work. We have another guy we subcontract out to for diagnosing complicated electrical problems, and he'll tell us what is needed to fix the car.
Kieran: How do you price your services?
Oscar: I don't know what others charge, but our customers keep returning. We charge good prices on parts because we buy in bulk. We typically mark up between 20-30% on parts. We quote a labor rate of $80/hour, but like to reduce that to $65/hour if we can. I know some dealerships charge more than $100/hour for labor, but we're cheaper than most auto repair shops around us.
Kieran: How do you decide what to subcontract versus what to do in-house?
Oscar: Based on the expertise of our mechanics. For example, we don't have a transmission expert, so we must subcontract that. On work we subcontract out, we normally mark it up about 20% on the price that the subcontractor quotes us for because we have to transport the vehicle there, but we're still giving customers a better price than they would get if they took their car there directly themselves.
Kieran: How do you get customers? What marketing do you do?
Oscar: We did a lot of marketing in the 80s and 90s, including TV and radio ads. Lately, we have spent zero dollars on marketing. We get some walk-in customers every now and then. But, when you've been around for 50 years, most of your customer base is repeat customers. Yesterday, I sold a car to a lady who bought her last car from us seventeen years ago. I sold another gentleman a truck who bought his last one from us nine years ago. So, we get a lot of repeat customers and referrals from previous customers.
Kieran: What marketing tactics would you use today if you were to open up a new auto repair shop?
Oscar: All the auto repair shops around us, and there are quite a few on Alameda and Firestone, have been around a while. Typically, these businesses are passed down from generation to generation, but these are established auto repair shops with an existing clientele base. I think it's almost better to find an existing auto repair shop that you can acquire rather than start one from scratch. I don't know how you would start one from scratch and get customers on day one when you have bills and expenses to pay.
Kieran: What skills or experience do you need to run an auto repair shop successfully?
Oscar: You need to have a good personality and be able to build trust with customers. In the auto repair business, there are a lot of shady people that want to rip you off. You hear a little squeak where you think it might be a simple brake job, and then they try to sell you a two thousand dollar job. That is scary for a customer. You need to build people's trust and get them to want to come back to you in the future. So, play the long game rather than rip them off on one job. People's trust is the most important thing.
Kieran: What are the costs to run an automotive repair shop?
Oscar: A little shop, which most people start with, might have four bays and an outside parking lot with twenty spots. In a high-traffic location, a place like that may cost $5K/month. The garage liability for a small shop runs for $8-10K/month. Then, you have to pay for electricity and employees. Most people hire one good mechanic who knows what they're doing.
Kieran: In addition to looking for a high-traffic area, what are some other factors to consider when selecting a location?
Oscar: We are in South Gate, so I know my clientele is 95% Hispanic customers. My service manager and anyone else dealing with clients need to be able to speak Spanish and English. The location also dictates your prices. We could charge more if we were located in Beverly Hills, but your costs would be higher. You should pick your location based on who you want your clientele to be rather than just picking a high-traffic area. You could pick a high-traffic area, but it's all rich people with BMWs and Porsches, but then you might not know how to work with them.
Kieran: How have you historically financed your business?
Oscar: The auto repair shop doesn't need additional financing, but the dealership does. We have a line of credit to purchase vehicles, so we work with borrowed money to keep our inventory stocked.
Kieran: Do you pay for any technology or software to keep your shop running?
Oscar: On the sales side, we use Turbo Deal. For accounting, we use QuickBooks. For the shop, we use a system called Mitchell 1. Mitchell 1 is one of the oldest makers of auto repair software. We pay for a monthly membership.
Kieran: You mentioned needing a very good mechanic. Who else do you need to hire for this business?
Oscar: We needed to hire salespeople who speak Spanish and English. We train them not to be pushy. We don't want to have an aggressive sales team. We want them to help our customers and treat them right. I don't want them to judge people. Meet and greet, then bring them to me, and I'll decide if we can sell them a car or not and will bargain on price. On the mechanic end, I can't hire mechanics who went to school because they are overqualified at my place. I need people who can do basic mechanical work and are hard-working. I can't afford to pay the big wages that big shops can.
Kieran: Do you test them during the interview, or how do you know someone can do basic mechanic work?
Oscar: I haven't personally hired anyone in quite a while because my service manager handles that. We don't order their uniforms or anything for like two weeks. So, we give them a two-week trial period to see if both parties are excited to work together. You'll immediately find out if they have the basic skills or any hope. We don't necessarily need a guy who knows a lot, but we need guys to be quick learners. So if we show them how to change the oil on a car, we expect them to be able to do the next one. Many people come and get experience with us, then move somewhere else and get paid more money.
Kieran: How do you pay your employees?
Oscar: The secretary and salespeople are on salary. Everybody else, the employees in the shop, like the mechanics and service people, are hourly employees. Mechanics can make a lot more money if they can find places that pay them by the job.
Kieran: What is the hourly rate for an entry-level mechanic?
Oscar: A good mechanic that came out of some trade school will be looking for $25/hour to start with and they will want to be in the $30-$40 range quickly. I can't hire that guy. The guys I have don't have any schooling; they are just hard workers. I start them out at $18/hour, and for some, I have to pay $20/hour. The highest guys I pay are $22/hour. Our low prices only allow me to pay a little money. We give them perks like vacation days, off days, and coffee, and we treat them right, but I can't pay them the big bucks.
Kieran: Is there any seasonality business?
Oscar: In the repair end, we see some people holding off on repairs and doing it when they get a tax return. But I don't see a lot of that anymore. So, I think no. When your car breaks down, you fix it. In the summer, more people may bring their cars in to have their radiators or air conditioning fixed due to car overheating issues. The same can happen on a rainy day; someone might realize their windshield wipers malfunction. The weather can impact our business a bit.
Kieran: What do you know now that you wish you had known at the beginning?
Oscar: We've had some tough and really good years, which is natural to happen when you've been in business for 50 years. Sometimes, I wish I knew when to get out. We've bounced back repeatedly but made millions of dollars and then lost millions of dollars. It's like when you're at the gambling table; it's hard to know when to walk away because you don't know what the future holds. We went through a rough spell last year, but we've seen some good signs this year.
Kieran: We've talked a lot about the auto repair shop, but the other side of the business is a dealership. You purchase commercial vehicles at auction and then resell them. Why does that business make sense alongside the auto repair shop?
Oscar: Many people who buy cars from us end up being customers in the auto repair shop. We give them a 90-day warranty when we sell a car. Most people will find something wrong with the vehicle and get one or two free repairs before the warranty lapses. They might need their first oil change by the time the warranty is up, and they'll come back to us because they like how we treated them. The auto repair shop also helps us sell the cars because people feel comfortable knowing that if something goes wrong, we can fix it on-site and don't have to take it anywhere else. So, people feel safe when they buy a car from us.
Kieran: Can you tell us more about the auctions where you purchase your vehicles?
Oscar: The biggest one is called Manheim. They gobbled up all the little mom-and-pop auctions over the years. My brother does the buying in Riverside. They used to have properties in LA, Norwalk, and Anaheim, but the spaces became more valuable to other business owners. So they pick places where they can get big lots for cheap so they can hold acres and acres of cars with less expenses for them. They're out in Riverside, Fontana, and other remote locations. The dealers would have never driven out there in years past, but now all the dealers try to go to those locations and buy the cars. So they're far away, but my brother lives in the Inland Empire, so it's not bad for him.
Kieran: What vehicles and prices are you looking for at auction?
Oscar: Most of the cars we like to sell are for less than $25,000. So, we're trying to buy them for under $20,000. Sometimes, we have to have vehicles in the $40,000 range just to have them, like a specialty dump truck, but I try not to keep too many of those. Then, we'll buy many cheaper cars that we can sell for under $20,000. You have to have a variety. We look for plumber bodies, box trucks, regular vans, pickup trucks, state beds, and utility bodies. We try to have a variety of stuff because not everyone is looking for the same type of vehicle.
Kieran: How much do you have in your inventory at one time?
Oscar: About 1 million dollars.
Kieran: Is there anything I should have asked you about that you think is important for someone who wants to start this type of business?
Oscar: Be patient, and don't expect to make much money immediately. Expect the ups and downs. Even in repairs where people's cars break down, they sometimes go through a spell where cars are excellent and don't need anything for a while. Or customers don't have a lot of money to spend on repairs. Be prepared for rainy days. Don't spend your money like crazy when you're making money. Realize that it's not always going to be good.
