How to Start a Used Car Dealership: Everything You Need to Know
If you're asking how to start a used car dealership, there are several steps that you need to follow, including getting a few facts about this growing industry.3 min read
2. Starting a Used Car Dealership
Used Car Dealership Introduction
If you're asking how to start a used car dealership, there are several steps that you need to follow, including getting a few facts about this growing industry.
It is estimated that there are over 210 million licensed drivers and 256 million registered vehicles in the United States. There are so many cars on the road that it can sometimes seem that everyone who wants a car already has one. While it's true that most licensed motorists own a car, this issue is a lot more complicated than it might appear.
For instance, it's common for drivers to own multiple cars. Despite this fact, many people are reluctant to invest in a new automobile. The reason for this is that new cars lose value the minute they leave the dealership lot, with most cars losing 40 percent of their value after only five years. While depreciation can be detrimental to the original owner, it can be very beneficial for used car buyers, allowing them to purchase a quality vehicle for an affordable price.
Used vehicles are so popular that they comprise a majority of car purchases. This means that starting a used car dealership can be extremely worthwhile if you have the desire and the capital to make the investment.
Contrary to what many believe, running a used car dealership requires much more than the ability to sell cars. Starting one of these businesses requires:
- The ability to stick with a complicated licensing procedure.
- Being able to pay for expensive startup costs.
- Covering ongoing expenses.
- Securing the vehicles on your lot.
If you don't make the right preparations before starting your used car dealership, you may find yourself facing a failed investment.
Starting a Used Car Dealership
Performing market research is the first step to starting your used car dealership. You need to find out if there is a high demand for used cars in your area to make sure you will be able to turn a profit.
To effectively assess demand, you need to select a possible location for your dealership, and then learn how many used cars have been sold in that location in the preceding year. You should also research what types of used vehicles were sold in that time period. For example, you should find out whether there is a higher demand for cars or trucks. If you find a make or model that sells more frequently, make a note so that you will remember to stock these automobiles in your dealership.
Researching other dealerships in the area and the type of cars that they sell is also important. If your research reveals that demand is not being met in the area you wish to open your dealership, you should proceed with the process of starting your business.
The next step to starting your dealership is understanding the difference between running a business and running a successful business. To make sure you fully understand the demand in your area, you will need to do a little math.
If you are able to find out how many used cars are sold in your location every year, you should be able to determine what percentage of those sales you can attract to your business. You can also get an idea of how much your dealership will make in a year by researching the profit per vehicle in your area.
Identifying your potential customers is the third step of starting your dealership. Without a strong customer base, your dealership won't be able to succeed, so targeting the right clients is of the utmost importance. Think about what types of cars you plan on offering at your dealership. Then, research the ages, genders, and incomes of the car buyers in your area that are likely to buy these automobiles. Never make assumptions about your customers. Instead, you should target clients based on concrete, quantifiable data.
Before you invest any money, you should compare the benefits of owning your dealership yourself versus franchising. Starting a dealership can be very expensive, and there are several risks involved, which leads many people to choose franchising a dealership instead of owning. When you franchise, you can sign an agreement with an already established dealership, providing you with more financial stability, which is crucial when starting a new business. You will also be able to acquire dependable used cars directly from the manufacturer.
If you need help to start a used car dealership, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.