4 Tips for Starting a Car Dealership Business

There’s no question that a car is a basic necessity and not just a luxury. Men are also more particular about the cars they use than women. In fact, many of them are passionate about cars and owning several of them including a spacious garage. Some want to start a car dealership business so they, too, can benefit from the business.

But do take note that this type of business is not for everyone as it requires millions of dollars in investment. Unless you have a group committed to providing people with the cars they need, becoming a car dealer needs a lot of planning.

Do Your Research

As in any project or business, gaining knowledge about car dealership is crucial. The very first step you need to take is to do a market research in your locality to determine the demand for the product.

Factors that have to be considered are the number of cars sold in your area each year for both new and used ones. But you can also gather the same stats in the past six months or so. Also, determine the percentage of cars sold by model and the existing dealers in the market.

Identify your ideal customers as well including their age, gender, occupation and income level.

Decide on the Type of Dealership

From there, decide next on the type of dealership you want to open in your locality. Your options are opening a franchise, a car dealership for brand new cars only, for used cars only or for both new and used cars.

Most large car dealerships are franchises and they also entail a large capital. The advantage here is the credibility of your business which can help you easily generate sales.

If you prefer to start small, you should focus on one segment only such as new cars or used cars. The used cars dealership normally attracts people who are on a budget but keep in mind that used vehicles will also need more service and maintenance.

Plan Your Finances

Your finances are a very important consideration the reason why you need to know the costs beforehand. The inventory cars entails the biggest cost here.

Some of the things you will also have to spend for include your state-issued dealer license, the place you’re going to use for your business, surety bonds and liability insurance. The surety bond is meant to prevent criminal activities and protect consumers from fraud which is common in the car business. A liability insurance is also needed to obtain a used car dealer license.

In the U.S., county and city governments require at least a half-acre of paved surface, an office and proper zoning. Most local governments limit the real estate to accommodate only a small supply of cars.

If you prefer to operate a franchise, you will have to pay the initial franchise fee and the annual fees in the succeeding years as part of your franchise agreement.

Start Small

With all those things considered, it would be a good idea to start a small car dealership business initially. You can start with less than five vehicles before expanding. Most states in the U.S. allow the buying of three to seven vehicles under a single name. Some small operators are even known to use their spouse, kids of driving age, relatives or friends as temporary owners of the vehicles they sell.

The benefit of starting small as well is you don’t have to prepare a huge capital. Also, you will not be facing huge problems should you decide to discontinue later on.

Originally posted on March 28, 2016 @ 2:25 pm

Business, Offline Business, Tips

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