If you really love used cars and willing to take things to the next level, you should learn how to start a used car dealership. It is a great way to make good money without stress. Yes, it allows you to sell cars without having to franchise through a major automotive manufacturer.
If selling used cars sound interesting to you, you will need to know just how to start the business so you can make the most gain from it. So, let’s get straight into how to start a used car dealership.
First, is Selling Used Cars Really Profitable?
The answer to this will always be yes. A used car dealership is a good venture if you understand the industry and have a good business plan to work with. In fact, research shows that the gross profit margin of used cars is almost double that of new cars. So, if you are thinking in that line, it is a great place to invest your money.
How Much Does a Used Car Dealership Owner Make?
This absolutely depends on you in many ways, including your marketing strategy and some other factors. But putting things on average, a used car dealership owner would make between $19,000 and $495,000 per annum. And that is a good business for a used car enthusiast.
How Much Does It Cost to Start a Used Car Dealership?
The amount of money you will require to start this type of business depends on a variety of factors, especially on the type of inventory you intend to stock. So you may need a few hundred thousand dollars to start the business. Some startup costs that may eat up the money include rent, early inventory, technology, employees, registration and licensing, etc. Now, let’s get into the business of the day and see how to start a used car dealership.
How to Start a Used Car Dealership
#1: Identify your preferred niche
Although you will be selling used cars, trying to stick with a particular auto manufacturer will make things easier for you. And that’s where choosing a niche comes in. it might mean choosing just a brand of vehicle or working only with a specific price point. That will make it easier for you to market the business to your target audience. Even if you want to branch out into more brands and price points in the future, that is also possible with growth.
#2: Conduct a comprehensive market research
Like any other type of business, you will also need to conduct market research when looking to start a used car dealership. That will help you know your target audience, what type of cars they prefer, what price means to them, and how best to attract them to your business.
Your market research will also help you identify what competition looks like in your chosen location. How many dealers are already there? How are they attracting buyers to their business, and what can you do to have an edge in the area. Comprehensive market research will help you see if there is an opportunity for you in the market or you should just focus on a less saturated market.
#3: Choose a suitable location for the business
The location you choose for your used car lot is also very important to the business’s success. You should have your eyes on a place that is easily accessible and have enough vehicle traffic to attract customers. So begin by first choosing a preferred location and then begin to check if there is an open lot in the area with enough space to contain many cars at once.
#4: Register your business
Of course, business registration is an important ingredient to consider when looking for how to start a used car dealership. You won’t want to start a business that makes you go against the law. So, officially register your business with the DMV in your state and also obtain a license to run the business.
The process of registering a used car dealership varies from state to state. So, it is best that you contact your secretariat office or speak with someone from your local chamber of commerce to know about the requirement for registering such a business in your area.
#5: Obtain licensing and insurance
To prevent being threatened by authorities to close down your business or face any legal hurdles, ensure you obtain the proper licensing for your used car dealership business. In addition to that, you will also need to buy the right insurance coverage. Common ones to look out for are general liability, inventory loss and property damage, and lot coverage. You will also need a surety bond to protect your transactions.
#6: Build your first inventory
Now that most things are already in place, including your license and insurance, the next thing is to start building your inventory. Since you are not franchising with any major manufacturer, you would likely need to be sourcing used cars yourself. So think of registering with auctions in your area and also think of how to effectively use social media to get good deals on used cars.
You don’t have to build a giant inventory starting out. You can start small and gradually build inventory as you make more money from the business.
#7: Have profitable buying policies
You don’t have to wreck your wallet trying to fill up your lot with used cars. You will have to come up with profitable buying policies that will help you have your lots stocked with used cars without draining your resources. This may include having a certain number in mind concerning how many cars are in your lot at once. It might also mean not going above a certain price range when shopping for used cars.
#8: Develop robust marketing strategies
This post about how to start a used car dealership will not be complete if we fail to mention that you need to come up with a strong marketing strategy for your business. This is especially important if your lot is located in a competitive environment. So apart from effectively using word-of-mouth marketing and some digital prints, you will also need to look in the direction of social media.
The truth is that most people looking to buy used cars would start their search online – from social media. So, think of a way to have a good online presence and get your business listed on relevant platforms. If possible, create a website for the business and list your cars on the site. This will make it easier for people to find you and bring good business your way.
Do I Need a Physical Location to Sell Used Cars?
This is not necessary. You can start a used car dealership from home. That is a smart way of avoiding a lot of startup and operational costs. But when you are doing this, you need to be sure it’s in agreement with your area’s state or local laws. Some states don’t allow you to store used cars in your home.
At the same time, you will need to invest more in creating a strong online presence. Build an attractive website, invest in SEO and market trends, and hire an effective marketing team to help your business succeed.
