7 Tips for Starting Your Own Car Dealership

Tips for Starting Your Own Car Dealership mercedes auto dealer startup

Combining a passion for cars, sales and an entrepreneurial spirit is what makes for a truly successful car dealership.

If you possess these three factors, your dreams of owning and operating a dealership could very well become a reality. But, building up a successful business is no walk in the park. It takes research, hard work, determination, and a number of resources.

So if you are looking for tips for starting your own car dealership, buckle up and dive into the rest of this blog post.

7 Handy Tips For Starting Your Own Car Dealership

As a car dealership, one of your main considerations will be to buy wholesale or purchase directly from a car manufacturer. You also have to consider whether you are going to sell exclusively online or front the costs of owning a physical showroom.

What will help to determine your above decisions is the amount of start-up capital you have to work with. Unfortunately, hopes, dreams, and motivation can only take you so far. You will need working capital in order to turn those dreams into a reality.

For now, here are 7 simple steps to guide you in the right direction:

1. Research, Research, Research 

Waking up one morning with the motivation to open up a car dealership is all well and good. But before you get anywhere, a little market research is a vital starting point. 

Before deciding on a location, dive into a bit of research on your local buyer's market in your region. Is there a demand for your dealership in your area? Is the general public actually looking to buy new or used cars?

Research how many cars have been sold in your region in the last 6 months, and take into consideration how far people may be willing to find the right deal!

2. Establish a Working Business Plan

Once you have a better idea of your local market, you need to create a working business plan. This is especially important if you intend to take out a business loan to add to your working capital. You need to showcase what you want to do with your business to your lender.

Make sure to include initial, ongoing and outgoing costs as well as any other working capital you have to support your business.

Another important part of your business plan is underpinning the types of vehicles you intend to sell. Will they be brand new or pre-owned vehicles? Will you focus on just one brand or multiple brands?

Include overhead costs of employee salaries, your property lease if you intend to have a showroom, and all other business costs.

3. Obtain All Relevant Paperwork

In short, you will need to obtain a dealer's license, a surety bond for your dealership and, of course, dealer's insurance.

A dealer's license allows you to sell an unlimited amount of cars each year, thereby increasing your profit potential. It's also 100% necessary according to Consumer Rights and Safety Laws within the U.S.

A surety bond is a wise move as this protects your business from contract defaults with suppliers, vendors, and wholesalers. Basically, a surety bond protects the transactions between your business and any third party.

Finally, a decent amount of insurance coverage is paramount to a successful dealership. Make sure your insurance covers general liability, lot coverage, property damage, inventory loss, etc.

4. Form a Legal Entity and Register for Taxes

This is another important step which helps to protect your business from liability and the potential for being sued. Forming an LLC legal entity is a smart move in order to safeguard both your assets and reputation.

Along with this, you will need to ensure your business is registered for a number of state and federal taxes before opening your doors for business.

5. Find the Ideal Location 

What's most important to keep in mind when it comes to location is the greater the population in your region, the more support for your business. Even if you have to travel to reach your business location every day, this could mean the difference between success and failure. As the saying goes "location is everything!''.

Take into consideration how visible your dealership is from main roads in your area. The more hidden and obscure, the less opportunity your business has. Car display lots can be difficult to keep clean, but make an effort to keep yours neat, tidy and well presented.

Ideally, a corner lot at a major intersection is your perfect location. But a spot along a high-traffic road is also smart. 

6. Scope Out Inventory Opportunities 

What's a call dealership without actual inventory? This means you'll need to do some serious homework and acquisition before you even consider opening your doors for business.

A great way to scope out inventory opportunities is to visit local bank auctions and local car auctions. Alternatively, keep a lookout for people selling used cars, purchase them at a lower price and resell after a few repairs and a little TLC.

If you intend on selling first-hand vehicles, do your research on manufacturers willing to sign a fair deal with local car dealerships. 

7. Make Marketing a Priority 

Marketing your auto dealership business should always be a top priority, especially in today's digital age. If you're not online, your business technically doesn't exist- yes, it's that important!

If you're a little clueless as to how to successfully market a business, there are a number of agencies willing to do it for you. Sometimes, investing in the outside help of a marketing expert can take your business success through the roof.

Establish a strong online presence for your car sales through a website and business blog. Make use of social media platforms such as Facebook, Instagram, LinkedIn, TikTok, YouTube, Threads, and Twitter (X) for maximum effect!

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