Start a Used Car Dealership
Have you ever wanted your own car business, but never knew how to do it? Well, here are some helpful tips to get you started.
Steps
- Start by looking for a location. Look for a property that has a large, level, and even lot.
- Hire a part-time mechanic and salesperson. The mechanic should inspect all cars before going on the lot.
- Assign the salesperson to work nights and/or weekends, when business is at its peak. Sales experience, particularly used car sales, is very important for a salesperson. It is likely that the extra salary involved in hiring a skilled salesperson will drive your bottom line.
- When entering the market, you need to identify your niche. Buy Here Pay Here (BHPH) lots are excellent performers, if you are able to maintain the financials side of the business. BHPH lots typically have the lowest cost of entry - you will purchase inventory that is older and less expensive for resale to individuals whose credit is too risky for traditional lenders. Business Intelligence software specific to the BHPH industry will help you make sound business decisions on to whom to lend and at what down payment and interest rate.
- Develop a relationship with repossession companies - in some locales you may perform your own repossessions, but often this will overextend you in the early stages of your business. Hiring a company who specializes in repossession will save you money in the long run.
- BHPH lots should expect at least a 30-40% repossession rate! Astonishingly, greater than one of every three automobiles you sell will default and result in a repossession. With those statistics in mind, it is of utmost importance to properly structure your financing on a BHPH lot.
- Tax law related to the Retail Installment Sales Act causes BHPH lots to pay tax on the ENTIRE profit of a financed sale in the year of the sale! To circumvent this oppressive tax structure, you may consider creating a separate financing company to purchase the loans at inception.
- Find sources of automobiles - auto auctions and wholesalers are two common sources
Tips
- Remember, the more you put into the business, the better the outcome will be.
- Make sure to pick a property that has enough, but not too much space. The customer's eye is attracted to a full lot, but you will need to provide sufficient walking space for them to feel comfortable viewing the cars, and you will need enough space to shuffle cars in and out efficiently for test drives and hopefully "sales."
- A level and even lot will make construction easier.
