23 Steps to Starting a Used Car Dealership Business

How to Start a Used Car Dealership Business With No Money ,Do you want to start a car dealership online? If YES, here is a 23-step guide on how to start a used car dealership business with no money or experience. Used car dealership business as the name implies is all about selling used cars to willing buyers.

Aside from the fact that the owners of used car dealership shops are known for selling used cars, they also go out of their way to source for sellers who wants to sell their cars. They buy used car at a favorable price and then re – sell at a good price that guarantees profits for them. In a nutshell, they are in the business of buying and selling used cars.

What It Takes to Succeed as a Used Car Dealer?

One thing about used car dealership business just like consignment business, you can start this business without money and still make profits. This is so because you can convince people who are looking towards selling their used cars to drop it with while you help them source for buyers and enter an agreement to make a certain percentage from the deal once you are able to sell – off the car.

The truth is that if you are trustworthy and dependable, it will be easier for people to trust you with their used car and wait while you help them sell. If the deal pulls out, it will be a win – win for both parties. You will make your profits and the owner of the car will make money off his or her used car. In other words you would be automatically helping them get rid of the used car they do not want and in turn make your profit.

No doubt starting a used car dealership business can be interesting at the same time rewarding especially if you situate your car dealership shop in strategic locations where you can easily attract people with low income who can’t afford brand new cars. The fact that fairly used cars are highly affordable and far cheaper than brand new cars makes used car dealership business a thriving and profitable business.

One good thing about starting a used car dealership business is that if you are diligent enough and if you have good business / marketing strategies , you can build the business from just one outlet to numerous outlets across different cities in the United States of America. You would need a good knowledge of automobiles, good business skills, bargaining skills and of course customer services skills if indeed you want to build a profitable business.

23 Steps to Starting a Used Car Dealership Business 

1. Understand the Industry

Recent statistics has it that the total annual revenue for used car dealership in the United States of America is US$370 billion with an annual growth of 2.4 percent. No doubt, with massive annual sales of nearly US$370 billion, one can confidently say that the used vehicle dealership industry represents almost half of the United States’ auto retail market and it is of course the largest retail segment of the U.S. economy.

Interesting Statistics About the Industry

For instance, in 2005, approximately 44 million used cars were sold in the United States, which is more than double that of the nearly 17 million new cars sold. The average price of used cars in the United States is $8,786. The industry has 127,940 registered car dealership businesses that employ a total of 237,788 people.

In the United States used car dealership market , the top four major players account for less than 20.0% of industry revenue in 2015, with the biggest used car dealer, CarMax dealership, generating about 12.6% of revenue. Recent findings also indicated that the industry concentration has increased over the last five years prior to 2015.

The automotive industry with reference to used cars dealership is indeed flourishing simply because more and more consumers are becoming aware of the need to cut unnecessary spending as it relates to purchasing cars, purchasing insurance policies and also the need to sell used cars as fast as possible.

Some of the factors and incentives that encourages aspiring entrepreneurs to venture into opening a used car dealership shop is the fact that the required amount needed to start the business especially when you choose to start a small shop is not on the high side compared to other small scale businesses.

That makes it easier for loads of entrepreneur who are interested in the business to come into the industry at any time they so desire; the entry barriers are quite affordable and any serious minded entrepreneur can comfortably raise the start – up capital without collecting loans from the bank especially if they can convince owners of used cars who are willing to sell their cars to drop the cars with them while they source for buyers.

2. Conduct Market Research and Feasibility Studies

Demographics and Psychographics

The demographic and psychographic composition of used car dealership is indeed large. This is so because if you conduct a quick survey, you will realize that the numbers of people who can afford brand new cars are far less than the numbers of people who can’t. Although there are people who can afford brand new cars that still settle for used cars for obvious reasons.

By and large used cars dealership business attracts clients that cuts across different economic class. It is in two phase, either you are selling your used cars or your buying used cars. So if you are mapping out marketing strategies for your used car dealership business, you should not just restrict it to only the middle class and the lower class in the society, but also the upper class.

3. Decide What Niche to Concentrate On

These are some of the niche ideas within the used car dealership industry that an entrepreneur who is looking towards starting the business can specialize in;

Bricks and Mortars Used Cars Dealership Shop

Online Used Cars Dealership Shop

Used Luxury Cars Dealership Business

Multi – brand and multi – maker car dealers

 

The Level of Competition in the Industry

The fact that an entrepreneur without start – up capital can actually stand as a middle man in the sale of used cars makes the industry to be open to all and sundry hence the stiffer competition in the industry. You can run this type of business without a physical shop; online shop will cut it for you. As a matter of fact, online used car dealership shops are more thriving than bricks and mortars used car dealership. This is so because it is easier for customers to review prices and model of cars online before eventually making their purchase. The truth is that, despite the level of competition in the used car dealership industry, entrepreneurs who are running the business are still making their profits and some of them generate as high as 30 percent turnover rate especially those that are well positioned and over time have been able to secure steady sources for neatly used cars.

4. Know the Major Competitors in the Industry

These are the list of some of the well – known used car dealership shops in the United States of America;

CarMax Dealership

AutoNation Inc.

Penske Automotive Group Inc.

Sonic Automotive Inc.

Group 1 Automotive Inc.

Van Tuyl Group

Hendrick Automotive Group

Asbury Automotive Group

Staluppi Auto Group

Lithia Motors Inc.

Larry H. Miller Group of Cos.

Ken Garff Automotive Group

Greenway Automotive

David Wilson Automotive Group

Suburban Collection

Jim Koons Automotive Cos.

Potamkin Automotive Group Inc.

Bob Rohrman Auto Group

RLJ-McLarty-Landers Automotive Holdings

Braman Dealerships

Open Road Auto Group

Keyes Automotive Group

West-Herr Automotive Group Inc.

Ourisman Automotive Group

Economic Analysis

Starting a used car dealership business just like starting any other business requires that you conduct your feasibility studies and market survey so as to get your economic analysis right. As a matter of fact, you just have to get your economic analysis right if your intention of building the business is to generate profits, grow the business and perhaps expand the business beyond one location to other locations within the United States and other cities in the world.

When conducting economic analysis for your used car dealership business, you have to critically examine these key factors; place, product, pricing, and promotion. As a matter of fact, you would have to continue to review these key factors at regular interval while running your used cars dealership business.

5. Decide Whether to Buy a Franchise or Start from Scratch

There is no hard and fast rule when it comes to choosing how you intend starting a business. Basically, you should be guided by your overall business vision and mission statement. If you are looking towards starting a used car dealership business, you would have to start from the very scratch simple because you can hardly get a franchise of used car dealership shop to buy. It is a business that is open to all and sundry.

Besides starting a used car dealership business from the scratch is less stressful when compared to other small scale businesses which usually require detailed groundwork before launching the business. With used car dealership business, you should just try as much as possible to secure a shop that is close to a major road and then leverage on every marketing tools within your disposal especially the internet when it comes to marketing your used cars.

Although starting a business from the very scratch might not be easy initially, but one thing is certain, if you are diligent and you apply the right business strategies per time, it won’t be too long before your business brand becomes recognized not only in your city or state, but throughout the United States of America.

6. Know the Possible Threats and Challenges You Will Face

The threats and challenges that is likely going to confront a start – up used cars dealership shop business is the fact that they will be competing with already established used cars dealership shops and also other potential used cars dealership shops that are likely going to be opened within the same location as yours.

You would have to go all out to compete for the available market in the location you choose to set – up your own used cars dealership shop. Besides cars are not like other stuffs that people buy every other day or once in a month. Other threats and challenges that you are likely going to face when you start your used cars dealership business are economic downturns which usually affect purchasing powers and also unfavorable government policies . For instance, if you are into exporting used cars to other countries as demanded by your clients and the government of one of the countries you usually export used cars to place a ban on such trade, it will definitely affect your business negatively.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

When it comes to choosing a legal entity for your business, what you want and the type of business model that you intend building should be some of the factors that should guide your decision. Generally, you have the options of either choosing a limited liability company which is commonly called an LLC, general partnership or even a sole proprietorship for a used car dealership business.

Ordinarily, sole proprietorship should have been the ideal business structure for a used car dealership business especially if you are just starting out with a moderate start – up capital and a small sales garage in a street corner. But people prefer limited liability Company for obvious reasons. As a matter of fact, if your intention is to open several outlets of your used car dealership shop in the different cities and to also sell used cars to clients in other parts of the world, then choosing sole proprietor is not an option for you; Limited Liability Company, LLC or general partnership will cut it for you.

For example, Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities to run this model of business entity.

8. Discuss With an Agent to Know the Best Insurance Policies for You

When it comes to starting a car dealership business, then you don’t have any options order than to purchase the right insurance cover or else you might run into a challenge that may drain your finance. Besides, if you choose to start any business in the United States of America, you will be expected to purchase at least some of the basic insurance policy covers as it relates to the industry you are in.

These are some of the insurance policy cover that you should consider purchasing if you want to start your own used car dealership business in the United States of America and also in most parts of the world;

General insurance

Health insurance

Liability insurance

Workers Compensation

Payment protection insurance

Overhead expense disability insurance

Business owner’s policy group insurance

Risk Insurance

Credit insurance

Deposit insurance

9. Protect your Intellectual Property With Trademark,Copyrights, Patents

If your idea of starting a used car dealership business is not just to operate in street corner but to compete on the international market by exporting used cars to other countries or importing used cars from other countries, then you should consider filing for intellectual property protection / trademark.

It will become handy and very useful as your used car dealership brand begins to expand far beyond your reach. The truth is that even if you are starting your own used car dealership business from the scratch, you can still decide to secure your brand name from an intellectual property clearinghouse if you so desire.

No doubt, it is quite challenging to build your used carBdealership business brand from the very scratch, and then watch the brand name slip off your hands. It is even very important to protect your company’s logo and other documents or software that is unique to your used car dealership business. If you want to register your trademark or intellectually property, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO

10. Get the Necessary Professional Certification

From a general perspective, you do not have any need for professional certification before you can be allowed to legally operate your own used car dealership business in the United States of America, Canada, and Australia and even in Europe. It is a business that is open to both the schooled and the unschooled; both the skilled and the unskilled hence there is no need for a special professional certification. Your business license and other business document is all you would need.

11. Get the Necessary Legal Documents You Need to Operate

The legal documents required for running a consignment / resale business is perhaps the basic legal requirements need to run any business in the United States of America simply because of the nature of the business. These are some of the basic legal document requirements needed before you can successfully start and run your own used car dealership business;

Business and liability insurance

Tax Payer’s ID

Fire certificate

Certificate of Incorporation

Business License

Business Plan

Non – disclosure Agreement

Employment Agreement (offer letters)

Employee’s Handbook (optional)

Operating Agreement for LLCs

Facility permit / license

Franchise or Trademark License

Insurance Policy

Contract documents (for customers, clearing / shipping

partners)

Online Terms of Use (for online used car dealership)

Online Privacy Policy Document (for online consignment

stores)

Apostille (for those who intend operating beyond the United

States of America)

12. Writing a Business Plan

The truth is that, in order to successfully run a standard used car dealership business, you would need to have a good business plan in place. Simply put, a used car dealership business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges and growth. The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Your business plan should outline and cover strategies on how you intend to manage your used car dealership business.

The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on sales, income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.

These are the key areas that should be covered in your business plan;

Executive summary and Company’s descriptions

You are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, mission statement and where your company will be located and also if you intend exporting used cars to other countries or opening outlets in different cities in the United States of America or importing used cars from other parts of the world.

Other key components that should not be missing in your consignment / resale business plan are product offering, SWOT analysis, competitive analysis, marketing and sales analysis / strategies, target market, market goals, pricing, costing and financial projection, publicity and advertising strategy, expansion and growth strategies, budget and start – up capital generation et al.

13. Prepare a Detailed Cost Analysis

Just like any other business, when it comes to starting a used car dealership business, loads of factors influences the amount that will be required to successful launch the business. Factors like the location you intend starting the business, the type of used cars you want to specialize in selling, the size of the used car dealership shop you want to open, and of course the state of the economy as at when you intend starting the business.

Irrespective of where you intend starting your used car dealership business, you would be required to fulfill most of the items listed below;

The Total Fee for Registering the Business in the United States of America – $750.

Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,300.

Marketing promotion expenses for the grand opening of your used car dealership shop in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580. Cost for hiring Business Consultant (if you intend carrying out detailed market survey and feasibility studies) – $2,500 (estimated figure) Insurance (general liability, workers’ compensation and property casualty et al) coverage at a total premium – $3,400.

Cost for payment of rent for a shop / garage for 12 month at $1.76 per square feet in the total amount of – $52,800. Cost for Shop / garage remodeling – $5,000. Other start-up expenses including stationery ($500) and phone and utility deposits – ($2,500).

Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $10,000

The cost for Start-up inventory (purchase of first set of used cars) – $100,000

Cost for shop equipment (cash register, security, ventilation, signage) – $13,750

The cost for the purchase of furniture and gadgets

(Computers, Printers, Telephone, TVs, tables and chairs et al) – $4,000.

The cost of Launching a Website – $600 (for online consignment stores)

The cost for an opening party – $2,000 (optional)

Additional Expenditure $1,000

Going by the report from the market research and feasibility studies conducted, you would need an estimate of about $170,000 or less to successfully set up a small scale used car dealership business in the United States of America.

If you want to start a medium scale used car dealership business in the United States of America, you would need nothing less than a million dollars ($1m). And if your intention is to start a large scale dealership business in the United States of America, then you should look towards generating over $2.5m as your start – up capital.

14. Raise the Needed Startup Capital

One good thing about used car dealership business is that you can start the business with minimal cash. All you need to do is to get used cars from family members; friends and neighbors with the agreement of helping them sell it and pay them the agreed amount while you make your own cut. But averagely, you would need a reasonable startup capital to launch a standard used car dealership business and trust me it can be challenging raising capital to launch a business idea.

Your idea must be workable and promising for you to be able to secure finance from financial institutions or from angel investors. The first thing to put in place before sourcing for start – up capital for your business is to draft a detailed business plan.

With a good business plan, you can easily convince investors to invest in your business. The truth is that no bank can give you a loan if you don’t have a good and workable business plan. Besides, investors will not take you seriously if you don’t have a business plan on ground before launching out to source for start – up capital. There are several options when it comes to raising money to finance a start – up business. Some of the options are; Raising money from personal savings and sale of personal stocks Raising money from investors and business partners

Applying for loan from bank

Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors Sourcing for soft loans from family members and friends.

15. Choose a Suitable Location for your Business

In starting a used car dealership business, it is very important to be strategic with the location you choose to pitch your business tent. It is important to note that used cars dealership shops may likely not thrive in highbrow areas of the society, but rather in the lower class / middle class suburbs of the city. So it is needful that you ensure you locate your used car dealership shop where the middle class and the lower class of the society live. This is because besides getting loads of people that will patronize you in this area, you would also get facility at a very cheaper rate compared to what you might get in high class area.

The fact that there different sizes of used car dealership shops scattered across the United States of America does not in any way mean that used cars dealership business can thrive in every location. Before choosing a location for your used cars dealership shop, ensure that you conduct a thorough feasibility studies and market survey.

The possibility of you coming across a used car dealership shop that just closed shop in the location you want to open yours can’t be ruled out. This is why it is very important to gather as much facts and figures before choosing a location to set – up your used car dealership business.

These are some of the factors that you should consider before choosing a location for your used car dealership shop;

The demography of the location

The purchasing power of the residence of the location

Accessibility of the location

The numbers of used car dealership shops in the location

The local laws and regulations in the community / state

Traffic, parking and security et al

16. Hire Employees for your Technical and Manpower Needs

Normally, there are no technical requirements for starting a used car dealership business aside from the fact that you might want to hire car technicians either on a full – time basis or part – time basis to help out in fixing minor repair works in cars so as to present them in good condition. You might also want to buy a CRM software application to help you manage your customer base; to inform them when you have new deliveries of used cars and to keep in touch with them.

As regard renting or leasing a shop, your financial capacity should influence your choice. If you have the required finance, it is to your advantage to acquire a property or lease a facility to be used for your used car dealership shop; it will give you the freedom to design the facility the way you want to it to be. But if you are low on cash, then you don’t have any option other than to rent a facility.

Typically, an ideal used car dealership shop would have theBowner, an accountant / cashier, auto – mechanic and one or more sales girls or sales boys. On the average, you would need about 5 to 10 employees to operate a standard used cars dealership shop in the United States of America

The Service Delivery Process of the Business

The business process of operating used car dealership business revolves around sourcing for sellers who want to sell their used cars, submitting your bid and then acquiring the used cars if you are able to price right.

After the purchase of the used cars, it now becomes your responsibility to ensure that the car is in good shape before displaying them for sale in your garage. In most cases, your auto – mechanic would have to fix one or more things and then passed the car through car wash department to be thoroughly washed. The truth is that, it is easier to sell used cars if they pretty neat and in good condition.

Aside from that, on a daily basis, the used cars in your garage are supposed to be cleaned / washed and then employ every means of marketing the cars whether on offline or online platforms or both.

17. Write a Marketing Plan Packed With ideas & Strategies

Running a business requires that you to be proactive when it comes to marketing your goods or services. If you choose to run a used car dealership business, you must go all out to employ strategies that will help you attract customers or else you will likely struggle with the business.

These are some of the marketing ideas and strategies that you can adopt for your used car dealership business;

Direct Marketing

Sponsor TV and Radio Programs

Erect your Billboards in Strategic locations around the city

Making use of sales Agents and sales reps

Online Marketing (via your official website / online store,

social media platforms and blog et al)

Referral Marketing

Engage in road show within the community where your used

car dealership is located.

List your used car dealership business in local directory /

yellow pages

18. Work Out a Reasonable Pricing for your Services & Products

One of the major factors that will help you get the right product pricing for your used cars dealership business is your bargaining power. The truth is that if you are good with bargaining, you will be able to get used cars at rock – bottom prices and then resale at good prices that will guarantee you make good profits.

Besides some people would ordinarily want to sell their used cars at give – ever prices if they lack parking space for it and when they able to get ready buyers. This is the reason why the average used car dealership business owner can make as high as 25 percent turnover rate.

Another factor that can aid you to get the right pricing for your used cars is to ensure that you dealer in neatly used cars, cars that you won’t have to spend much to put them in good shape. You can as try as much as possible to cut your operational cost to the barest minimum if indeed you want to maximize profits in your used cars dealership business.

19. Develop Iron-clad Competitive Strategies to Help You Win

When it comes to competing favorable in the used cars dealership industry, you would have to explore ways of getting neatly used cars at giveaway prices. One thing is certain, if you operate the biggest used cars dealership shop in your location and you deal in various brands of used cars et al, you are likely going to attract more customers than your competitions.

Another possible competitive strategy that you should adopt when it comes to winning your competitors in this particular industry is to ensure that you deliver excellent customer services at all times. The truth is that, people will always go back to places where they are treated like kings and queens.

You can as well maximize CRM software application to effectively manage your clientele base.

20. Brainstorm Possible Ways to Retain Clients & Customers

No doubt one of the strategies that you would need in order to generate repeated sales from your customers and also to retain them is to ensure that the you sale neatly used second hand cars at affordable prices and also ensure you adopt a win – win approach when it comes to purchasing used cars from your customers. You should also ensure that your customer service delivery is always on point.

The truth is that if your customers find it difficult to get quality used cars from your shop, you are likely going to struggle to get them to come back; people usually go to places where they are sure of getting value for their money. You can also make uses of promotional ideas such as loyalty schemes, direct marketing, and give them the opportunity to buy cars from you and pay by installment.

Lastly, ensure that you offer your customers’ incentives if you want to retain them, continue to generate repeated sales from them and also to attract new customers.

21. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Used cars dealership business just like any other business in the retailing industry, requires steady promotion to get people to buy into the brand. Your brand has to do with the way people perceive you to be which is why you should be deliberate when it comes to communicating and promoting your brand in the market place. In promoting your brand and corporate identity, you should leverage on both print and electronic media. As a matter of fact, it is cost effective to use social media platforms to promote your brands, besides it is pretty much effective. Here are the platforms you can leverage on to create brand awareness of your used cars dealership business and to promote your corporate identity in the market place;

Place adverts on local TV stations, Radio Stations and

Newspapers / Magazines

Run your own special TV program

Sponsor relevant community programs

Leverage on the internet and social media platforms like;

Instagram, Facebook , Badoo, YouTube, Twitter et al

Install your Bill Boards on strategic locations

Send out introductory letters to households and corporate

organizations in and around your location

Encourage the use of word of mouth especially from loyal

customers

Ensure that all your employees wear your branded shirts

during work hours

22. Create a Suppliers/Distribution Network

The whole idea of successfully running a profitable used cars dealership business is to get steady supply of neatly used cars. In essence, one of the first business strategies that you should put in place explore means of getting supply of various brand of neatly used cars.

If you have a rich network, you can easily come across people who want to sell their used cars, you can as well place adverts on available advertising platforms to inform people that you buy second hand cars. In recent time, the internet has become the busiest place where people sell and buy second hand items, so you should make plans to leverage on the internet when it comes to purchasing used cars that can be displayed and of course sold in your car dealership shop.

Even if you run a brick and mortar kind of used cars dealership business, you can still go ahead to have an online used car dealership shop. It won’t cost you much to set – up an online store except for the logistics of shipping et al. Besides if you have an online used car dealership shop, your target market won’t just be restricted to the location of your shop but the whole internet community.

23. Tips for Running a Car Dealership Business Successfully

Running a used car dealership business involves profiling the cars that are up for sale, ensure that the cars are in top shape in case a potential buyer comes in and wants to test – drive the car, and also ensure that the cars are well arranged to look attractive.

In used cars dealership business just like in any other retailing business, after the day’s sales, the books will be balanced, the shop facility should be cleaned and all the cars should be properly arranged and covered with trampoline if possible to avoid dust settling on them.

If you are getting the used cars to be sold from people who intend making money off them, it’s important that you properly examine and review the cars so that you can properly cost them and agree on the percentage to pay the owners of the car after selling them. If you do this, you might avoid having loads of cars occupying space for a longer period of time in your car dealership shop.

It is essential to categorically state that the success of any business lies in the commitment and dedication of the employees. So if you intend running a successful car dealership business, then you must ensure that you carry every member of your team along. You should create time for meetings; a time where goals, processes and issues will bereviewed et al.

Lastly, you should keep your doors open for suggestions from members of your team and you should be willing to reward excellent performance as at when due so as to create healthy competition amongst your employees especially those in the marketing department.

Frequently Asked Questions

1. What Are The Costs Involved In Opening A Car

Dealership?

The total cost of opening a car dealership is generally

considered to be upward of $100,000 to as much as $200,000.

The reason for the range in the cost is due to the difference in

expenses depending on the state you are opening your

dealership in, and the type of dealership you will be opening.

The costs involved are broken down thus:

Business registration – from $50 to $750

Business Location – between $8,000 and $53,000

Accountant Fees – between $200 and below $600

Business License – between $100 and $300

Auto Dealer Bond – between $5,000 to as much as $

100,000

Insurance – $350,000

Inventory – $100,000 or more

Payroll – average weekly earnings of dealership employees

in the U.S. are about $1,122

Dealer Plates: Cars driven off your lot for a test drive need

an attached dealer license plate. Cost averages $90 per

plate.

Advertising ($1,000)

Computers, printers, phones ($4,000)

Other Costs – $15,000 to $20,000

2. What Are The Keys To Launching A New Car Dealership?

The keys to open a new car dealership include;

Decide what type of Car Dealership you want to open: Chain

new Car Dealership, Franchised new Car Dealership,

Independent new Car Dealership, Online new Car Dealership,

etc.

Research your competition. Know what your competitors are selling, for how much, and then make sure you plan to offer something they don’t.

Find a great location. Car dealerships tend to be more successful when they locate in or near new developments, and in high-traffic areas.

Have a business plan.

This will help you set goals and give you a roadmap for achieving those goals. It will also help if you plan to approach potential investors.

Business and financial plan: Your business and financial plans are two other important pieces of the dealership puzzle. Ultimately, these two will be informed by the choices you make with regards to where and what kind of dealership you wish to open.

Licensing requirements: To open a dealership in any state, you will need to obtain a business license allowing you to sell vehicles of a particular kind.

Legal considerations. Find out the regulations for running your dealership. You will need to know the specifics of the regulations concerning consumer protection laws before you open your dealership.

3. What Is The Growth Potential For A Car Dealership?

Global sales of cars and SUVs had been in gradual retreat from the 94.3 million high of 2017, but then dived about 16% to 76.5 million in 2020, according to IHS Markit as the coronavirus came out of nowhere to shut down many economies.

In 2021, the global auto market is predicted to zoom ahead by 9% to 83.4 million, advance another 5% in 2022 to 86.9 million, followed by another solid 4% in 2023 to 89.7 million. January forecast for new-vehicles sales in 2021 is 15.7 million, growth of 9% from 2020.

4. What Are The Ongoing Expenses For A Car Dealership?

Some of the ongoing expenses for a car dealership include; Staffing – staffing constitutes one of the largest overheads for dealers – up to 60 per cent of running costs in some cases.

Land and rent – Land and rent values are traditionally high in the auto sector, with brands striving to place their showrooms in the most high profile – and high cost – areas.

Utilities

IT investment – Increasingly complex compliance requires updated IT structures to manage it all, a concern when IT is already one of a dealership’s main overheads.

Advertising – Advertising is essential when you’re running a dealership

Office and shop supplies – These are small costs but they add up overtime

Inventory – Those cars sitting on your lot cost you money every single day.

Others – credit card interest, legal, postage, repairs andmaintenance, insurance,

5. How Much Does It Cost To Open A Showroom For A Car Dealership?

You can spend anywhere between $100,000 and even $950,000 to set-up a car dealership showroom. Initial startup costs will include;

Building lease or purchase and renovation

Equipment and professional installation

Store fixtures and office equipment and supplies

Licensing

Surety bond

6. If I’m Opening A Car Leasing Company, How Do You Get Dealing With The Car Manufacturers?

Car Leasing Companies purchase cars from the manufacturers via an instrument called floorplan financing. Generally, all new vehicles are financed through the manufacturer, and dealers pay interest monthly on that loan.

7. What Happens During A Typical Day At A Car Dealership ?

What happens during a typical day in a car dealership would depend on which spectrum you are viewing the business from. If you work in finance, you’d likely sign sales documents and will likely offer an extended warranty or other products to customers.

The insurance office will likely be sorting out insurance for new car sales. There are also employees in the car park hosing down cars that are set to be driven off the lot after getting purchased. But one of the major things that happen in a car dealership is car sales and closing deals. The average car sale takes about four hours.

Yes, it’s a long time, and that’s because there are a lot of pieces to it. The dealership needs to run your credit, get your loan approved, appraise the car you’re trading in, figure out the pay-off amount to your current car and agree on a price for the new car you want to buy.

8. Where Can You Start A Used Car Dealership Without Having A Large Lot?

To the untrained eye, most used-car lots look alike, but that is not so. Some are larger than others, but it is usually dependent on the kind of consignment they carry. New-car dealer lots are usually larger than independent car lots and used car lots. But this is not compared to Consignment used-car lots, Specialty used-car lots and “Buy Here, Pay Here” car lots.

These dealerships can be started is all states of the United States, you just need to make the necessary inquiries.

9. Would Buying A Car Dealership Be A Good Investment?

Yes, a car dealership is a good investment. But know that before you can make the big bucks off this business, you must be a good sales person because the money can only come in by selling cars. If you want solid facts, know that the Kerrigan Blue Sky Report estimated that the average dealership return on equity over the last ten years had an annual low of about 12% and a high of over 30%.

The big profit usually comes through arranging car loans, selling add-ons, and making money on your trade-in . Dealers can easily make a profit of $3,000 just through the financing alone.

10. What External Factors Affect The Car Dealership Industry?

External forces are causing the automotive industry to go through a period of accelerated change, and these external factors include;

Per capita disposable income

Price of new cars

Aggregate household debt

Average age of vehicle fleet

World price of crude oil

Taxation

Interest Rate

Demand and Supply

Government Regulation

Environmental Influence

Recession

11. What Is The Average Gross Margin For An Independent Used Car Dealership?

Independent used car dealerships on average are performing even better and are projected to sell 20.6 million used vehicles compared to 19.8 million in 2018. This is a 4% increase. The gross margin of the business is noted at $1,216 per vehicle.

12. What Are The Key Costs In The Car Dealership Industry?

Purchases are the greatest expense for Used Car Dealers, and account for over 84% of revenue. In addition to purchasing used cars at auction and from customer trade-ins, used car dealers must also repair and recondition these vehicles. Wages are also a major expense, but increased automation with regard to inventory management and online cataloging has resulted in minimal wage growth. Marketing costs can be significant for used car dealers. According to the National

Independent Auto Dealers Association, car dealers spend 33.6% of their marketing budget on internet advertising

13. What Are Some Skills And Experiences That Will Help You Build A Successful Car Dealership?

For you to run a profitable business, you need to build industry skills. Some of the skills needed if you want to build a successful car dealership include;

Education or experience in the industry

Product knowledge

Negotiation skills

Financial literacy

Persuasion skills

Adaptability

Ability to listen to what the customer has to say

Ability to sell effectively over the phone

14. Do you want to employ people or sell cars yourself?

This depends on the size of your dealership and the type of business you want to run. If you are running a standard dealership where you have a car lot full of vehicles, note that you may not be able to make enough sales to cover up your fixed expenses.

So invariable you need to employ salespeople. But if you are a just running a small business where you sell less than 5 cars a year, then know that you can run your sales on your own.

15. What Makes A State A Good Place To Open A Dealership?

The success of a dealership depends on many factors. These range from sales to state specific factors such as business climate, fees, surety-bond amounts and more. A common indicator of state dealership-friendliness is average annual sales per store.

Here are the best states to start your car dealership business

in the United states based on their volume of sales;

Oklahoma

Arizona

Florida

California

Nevada

16. How Much Money Do You Need To Open A Toyota Dealership?

The initial investment for a Toyota dealership franchise is at least $500,000. However, the price can vary according to the size of the dealership. In order to set this business up from the scratch, you will require an investment of up to $11.3 million, including working capital, physical facilities, land and inventory.

17. Where Are You Going To Buy The Inventory For Your Dealership?

Car dealers order their inventory based on their reading of the marketplace, how well certain models have sold in the past, on feedback from consumers and – of course – what the OEM (Original Equipment Manufacturer) wants them to order and keep in their inventory

Used car dealers get their inventory from a number of sources, which include trade-ins, auctions, rental companies, fleets, finance companies, private sellers, ex-demonstrators and pre- registered new vehicles.

18. What Is The Difference Between A Franchise Dealership And An Independent Dealership?

A franchise car dealer sells both new vehicles and used vehicles, whereas an independent dealership will only sell used cars. As a result, one of the biggest differences between a dealership and a franchise is that typically, an independent car dealer will have a much broader selection of used vehicles than a franchise dealer.

Another dealership and franchise difference is that franchise dealers often feature service departments where technicians can perform a variety of necessary services to keep customer cars running at peak levels. The vast majority of independent dealers will not offer a service department, which means customers are on their own if something goes wrong.

19. How Do Most Dealership Owners Finance Your Floor Plan?

Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. Much like a credit card, a floor plan financing company extends a line of credit to a car dealer. Dealers can then use their floor plan line of credit to purchase inventory from auctions and other inventory sources.

If a dealer purchases a car on a floor plan, takes it back to their lot and it doesn’t sell within a contractually determined number of days, dealers are charged a small fee. As a dealer sells their inventory, they pay back the original loan.

20. How Much Profit Does A Car Dealer Make On A $50,000 Car?

Car salespeople make between 20 to 30 percent of profit from the sale of a car. So in the sale of a $50,000 car, the salesperson can count on making from $10,000 to $15,000. But there is really no percentage when it comes to the amount car dealerships make when it comes car sales. This is because they are left with what is remaining after all the fees and deductions have been made. Sometimes a car dealership can be left with just $700 at the end of a $50,000 car sale.

21. Will An Indoor Dealership Be Subject To Stricter Rules And Regulations?

All dealerships are subject to the same type of rules and they all have to abide by laws and regulations imposed by federal and state governments. Some of these rules include;

Gramm-Leach-Bliley Act Privacy Rule

Gramm-Leach-Bliley Act Safeguards Rule

Disposal Rule

Used Car Rule

Equal Credit Opportunity Act

Red Flags Rule

Form 8300 and Reporting Cash Payments of Over $10,000

Office of Foreign Assets Control (OFAC)

OSHA 29 CFR 1910.157

Regulation Z

Source:https://www.profitableventure.com/starting-a-used-car-dealership/