How to Start a Used Car Dealership – Surefire Tips for 2022

The Best Strategy To Use For Start-up a Used Car Dealership

You have found the perfect business idea on how to start a used car dealership, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your car dealership. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

How to Open a Car Dealership: 9 Steps (with Pictures) - wikiHowWhat you need to know about independent used-car lots

STEP 1: Plan your business A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are: Luckily we have done a lot of this research for you. What are the costs involved in opening a car dealership? Becoming a car dealer isn’t easy in most states.

Auto dealers usually must file a surety bond with the resident state’s DMV before they get an auto dealer license. The license allows them to sell vehicles in that state. Purchasing a bond can be very confusing. A surety bond is a form of insurance which is designed to protect consumers and the state from fraud.

3 Facts About Used Car Dealerships

Some general bonds include: DMV bonds. Used car dealer bonds. Wholesale car dealer bonds. RV bonds. Motorcycle dealer bonds. Bond premiums depend entirely on your unique situation, which makes it difficult to quantify exact costs to start a dealership. In general, the surety bonds you need are priced based on: The amount of the bond needed.

Whether or not you choose to finance the premium. Your credit score. If you have good credit, for example, your premium might be just 1% of the total bond amount. So, on a $10,000 bond, you would pay a $100 premium. In addition to the bond, you will need licensing.

Most states have several categories of dealer licenses, such as: New car dealer Used car dealer (retailers) Wholesaler licensing Rebuilder licensing Reconditioner licensing The general process for getting into business is: Fill out an application form. Get a surety bond (states specify the minimum amount based on your line of business).

How Much Does It Cost To Open A Car Dealership?

Get your sales tax number. Establish your permanent business location. Take photographs of your business sign and location and adhere to your state’s specific photo and signage rules and regulations. Pay the mandated fees. Get your dealer’s tags from the local county courthouse. Get your sales license to sell vehicles (if you intend to be a salesperson in the business).

A dealership can be run for several thousand dollars per year in operating costs or $15 million for a franchise operation. Who is the target market? Dealers typically run advertisements locally for customers, but most of the business is generated by referrals through the salesforce. Friends, family, neighbors, and community members are the “target market” for a dealership.

Many customers will finance the purchase so they need the ability to qualify for a vehicle loan. Dealerships typically have a difficult time selling to individuals with poor credit. However, some dealerships specialize in hard money loans and “buy here, pay here” plans where customers with poor credit are able to finance a vehicle directly from the dealership through a special financing program, similar to “rent to own” payment schemes found in other industries.

The smart Trick of How To Start Sales Of Used Cars Business That Nobody is Talking About

Customers typically pay commissions on vehicles they purchase (which is bundled into the total sales price of the vehicle) and pay hourly or a flat fee for maintenance. How much can you charge customers? Dealers usually charge the manufacturer’s suggested retail price (MSRP) for their vehicles. However, a dealer may discount their vehicles to entice prospects to buy.

Dealers often also receive incentives and “holdback” from the manufacturer. Pricing to the consumer is not transparent. Meaning, a consumer doesn’t typically see the costs and profit for the manufacturer. Instead, consumers see total vehicle price. How much profit can a car dealership make? As with dealer operating costs, profit depends entirely on the dealer’s wholesale pricing and cost for inventory, cost for bonds and insurance, and other overhead.

Used Car Dealer Business Plan Template Sample Pages – Black Box Business PlansHow Much Does It Cost To Start A Used Car Dealership Carketa App

How can you make your business more profitable? Making a dealership profitable isn’t easy. Because there are so many laws and regulations governing the sale of vehicles, most dealerships rely on good customer service to fuel future growth. However, a dealer can increase the odds of making more money by specializing.

Some Of How To Start A Car Dealership

Luxury dealers may also make more than dealers selling mid to entry-level brands. What will you name your business? Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Car Dealership Name Generator If you operate a sole proprietorship, you might want to operate under a business name other than your own name.

When registering a business name, we recommend researching your business name by checking: It’s very important to secure your domain name before someone else does. STEP 2: Form a legal entity The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation. Establishing a legal business entity such as an or protects you from being held personally liable if your car dealership is sued.

You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own. STEP 3: Register for taxes You will need to register for a variety of state and federal taxes before you can open for business.

About Most Common Startup Mistakes For Auto Dealers

It’s really easy and free! You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?. Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

For example, some LLCs could benefit from being taxed as an S corporation (S corp). There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides. STEP 4: Open a business bank account & credit card Using dedicated business banking and credit accounts is essential for personal asset protection.

In business law, this is referred to as piercing your corporate veil. Additionally, learning how to build business credit can help you get credit cards and other financing in your business’s name (instead of yours), better interest rates, higher lines of credit, and more. Open a business bank account This separates your personal assets from your company’s assets, which is necessary for personal asset protection.

8 Easy Facts About How To Set Up A Car Dealership?

Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more. Open net-30 accounts The term “net-30,” which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.

Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit. Get a business credit card This helps you separate personal and business expenses by putting your business’ expenses all in one place.

STEP 5: Set up business accounting Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing. STEP 6: Obtain necessary permits and licenses Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

Little Known Details About How To Get A Good Deal On A Used Car

Applications for this license will vary by state. This article offers general advice on how to get one. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses. In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits: STEP 7: Get business insurance Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully.

If you’re unsure of the types of risks that your business may face, . This is the most common coverage that small businesses need, so it’s a great place to start for your business. Learn more about General Liability Insurance. Another notable insurance policy that many businesses need is Workers’ Compensation Insurance.

STEP 8: Define your brand Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors. If you aren’t feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we’ll give you helpful tips and advice for creating the best unique logo for your business.

Our Guide on How To Become An Auto Dealer

Some new dealers hold a tent sale. This is a special sale conducted off-site (away from the primary business location) to attract new customers. Every state and county has different rules and regulations regarding tent sales. In some states, for example, you will be expected to give notice to the local authorities and pay a fee for a license to hold the sale.

Many customers are past customers, so referral business and retaining customers through excellent customer service is key. Offer special incentives to customers, like special dealer financing or dealership perks (special deals on service) to attract new customers. Some dealers also go beyond sales and service to provide a unique experience for the customer.

Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you. STEP 9: Create your business website After defining your brand and creating your logo the next step is to create a website for your business. While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience.

Facts About Bureau Of Motor Vehicles, Dealer Licensing

Here are the main reasons why you shouldn’t delay building your website: – full stop. The size or industry of your business does not matter when it comes to getting your business online. Social media accounts like that you own. Website builder tools like the Go, Daddy Website Builder have made creating a basic website extremely simple.

Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete. Other popular website builders are: Word, Press, WIX, Weebly, Squarespace, and Shopify. STEP 10: Set up your business phone system Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2021 to find the best phone service for your small business.

Facts About Opening A Dealership

If your love for used cars ranks above enthusiast, it may be time to take things to the next level. Ever thought about owning your own dealership? We’re going to tell you how! Our exclusive interview with Carlos Becerra of Imports & Classics helped reveal the details on starting a used car dealership.

However, with the right location and a passion for the car business, you can be successful in the industry. Follow this guide and you’ll be well on your way to becoming your region’s top car dealer. 1. Become an entrepreneur… Or at least get in the mindset! Carlos had been an entrepreneur his entire life before he even got into the classic car business.


  • Chris Darling

    Chris is a busy mom of two, who loves to tinker with computers and read in her free time. Her knowledge of what it takes to start up a business especially businesses that operate on the internet has helped many people from around the world. Chris often shares her experience as an online entrepreneur and business coach, speaking at events all over about how she created multiple successful businesses and profitable websites. She also offers advice on how people can build their own business website or blog for very little money, while still maintaining quality content. [email protected] Darling Chris


You May Also Like