Starting a Car Dealership and Raising Capital

WordPress tells me that some people reach my blog while looking for information on how to start a car dealership and how to raise capital for it. So, I thought I’d try to be helpful and provide some information to help those people out. In the case of errors and omissions, I apologize, but feel free to let me know what I did wrong.

In order to sell more than five cars a year to the public, most states (maybe all) will require that the seller become a licensed dealer. Selling more than five cars a year is known as curbstoning and is definitely illegal.

Most requirements to start a dealership center around a few things: a retail location that has enough space to show at least five cars, a surety bond for around $25,000 and a lack of criminal record. The surety bond is basically just an insurance policy and can be purchased for a few hundred dollars, it’s also known as a motor vehicle dealer bond. Of course, all of these vary by state. The application can take a few weeks to process, cost a few hundred dollars and will require more information about corporate structure and balance sheet.

Once the application is approved its important to get up and running. This will likely mean obtaining liability insurance, signing up for a floorplan, and registering for auction. The company used for the surety bond should also be able to help out with the liability insurance. Floorplans are lines of credit that are used specifically to purchase inventory, a few companies to look at are: MAFS, AFC, Dealer Services Corporation, Auto Use.

Next, and it’s possible to do this while getting the insurance and floorplan, register for auction. Auctions will want information on the dealer’s license, surety bond, corporate structure, and balance sheet. Just call up the closest auction and ask for new dealer registrations. I’m always a big fan of online auctions, so check out OVE, ATCOpen, GMAC SmartAuctionOpen and Adesa.

Before selling cars make sure to have all of the necessary paperwork, this includes, and depends upon the type of dealership, the buyer’s order, buyer’s agreement, odometer disclosure, document to transfer titles, and several more depending on the dealership. It’s also important to order dealer tags: temporary tags and untitled vehicle tags.

Other things to think about are:

  • Website: there are several good web solution providers, SEO experts and blog resources to help
  • Lawyers and corporate structure
  • Marketing plan
  • Why you want to start a dealership in the first place

156 responses to “Starting a Car Dealership and Raising Capital

  1. Surety bonds are not insurance policies AND they are not a few hundred dollars for all applicants…they can be thousands at times.

    See http://www.jwsuretybonds.com/blog for more.

  2. I have been a dealer for 32 years. Starting a car dealership isn’t as easy as it may seem. Car Dealer must understand the value of every vehicle they purchase. While you are getting your ducks in a row. In order to help you get in tune with the market. I strongly suggest that you Put yourself in the customers shoes and Surf, Surf, Surf the Internet for Websites such as AutoTrader.Com and Cars.Com. Look at dealers in your area and study their inventory and prices. Keep in mind, dealers that finance have a much higher markup when compared to dealers that sell for cash. In other words, when studying the market keep in mind that some vehicles may have been priced for cash whereas some might be priced with Seller Financing. The main point is that you can use the Internet to enlighten you concerning the market. If a consumer is looking for let’s say, a 2003 Ford Mustan, they will probably search every vehicle within 200 miles and thus they will have a pretty good idea of the market on 2003 Ford Mustangs. So, why shouldn’ t you? Today’s consumers are very knowledgeable about the market. Today’s customer It’s just my personal opinion but I feel comfortable in saying that concerning Online Sales, don’t let the consumer have more knowlegde about the vehicle than you. Concerning Invetory: Once you have determined what models you intend to carry, if you can afford it, purchase three of each type of vehicle you carry. In this way, if a customer arrives at your lot and doesn’t like what he sees, by having three of each, ther’s a high probablity the consumer might purchase one of your other vehicles. Not all vehicles are street worthy. Before buying a vehicle, make certain you inspect it thoroughly and determine how much reconditioning will be needed. If you have a true picture of the amount and cost of reconditoning, you’d be better off not buying the vehicle. Over the years I have seen many good people bite the dust simply because they were over anxious and spent all of their capital on vehicles that either weren’t good merchandise or perhaps they had a good vehicles but they paid too much. The owner small produce stand can make almost as much as a large one if he has the type of produce that is in big demand and would rarely need to worry about spoilage. My point is this, know the market. If you are going to buy cars at the auction. Arrive at the auction early so you will have enough time to select and “INSPECT” a large number of vehicles. In this way, you will have a larger selection to choose from and won’t feel pressured to buy the ones that cost too much. Always remember, the duty of a used car dealer is to provide TRANSPORTATION. Most consumers can’t afford to pay for a vehicle that is broken down. If you are dealing with a Capital Company, they will certainly frown if your customers can’t repay their loan due to a non working automobile. If you are in the Houston Area, we have one of the best Automobile Dealer Associations in Town. My fellow dealers and I are always willing to lend a helping hand to fellow dealers. Every time a dealer goes under, the reputation of all dealers stands to be affected. If a dealer goes under and burns a bank or capital company, it can have a negative impact on all dealers. Although you can in fact make a lot of money in this industry, you will be taking a risk. As a general rule, the higher the risk, the higher the profit potential. Start slow and you’ll have less chance of losing money due to simple mistakes. Don’t expect to fill all of your parking spaces as soon as you go into business. I have always felt better to have money in the bank rather than to spend all of your money or floor plan simply because you wanted to have an overstocked looking lot. As a general rule, you can usually get a much larger down payment for an older luxury model when compared to a newer model but with less miles and less equipment. In other words, some vehicles will bring a big down payment. Some won’t. Make friends with the dealers in your area and pay attention to what they are doing. Most dealers won’t mind sharing their success and failure. If you can learn from the mistakes of others, you will have fewer failures. In the essence of time I will not elaborate more. In closing, I wish for you much success. Always remember, Today’s Obedience will bring Tomorrow’s Reward. Good Luck.

    Gerald James

    • My name is Tony. Im a 23 year old man highly intrested in obtaining my dealer licesence. I have so many question regarding starting my dealership that its to much to write. My main referance would be is it realistic to start out with $7000 and build from there. My email is Anthonyhill0780@gmail.com. If anyone could share some valueable wisdom it would help me indefinitly.

    • very good advise, thanks

    • My name is Ricky and just like Tony I am also in my early 20′s and trying to start my own dealership. I have been going to auctions with a freind dealer and was wondering if it would also be possible to start up a dealership with $10,000 and build from there. My email is karank911@yahoo.com, any help would be appreciated. Thank You

    • If anyone knows anybody wanting to start up a dealership please let me k ow or if u know someone that has a dealership that is not doing so well. I want to opportunity to run a dealership. I am have been very good in a limited roll on improving dealerships. Cadmar or C cmbautobroker@yahoo.com

  3. Going beyond Gerald’s excellent recap of issues to be considered when pursuing a dealership start-up I would add the importance of thorough market research during the due diligence period. World class retailers pick their locations based on a need for their services, rather than based on proximity to where they live, where they already have commercial property available, or where they “think” a car dealership would be appropriate. Time spent planning before committing, saves endless heartache and financial loss down the road. Following site selection, know your likely competitors and their level of proficiency. If the best dealership in the area specializes in late model high end European imports, but there is no proficient local dealer specializing in commercial vehicles, then that is where the opportunity exists. Don’t decide you want to sell used BMW’s just because you happen to like BMW’s!

  4. Wow. With all due respect to Gerald and Michael, their comments reflect the bias and perspective of a traditional car dealer. Great advice if you are interested in creating a traditional car dealership.

    “The discovery of water was not made by a fish.”
    – Gary Kissler, The Change Riders

    As long as the incumbents struggle to get outside of their “fish bowl”, it will be easier for an outsider to create a 21st Century version of the dealership.

  5. I am looking into the auto industry as in oppertunity to do something big for me and my family i sell cars for a living but would perfer to have my own and is looking for advice on the start-up cost and what to look for down the road i don’t want trail and error i need guidence so if any of you have a word good or bad let it fly my destiny has been ordered.

  6. i am trying to start a small used car dealership in florida and the surety bond cost is 3700. i am not sure what to do, i budgeted 500 for it now it is 8 x more. is there any cheap surety bond companies out there.

    • a1suretybonds.com
      Michael Neschke
      cell # 702-491-6080
      office # 1-800-737-4880
      I just used him and was very pleases. Tell him Nici Wright told you to call.

      • Dealer bonds are based on credit worthiness. a low score will cost you much more than whatever the standard cost is. ask why the premium was so high. There are ways around these matters if this is the cause. You can put the license in your wife’s, a relative’s name or a friend and list you as the sales manager and get by as long as there is no misunderstanding between you and the person whose name the license is in.

  7. As a young buck coming up through my high school years some people wanted to become doctors other wanted to become lawyers, i wanted to sell cars. The thought snow balled from then into wanting to owning the #1 dealership within a reigon. Now after working at 14 different dealerships (working at couple of them a couple different times.), in 3 different states in the last 4 years will change what anyone thinks of the automotive business. But like the passion of brett farve for the game of football i still love selling a $30,000 ride to someone who just drove into to town to purchase a ???? from wal-mart. With in the next couple months i plan on “starting my business” buying and selling vehicles on the side, marketing my business name, banking my profits, an take it run with it to the top. It’s funny because as i putz around see what other people are stating about trying the same, there seems to be 2 of the most important things most overlook, location an realy knowing how to sell a car. Lets keep it real, i could teach a 3 year old the old ten steps of selling a car, but it’s psychology of being like the customer, being 2 steps ahead, an controling the whole situation with them “thinking” there controling there purchase process. My advise toward the subject of conversation of starting your car dealership is to work at not few different dealerships but a bunch of them, i highly recommend selling cars for a couple of months in a market like florida or california if your use to kansas, or vise versa to go from florida an go sell cars in pennslyvania. Most also start by saying i been selling cars for 15 years which automaticly quailifys them to become a owner, but in reality it’s that same sells that sold 8 cars his first month, an 15 years later 8 cars sold last month. Become a great sellsmen with plan an the rest will follow. An like a few other mentioned, don’t open a pre-owned dearship in a town or city where there’s already a 100 others, ” think outside the box” , there’s more food to go around in a town where your the shark…

  8. hey guys. thanks for the help. although im opening my used car dealership in canada this information helps me alot. i appretiate all the advice and if you guys have any more impotaint advice that you guys can share with me can you please email me. thank you.

  9. The differences are beginning to emerge after the average desk body and a very harmonious, in our view, a modern silhouette touring: fast, with notes sportivnosti and at the same time vmestitelnogo and cozy…

  10. I’ve worked for premium dealewrs as I got started and then graduated to Acura,Infiniti and Mercedes. Selling is like taking candy from a baby. I don’t have a million dollars to start a dealership but want to badly. How do you get capitol? Which manufacturers will help a startup?

  11. Starting up internet based car dealership. What do you guys think of this? Any pitfalls? Any
    benefits compared to traditional?

  12. I am to going to startup a new dealership. I have ten years experience in auction experience and looking to capitolizing on my experience (arbitrator) any suggestion on goin from wholesale to retail?

  13. I think you hit the nail on the head

  14. Hey guys, some interesting reading here. I am from an IT background and I was playing around with the idea of starting an online car dealership (www.kenyacarbazaar.com), now I am inundated with requests both locally and internationally for people looking to buy and people selling cars.

    This project is not over yet, in fact I am planning on taking it a step further by adding other sources of income.

    When planning to start an online dealership, try and get a good developer who can quickly make modifications to your system without having problems. I have come to realise that user satisfaction is key and the more people find it easy to use a system and get information, then the more they will come back and refer the service to their colleagues and friends.

    The other thing that you need to look into is search engine optimization. You need to make sure that your website is Search Engine friendly and that it is listed on many online directories (i.e. Yahoo, MSN, Alta Vista, etc). The more your site is visible online, the more people come to your shop. Try searching for car dealerships in Kenya and see the results……

    I also agree with most of the above comments that it is important to know a lot about cars before you get into it. I find myself making mistakes here and there not being very current with the automotive lingo, but not for long. You need to be a master of the product that you are selling.

    I am still trying to understand the local market demands and build up on my offline marketing strategy. So for me, it is a constant learning curve.

  15. Sorry for the double post guys, but just to add I would say the first most crucial thing to start with is a BUSINESS PLAN.

    Make sure that you start out with a business plan first, even if it is a simple one. You can always improve on it as you go along. I failed to start with a business plan myself but I developed one some time back which I have been updating every time and again.

    Very helpful tool!!!

  16. Hey guys, do you think its a smart idea to start a dealership with the economy the way it is? I have a few ideas that Im sure could put a “twist” on the idea of a car dealership, but not sure if I should begin research and get serious about this.Im sure many others are thinking this also…

  17. Starting up a car dealership now could be a smart idea. A lot of poorly run dealerships have been weeded out by the economy. If you’re willing to work a lot of hours and be honest with customers, I believe it could work out.

    You don’t a million dollars to start out. All a million dollars would do is attract the vultures. Learn how to buy cars and sell them for a profit first.

    Have a business plan like Frank suggested. And stick to it. A lot of dealers selling cars in the 5k to 7k range make the mistake of buying more expensive cars because some lender has given them money.

    Speaking of lending, stay away from flooring lenders. One of the largest flooring lenders, Dealer Services Corporation (DSC), has filed hundreds of lawsuits against small dealerships. Your car lot may be in Alabama, but they sue you in their hometown in Indiana. They also accuse you of fraud based on an Indiana statute, and claim triple damages. So you borrow $50,000 and they can grab every car on your lot 6 months later. Then they sue you!

    If you just give yourself some time to grow, you’ll probably be successful. You’re return customers will be what makes you successful, so treat all customers with respect.

    Also, make sure that your bank or finance company treats your customers well. Some of them, like Lobel Financial, have been chastized by state attorney generals for their outrageous collection tactics. Every thing is a reflection on your business, so don’t let your customers be abused.

  18. Starting up a car dealership now could be a smart idea. A lot of poorly run dealerships have been weeded out by the economy. If you’re willing to work a lot of hours and be honest with customers, I believe it could work out.

    You don’t need a million dollars to start out. All a million dollars would do is attract the vultures. Learn how to buy cars and sell them for a profit first.

    Have a business plan like Frank suggested. And stick to it. A lot of dealers selling cars in the 5k to 7k range make the mistake of buying more expensive cars because some lender has given them money.

    Speaking of lending, stay away from flooring lenders. One of the largest flooring lenders, Dealer Services Corporation (DSC), has filed hundreds of lawsuits against small dealerships. Your car lot may be in Alabama, but they sue you in their hometown in Indiana. They also accuse you of fraud based on an Indiana statute, and claim triple damages. So you borrow $50,000 and they can grab every car on your lot 6 months later. Then they sue you!

    If you just give yourself some time to grow, you’ll probably be successful. You’re return customers will be what makes you successful, so treat all customers with respect.

    Also, make sure that your bank or finance company treats your customers well. Some of them, like Lobel Financial, have been chastized by state attorney generals for their outrageous collection tactics. Every thing is a reflection on your business, so don’t let your customers be abused.

  19. I have been a dealer since 1996.in the beginning i started selling cars in 1991,,,worked sales for 2 years,,,did finance for a year ,,and was used car manager for 2 years,,,,5 years learning curve,,,,opened my own dealership in 1996….with 6 used cars,,,in 1998 it became a 75 cars ,,med size used car lot,,in 2000,,,got nissan dealership,,,,with 200 used cars and 75 new cars,,,worked hard made money,,,,aquired honda store in 2002 ,,,toyota in 2004,,, in 2006 bought a mercedes store,,,,and in 2008,,,bought ford store,,,,now i own five dealerships,,,and approx $500 employees work for me,,,,who works the hardest …me,,,,,,so the password is hardwork

    • hi Seth, i am trying to start or buy a dealer in China, just curious whether it is true that if you own the dealership, most of the profit actually comes from after sales service instead of selling cars.

    • Seth,
      please reach out for me when you get the chance. I will need help setting up a foreign car dealership abroad. My E-mail is ;eddung@msn.com. I am willing to work hard. God bless you.

      -Ed

    • hi seth, randuaus@gmail.com
      thats my email address please drop me a mail

    • Seth, Can you reply to me with your contact information? I would like to send a few ideas your way in regards to online sales using one of my company’s domain names; SeeTheCar.com
      Thanks for your time.
      Sincerely,
      Ryan Dulina
      570-401-6120
      ryan_dulina@yahoo.com

    • Hi I currently have a small dealership where I finance the note to customers, is this the same kind of business youre into or more like cash deals and selling the notes to finance companies? Im just curious since I have been in the business for 2 years and barely have less than 120k in notes receivables.

    • Hi Seth, I am looking into opening my own business selling used car. Any extra advise would be helpful. Thanks Abby

    • I would love to chat with you. I have 20 years of auto experience. If you could find it in your heart to give a guy in Indiana a mentoring.

    • Hi Seth, looking to start just as you did ( start small and build) but i am finding it hard to secure financing for my lot. Floor plans just don’t seem to want to help someone that is not already established. I have great credit, but not a lot of money. I have the knowledge as i sold cars for 12 years and was a Used car manager at a Cadillac, Buick, GMC franchise for 5 years. Any suggestions would be greatly appreciated. By the way i live in the panhandle of florida if that makes a difference

    • Awesome..I have been doing the same with a 10year curve…but mine has been in the industry repair side…getting them ready for sale.ive owned a collision shop for around 15 years now and think it’s time to start buying damaged and reselling that way any advice?

  20. God bless you guys

  21. Hi everyone ! i am looking to have an online car dealership, but i don’t know where to start . Please if anyone have an idea, please email me at dannyivan81@yahoo.com. Thank you. I am an asian guy, and haven’t been in US that long , so it is kind of hard for me. Thank you again everyone.

  22. I’m wanting to start an online automotive dealership, please help me with any info that you may think is helpful. i don’t have a lot of money but would like to get started !

  23. State laws on the surety-bond requirements for auto dealers keep changing…here’s a story on some of the new laws, many of which increase the bond amount: http://www.suretybonds.com/blog/surety-bonds-required-for-more-car-dealers/

    Carol Tice
    for SuretyBonds

  24. I have been involved in the used car industry for 30 years. I started out in the reconditioning end. I have sold cars wholesale on just about every level. I have dabbled in retail to friends neighbors ,relatives, and referrals . I don’t like the future of the wholesale industry. I have signed a lease for a used car lot that I am very familiar with. However am undecided if I want to continue with the same basic format that I currently have or try and develop a different marketing strategy ? I seem to always have the right advice for other peoples businesses or lots. Now it is my turn . Do I finance or not (can I get banks to accept a new entity?) Do I develop this slowly and continue to focus my attention on buying and selling wholesale while feeding the lot hand picked cars ? Which software do use to run the business.

  25. I am a 21 year old man who worked at mazda and cadillac. I have always had a dream of owning my own used car dealership so I think the best way to start is by working around cars. I come from a business family that owns several car dealerships that are very successful. Thanks everyone for posting idea’s that are very helpful to me, so maybe i can one day in the near future look up to you guys helpful tips and advice.

  26. Thinking about opening up a used car dealership in the chicago area. Been selling cars on the side for a few months now and have a cousin who owns a dealership. Can anybody please let me know roughly how much I need to start? (Including bonds and insurance and downpayments and all that good stuff)

    Thanks

  27. A buddy of mine is aquiring a nice piece of property to open an Auto Dealership, however, his credit is very bad. Does that matter if you’re trying to sign up with finance companies to fund your customer loans?

  28. Hi, I’m an American currently living in Africa in a fast expanding economy with zero new or barely used auto dealerships. I see this as a giant opportunity for me. My question is for anyone that deals directly with the auto makers like Honda, Toyota, chevy, ford, etc. People here have been buying cars and having them shipped from Asia and Europe paying up to 5000 dollars on top of the purchase price. I want to become the middle man by buying vehicles in bulk to save on the shipping and selling them here. I have been to all the auto makers websites and have been thus far unable to find contact info for anyone that can help me work on the numbers for my investor presentation. If anyone here can assist I would greatly appreciate it. Thank you

  29. I’m wanting to open an exotic/ultra high end preowned dealership. I plan on starting small with less than 20 auto. Any idea on the start up cost??

  30. I have a home with 4.7 ac high & dry property where I can re-zone from recidential to commercial. The property is located near orlando, davenport.
    This is a small intersection near 17/92 & state hwy 4. The location is good for on-line or export market.

    I am looking for a financial partner with marketing experince who can work full time.

  31. Hi,
    I’m a licensed car dealer in the USA, I’m looking fro a good connection in Africa to export used cars. If you are interested contact me at
    scarthage@yahoo.com
    Thank you

  32. Im 19 and love every aspect of automotives, specificaly aftermarket performance vehicles. I would love very much to own my own car dealership selling exactly these kind of cars. I know that there is no profit to be made in taking a vehicle, adding custom aftermarket parts, and selling it. However, I see very nice looking, heavily modified aftermarket vehicles go for well less than they are worth at auctions because there simply isnt anyone there looking for such a specific kind of vehicle. Buying such a car would put in my possesion a car worth well more in value then what I paid. If the right person comes along who likes this vehicle will also see it for its true value, and realize what a deal they are getting if I only mark it up a few thousand from what I paid. This leaves both of us with a good investment, only screwing the guy I buy it from that did all the work with no return. I would open a shop in my area selling these specialty vehicles and also operate a service shop within capable of working on the vast number of aftermarket modifications made to these very unique vehicles, as well as any other aftermarket vehicles purchased or built by someone else where. Not many standard shops can service a Procharger, or Tune a High Performance vehicle in my immediate area, which is in the DC metropolitain area and is the 7th, I believe, fasted growing county in the US. I realize I may sit on these cars for a while until the right person that likes them comes along. Also, I have a marketing stratedgy of being 100% firm on the price with a huge markup while at the same time lowing the vihicle in price each day by a certain percent. Anyone can tell me the price they would pay, and I can garuntee them that they will be the first I call on the day the car reaches their price if it isnt already sold. I think this could be an extremelhy profitable idea and would greatly appreciate any advice from any qualified individuals with experience in my field of question.

    Thanks,
    Devan – (Procharged 2005 Mustang GT – 500HP….Worth 35 with all its parts, I got it for 20)

  33. I think that the info on this page is great! The only draw back is that no one has yet to answer the main question that keeps surfacing. Are there any used car dealers that can give an idea of how much money total is needed to start up a dealership? I understand that different states will have an impact on how much is needed, but what is a good goal or amount to work towards to save up to start up? Also when starting what is the best market to get into in order to make good profits at low costs? And should you have a garage or would that bring in too many overhead costs?

    • David, I have been in the automotive industry for a long time, mainly consulting with dealers on best practices as it relates to the Internet. I recently decided I wanted the ability to buy and sell vehicles, drive demo’s and not have to pay sales taxes and essentially put into practice everything I have been consulting with dealers on for the past 12 years. With that said, wanting to know the start-up cost of a dealership is a very loaded question and has many answers. Are you looking to build a new lot, purchase and existing lot or lease a lot? Every state typically has requirements such as physical location, with display area and offices to conduct business…how much space and money do you want to spend opening a lot (if you lease expect first month, last month and security deposit)? They also require the surety bond, which can be $250-$5000 per year depending on your background and credit worthiness. They also require garage and liability insurance, which is typically based on the number of “dealer tags” you want, plus the dollar amount of inventory you plan on carrying (I would say anywhere from $5000 – $10,000 per year, maybe more if you are planning on carrying several million dollars in inventory…can be paid out over monthly payments, but still will require 2-3 month for you first payment). Dealer license, Background Check and Finger Printing could be $500-600 to start, plus $150-200 per dealer tag that you get), then you have to renew your license every year and your dealer plate tags every year. Most states will not give you a dealers license if you have a felony on your record unless it’s a DUI and it was more than 7 years ago, if you have multiple DUI’s forget the license and move on. We have not even began to discuss getting lines of credits, floor plans or bringing your own cash to the table to purchase cars. There are other expenses, like utilities, occupational tax licenses, marketing, website costs, forms to purchase, software to purchase to protect you from breaking any state or federal laws when selling a car and more. As you can see it’s not very easy, but starting small is your best bet. I know plenty of people who have started out with $50,000 and continued to build and over time increased their lines of credit to purchase more vehicles to grow their business. Plus, in today’s economy banks are not handing out lines of credit or loans to anyone without AAA Credit and Collateral to protect their downside. There is much more I could write, but hopefully this will help some or all.

      • My Name is Ed. I like your informative post. I most definitely need some help in the area of export and internet dealership and sales, both domestically and internationally. I look forward to chatting with you. My e-mail addy is eddunga@msn.com.

        Regards,
        ~Ed.

  34. David,

    I also noticed that no one is willing to answer the question as to “how much?” I am also searching for that answer, and im starting to think that a minimum amount is around 50k. but that would be a very lean operation with only handful of sub 5k cars….what is your opinion? obviously, the more capital you have the less stressful the first couple of months will be.

  35. I am the owner of a homebased Income Tax Business. In 6 years I have grown my client base to over 900 people. This is my gold mine and I am trying to now cash in in other ways. This year alone, I had over 300 clients, who were all looking to spend $3-5,000, directly ask me if I was able to get them access to vehicles to purchase. Now, I attended dealer auctions years ago, and I’ve bidded on a couple during that time and a little familiar with the process, but I really want to capitalize on this opportunity. I researched the states requirements, actually this state and the 2 neighboring states. I am really looking for suggesstions on how to handle this opportunity. It is definitely a million dollar opportunity. The question is, do I obtain a dealers license and work the aucitons and pair my clients with the vehicles of their choice, or do I work out a deal with an already established and experienced dealer to keep overhead and liability low?

  36. Thank you for the good writeup. It in fact was a amusement account it. Look advanced to more added agreeable from you! By the way, how could we communicate? I’ll just check back at autoventures.wordpress.com for you later.

  37. LoveThe Lambos

    Here is my Experience and I don’t mean to be aggressive , harsh or stupid. If you don’t agree with my opinion, it’s ok, I can live with that, but all what I’m about to say here is the pure true!!!!
    I’ve been buying and selling cars under other dealerships or on commission for 3 years and working night shifts on a coffee bar for 6 years.All that capital were directed to my set up for the business.
    I’ve been stacking studies on cost on dealerships for 5 years. I’ve done several open dealer courses, including at G.I.A.D.A .

    In January 2011 I opened my own dealership.

    Cost me in first rent contract, deposits, office set up, lot set up, bond, insurance, basic tools, utility set up, advertisement + software + classes exactly $26.753.00
    Base rent is $2800.00
    Monthly cost is $5900.00 including rent.
    I had 80k. After set up, I started buying cars with 52.000.00
    Bottom line: I’ve got to sell 6 cars a month, with at least 1000.00 profit on it to BREAK EVEN on the business.
    I work VERY HARD, I do my homework EVERY DAY, so I can move 8-13 cars a month, on a average profit of $1200.00, and it is NOT easy!

    Just got line of credit of 60.000 after good practice and decent credit score. That will be active in July, so now I can breath better!!!

    Please understand, this all is based on my $80.000 initial investment:.
    At the beginning:
    DON’T expect to turn a car in less the a month.
    DON’T expect to profit more then $1000 on a car.
    DON’T deal with cars that cost more then $8000.00
    DON’T expect to move more then 7 cars a month in the first year, unless you’re highly experienced, ORGANIZED and CONSISTENT!

    As much as I hate curb-stoning, if you sell cars on the side and you can’t make more then $3000 on a $10.000 capital a month , just stay where you are, or this business WILL EAT YOU ALIVE with all the costs, I guarantee you!!!
    Also,
    You will have to be the BEST buyer at the auction, or when it comes the time to sell your car, if you payed AVERAGE auction price, your are on your way to be OUT OF BUSINESS!!! Your competitors will have a better price, better financing options and MORE MONEY to sit on they’re car on the lot then you do!!!
    If you can’t wake up at 6AM and work till 9PM, DON’T open a car lot.
    If you can’t organize your personal finances by now, DON’T open a car lot!
    Do you have less the 700 Credit Score? DON”T open a a car lot
    If you think I’m lying or exaggerating, DO NOT OPEN A CAR LOT!!!
    TRUST ME!
    Go back to the basics, learn how to be patient, organize your financial life, fix your credit , be consistent on earning money on a fixed paying job and then rethink opening a car dealership.

    If you LOVE cars, and your dieing to open your dealership, rethink 10 times. Do your homework DOWN TO THE PENNY!
    But the most of all you have to be consistent in what you do.
    If this was of any help, you just made my day.
    Thanks!

    • GAcarenthusiast

      LovetheLambos, you mentioned Giada, I presume your from ATL. Your comment is pretty worrisome, since im from Ga and have been putting my time and effort into getting my license. whats the issues with your lot, too much to soon?

    • Great Post 1 question where did you open you dealer?!

      • From my experience you don’t have to work hard or long hours in the auto business to make a very good profit. You don’t have to have a ton of money, the greatest location or the newest cars to be successful. People that make an auto sales business a long hour-tedious unbdertaking are doing something very wrong. Selling is easy. People need cars-you supply them. Everythiing you put between these two ideas are roadblocks that are costle and time consuming. The attitude you use to sell the cars, greet the customer, represent the vehicle is the telling point of success. I have sold over 12,000 vehicles, seldom have any type after the sale problems, work as I want and never stress over the business. Auto selling can be a lot of fun and money or misery and losses. You have to decide the road to take.

  38. Ha ha ha ha… situations are not the same countries are not the same… u guys especialy the last one have scared a hell out ot me.

    But i thing will have to try one more time to open a car dealership.

    Thank u

  39. Thanks for the advise people it helped a lot

  40. EVERYBODY IS DIFFERENT. WHATS FOR U IN LIFE MIGHT NOT BE FOR SOMONE ELSE. IF U HAVE A DREAM GO FOR IT. DONT BASE YOUR LIFE ON OTHER PEOPLE STORIES. JUST FOLLOW YOUR DREAMS AND HAVE FAITH IN GOD.

  41. I am 21 years old and have previosly worked as a salesman at Kia and Honda since I was 18. After I realized my potential I decided to leave Honda and invest my time in learning the operations of a used car dealership. Currently I invest money into the dealership I am registered with by buying cars from the auction and putting them up for sale to earn more experience before I can open up my own place. In order to be successful in this business, you have to put your name out there, your family and friends and their friends should know if they need a car they need to come to you! One thing you shouldn’t forget is that referrals and repeat business is the golden key to success in the used car business!

  42. You can start a auto sales business with a small amount of cash if you think through the process. You must have a location, fees paid, lis. bond, etc. But you can start with only a small number of vehicles that are in the lower cost bracket ($3500-$6500) and can make a decent profit. This price auto’s usually are higher miles and require more make-ready. Good advice is to stay as far away from auctions as possible as a beginner. Find a local wholesaler and pay a little more from him but get a vehicle that’s more honest than many auctions. Learning the car business is not rocker science-& does not cost a lot to get in, but the lessons a new dealer pays can be very expensive. You can normally figure what your monthly overhead will be and divide down the number of auto sales it would take to make that amount. You can use a nominal profit figure for each sale until you know by recent sales. Normally on 3500-6500 cost cars I mark-up the price by 1800-2800. But these cars are absolutely ready to sell. New inspections, detailed, oil change, road test, mileage guarantee and free 90 day drive train warranty. Want to build up your sales-No. 1 rule many dealers overlook. DON”T LIE TO YOUR BUYERS-DON”T MISREPRESENT YOUR CARS. This will serve you well. I’ve been in all aspects of auto sales since the 60′s and have had few mad customers while selling over 12,000 vehicles in the county I live in. Good luck & watch the cost of your lessons. I have written over 200 articles on different aspects of the auto business from the mechanic part to the accountant in an effort to help people who want additional information.

  43. Does anyone know of a reliable secondary finance company to go with as I am starting on my own. Everything is all setup as far as all local banking for prime lenders . There is so many to choose from but I dont have the time to weed out the 1000`s of companys . If I have to I will but didnt know if anyone could throw out some suggestions. I thought about buy here pay hee but I am able to hold 20 cars on my lot so I dont think it would be cost effective. I have delt with buy here pay here at the lot at I was at before never seemed to pan out . Management never followed up with customers . Any input would be appreciated . By the way this is for New England area. Thanks everyone in advance

    • One of the sub-prime lenders that allow you to take front end money and share the back end and take care of the repo’s should be looked at. Some of these you have to buy into upfront (about $10,000), and rent their software but it’s a pretty good deal compared to some of the subprime. One that seems to do pretty good is “Guaranteed Credit”, but there are others. What these basically do is give you back the wholesale value of your auto plus any trade-in or cash down, and they finance the loan at 18-21% and when it is paid down to zero investment for the finance they begin to share the rest and the interest with you. The set up 100 pool units to put your notes in, and if about 82% pay for a year they advance the dealer some funds. Worth looking up. I have another subprime that’s ok, but don’t have the details in my hands now.

  44. there are a couple of companies that release the funds if the buyer has made a payment within the first 30 days. Not a bad deal . I think in 08 most of those companies got washed out. I have seen a couple companies do 60 days. I`d like to find another one of the 30 day companies to deal with . I get no help from any local dealers on info this is all in my expirence so the more info the better. Counting down the days of opening July 2,2012 . I am really just thinking is it really worth it with the whole idea of the promised credit ordeal. I will be holding 20 cars on my lot so its a toss up wether to jump on board or not.

  45. In Texas about $2-3 grand will get you in the car business, plus lot rent and utilities. The cost is very cheap compared to the rewards available with a little common sense and ability to sell. You can start with one or two vehicles if needed and can get around the floor-planning to start by getting a bank to finance you a vehicle or two. Although in most cases you will have to transfer the vehicles and pay sales tax, if you bought them at a wholesale price you can still resale and make some bucks. Not the best way to start but it will work. Slow to build from here and overhead needs to be low for this to work. Might try to rent space from another dealer or work as a salesman for one and keep a couple cars of your own to sell. Some dealers will do this-others won’t. Add to your inventory as you profit-re-buy through your bank as you sell. Even in today’s market place it is possible to use $50,000 for purchases and with a good turnover and a little luck to double up in 12 months. The thing to remember is that your investment will turn from as little as 4 times to as much as 12 or 14 times a year. So your $bankroll multiply s by that many times., Car sales is a very easy business-it doesn’t take a rocket science to make it work, although some dealers think so. You might find some information by goggling Car Talk – Don Rice. More published articles will be available in the future.

  46. Your site is really cool to me and your subject matter is very relevant. I was browsing around and came across something you might find interesting. I was guilty of 3 of them with my sites. “99% of website owners are guilty of these five errors”. http://is.gd/MP2Ncf You will be suprised how simple they are to fix.

  47. A lot of mixed responses on here, and a lot of “old school” owners trying to scare out new entrepreneurs. I’m 25 years old and started up my dealership with about $30,000.

    My surety bond was free because I was friends with a finance manager, I convinced him to come into the business as a 1% owner. He got a dealers license, buys his cars, and I sell them for him on my lot for a commission (as well as selling my own cars). He doesn’t send that many cars my way, and it saved me a few grand in initial costs.

    I made a couple mistakes at auction starting off, overspent on a few vehicles. Buy an iPhone, get the Manheim App, scan the car VIN as it rolls through auction and it will tell you average auction price, as well as average retail price.

    eBay can be your best friend, I’ve made my best deals on eBay. I just recently bought a truck for $2,500 and sold it for over $7,000. Is that typical? No, but it paid all of my bills for the month, so everything past that was profit.

    I’m not going to give away everything I learned obviously (because I learned the hard way), be patient, be smart, be resourceful, and watch the money come in.

    PS
    Be honest, don’t lie to make a few hundred extra bucks. You might think you’re screwing someone else over, but in reality you’re screwing yourself. If something is wrong with a car tell your customer, and take a smaller profit. They’ll appreciate it, tell their friends, and come back to you for future purchases.

    Good luck.

  48. Saeed Jacob ( New Jersey)

    I recently opened a used car lot in the state of New Jersey but can’t seem to find lenders to finance for my customers, can anyone assist with finding finance options for my customers

  49. One special finance company that s helping dealers by buying their customer’s contracts is MAF. (Mid Alantic Finance Company). 888-243-8367 or http://www.midfinance.com
    Just posting this to maybe help some secure some finance angles. I do not use this company , but will when I open a new used car dealership. Thanks Don Rice Cleburne, Texas

  50. I think the secret is hardwork as one of the post suggested. I am only in high school but after I finish I plan in going into a career, if it doesn’t work out I plan on trying to sell cars.

    I have a question: is the money In used or new car sales?

    …And to the guy who asked how much it would cost to start up an exotic car dealership with 20 cars in your inventory, use due-diligence. 20 exotic cars would cost you at least 1 million( based on 50k on each car which isn’t much for an exotic car). So at least 1 million just for inventory, plus land, liscence and so on.

  51. I am in So. California and just got done getting my dealer license. I started with a office and two parking spots to see if I can get this off the ground before I get a big lot. I have a few questions for the board here.

    1) I am pre approved for a floorplan, but will they grant it if I don’t have a lot?
    2) I was thinking of focusing on Mini’s, Prius’s and Landrovers. These all seem like niche markets. What is your opinion?
    3) I some dealers going to warehouses instead of the regular auto lots. I understand this take more marketing and you don’t get the walk on traffic, but seems like more and more people are searching on the internet first before buying a car. Do you agree with this?

    I have about $25K in cash to buy cars and another $25K in flooring (if they will grant it to me due to my location). I figured I would start with 4 – 5 to 7K (wholesale cost) cars and hopefully be able to sell them and turn then within 30 days…at about $1000 to $1500 profit, is this reasonable?

    Thanks for any input in advance!

    • Floorplans are based on credit worthiness, not location, and should not be a problem. Price range is fine if you can find good autos in that range. Auctions are the kiss of death for a new dealer. Lessons are quite expensive, cheats and fraud is abundant at auctions. Try to buy from a dealership or a dealer that gets their vehicles from a dealershi, not an auction. If that’s not possible, talk to wholesalers that work the auctions on a regular basis and buy your vehicles from them with the option of turning them down if they have problems.
      This may cost more per car but it is cheap for a new dealer to buy this way. It’s not normally a good idea to limit your inventory to a certain type, although many do this successfully (pick-ups,SUVs-etc) The best way to stock your lot is to vary your vehicles to attempt to have something for everyone. You can get a list from local tax assessor that shows what vehicles were sold each month in your area. This telkls you what to try to buy to resale. Starting small is the right approach to see if this business suits you, learn the ropes, and control and learn all aspects of the trade. Best advice to a new dealer: make sure your cars are in good condition, have them absolutely ready to sell before showing them, and ask for a good profit and never lie to sell one.

  52. Im truly trying every thing that i can to get my dealers license. I live in The state of Kentucky. but first im have to sale 2 or 3 cars to pay for the paper work and ect. not sure of all cost yet. so i figure ill start out small, even thow i know alot about cars and people screw what the market say, make ur on capital .. im a true believer in “small business ” is the business people want for better deals and understanding which is key.. lol big business and a few small business is very very lucky one man like me is broke .. because i can run any business better than most business owners lol i stay postive and one day ill be able help every person or people that walks the earth..in time ill gain capital from rock bottom to the were ever..

  53. Im truly trying every thing that i can to get my dealers license. I live in The state of Kentucky. but first im have to sale 2 or 3 cars to pay for the paper work and ect. not sure of all cost yet. so i figure ill start out small, even thow i know alot about cars and people screw what the market say, make ur on capital .. im a true believer in “small business ” is the business people want for better deals and understanding which is key.. lol big business and a few small business is very very lucky one man like me is broke .. because i can run any business better than most business owners lol i stay postive and one day ill be able help every person or people that walks the earth..in time ill gain capital from rock bottom over top the capital of all

  54. I have always wanted to sell cars for myself but I don’t know where to start or get funding to start up.. I live here in Phenix City Alabama if there is anyone who can give me some advise email me.. I am ready to try to make my dream come true..

  55. Opinion Please.
    Ok I am into my 3rd month selling cars from a small office with four parking spaces. I have been selling 5 – 6 cars a month out of here. I don’t think I have ever worked this hard in my life, but it’s fun so far. I have aquestions maybe the more experience people here can help.

    I believe I need a better location. I am tossing about renting a warehouse with a small office and selling out of there. This way the cars stay clean, safe and I can stock more inventory. I would advertise as I am doing now on Ebay, Autotrader and Craigslist. So my question is, how much foot traffic am I loosing? I drive by dealer center and there are 15 used car dealers in a 2 block radius and it seems like a lot of them carry the same selection of cars. Are people actually driving down the street and stop to buy a car anymore? Or is most of it internet, marketing driven? I am sure there are a few deals that come to play due people walking on the lot, but this is where your opinion can help. Do I go with my plan or step up and get a lot which costs me double.

    thanks for the advice in advance!

    • Exposure is important to selling auto’s, but perhaps you are not using all the tools available to you at your present location. There are many ways to get the word out about your cars from your present location. One is referrals-work each customer you sell for names of someone they know that may need a vehicle. Use wearing appearal
      that displays your business name, which allows people to ask about your business or
      ask about a car purchase. Sponsor some small event for a club or group or give a speech at such, of course wearing your business name where it is clearly visable.
      Ask for business. Offer a customer a fee to
      find you buyers in person or by phone or internet. Get a website up and going if you do not have one, butr make it difeerent for the prospects. Make the people that visit want to do business with you by offering more

      • Thanks for the advice Don. The place of business I am at now is too small, so that is why I am looking for a bigger place. I am getting the buyers by advertising, but I confused if I need a open lot with the rest of the dealerships or just rent a warehouse and continue what I am doing, but on a bigger scale. If I had more room, I could stock more car, thus I can sell more. You know anyone using a warehouse? I know Texas Direct started this way and they say they are one of the largest in the country????Thanks for your response!

      • If you go warehouse you should remember these things. Cost of overhead usually goes up. Insurance against breakins or theft goes up and must be in force, and inventory of autos must be great enough to keep the attention of shoppers. I have found that shoppers will be more interested when the dealership has at least 15-20 vehicles to choose from, and they need to be a general mix of what is popular in your area. Warehouse selling usually requires much more cash to advertise than regular sales where cars aqre visable. One way to reduce your cost is to line up a couple more dealers to use the space and pay some of the cost, or add a auto specialty service to obsorb the rent–detailing, vinyl repair, paint touchup ,pickup accessories, oil-lube-etc.

  56. I have one more question maybe someone can guide me.

    I just recently got a small flooring line. Not much, but enough to buy another 5 – 6 cars or so. I used this last month, instead of paying cash for everything. So out of the 5 cars, 3 have sold and the 30 day curtailments are coming due. It seems time flew on by and now do I pay the curtailments (15%) or do I bring them back to the auction and cut my loses? One car I haven’t had any action on, but it’s clean and seems like everyone buys them at auction (2004 Nissan Xterra). I don’t know how dealerships with 50 – 70 cars on a floorplan works this out. Any advice would be appreciated.

    thanks again!

    • Finance curtailments is an ancient rule that is terrible. If a banker or floor plan operator has any sense at all they would understand that many times it takes 30 days or more to get a car ready for your front line. Secondly almost no cars loss value in 30 daus, which is what curtainment is about. Most cars will sell for the same price or more months down the line. The way most dealers get around floor reductions is to dealer trade a care for a different one from a dealer friend. This procedure must be watched carefully or the trade will amke for a worse deal later on. this gets around the reduction or sending a vehicle to an auction, which may lose a good chunk of change. Always buy your cars close to ready to sell, never let them sit around at shops getting repaired too long. Always buy the prettiest, brightest, best equipped cars for a fast sell. To get away from curtainlments try to put up some collaterial and get a line on credit either payments or term. this stops curtailments, the collaterial stand good for the loan and when you buy a car you get the title immediately, and only make the monthly payment of either principal or interest. This approach is a win for the banker also because it costs a lot less to service this type loan and does not have the expensive cost of disposing of cars, etc.

  57. So here’s my question that I’m trying to figure out… I’m opening a small used dealership and right now I’m working on the floorplan/financing the lot for my inventory part. So I checked with AFL and they are raping folks! This can’t be the only option out there is it? Basically I was told that the current rate was 9% and that’s daily on the inventory! So for me to have $100,000 on a lot it’s basically going to cost us $10,000 a month!? I really feel like I can walk up to a booky or something and at least get a 9% rate for a 12 month term. Somebody has to know another option and PLEASE let me know. Thanks for all the info!
    Chris

    • The percentage is usually yearly but paid monthly. At 9% your interest on $100000 per month would be $900, plus or minus on the apr rate. Auto Use is another florplan provider, but they are usually about the same amount plus they all used to have an acquization fee, a payoff fee and daily full coverage insurance that eats away at your profit. Lots of dealers use these kind of floors, but you sure give up a large amount of profit. The best option now available is to secure a line of credit at a bank by pledging some colleteral and make monthly payments. This way you have your titles in hand, and when the note is paid off everything belongs to you. This way is a lot less work, less mistakes and smoother business.

    • I had good luck with DSC or ABS (if you have one in your area). I like ABS as there isn’t any curtailments. DSC is much lower than 10%, but it all depends on your credit. The percentage rate is usually yearly, not monthly, so maybe that is what is throwing you off. I have a 4% rate with one of my floorplans, which a means $7000 car costs me about $50 a month. You need to turn and burn and not look at the $100,000 at 10%, the faster you move the cars, the less you pay. I don’t know where you buy your cars from, but I know MAFS has decent rates too.

      Good luck.

    • Hey Chris Im going through the same problem finding capital to buy cars, I already have two credit lines (one with DSC for 15k and one with Auction Credit for the same amount) did you apply for a line of credit with the bank? What are the requirements for a line of credit of lets say 15,000? I would like to exchange tips with you my email is adrian@delnortemotors.com. Thanks!

  58. What other forums are there for Used Car Dealers? I did a google search and kept getting new dealer sites. Any recommendations?

    • The new car dealers are sitting their websites with key words that direct people to their site regardless of the subject matter. This piggybacking is a large tool for web designers and have a impact on smarter sites without these keys. Use of the key words allows sites to cause a lot of wasted time for internet users by directing their inquiries to information that is not even related to desired information. This is just one of the flaws of the internet. But about the car dealers sites for information they are few and far between, and some of those available are commercial venues selling their fantastic ideas to the unknowing, or by people trying to earn a buck on selling books. This market is poorly represented on the web.

  59. Input needed.
    Ok I have been at the for 3 months now. I have moved 16 cars, not too bad, but here is my problem. I am purchasing cars between 4,000 to 6,000, seems like most of my cars need a lot of recon or problems repaired. I am averaging right at $1000 per car, seems like a lot of work to get the cars purchased, recon and sold for $1000, but it’s better than nothing. The last 4 cars I purchased from auction set me back some cash. Two I sent back to auction as there were major issues with and took a bath on those and the other 2 I sold and lost a few hundred. I am trying to buy cars that are niche cars, bmw’s, land rovers, mercedes, jags, which I know are risks and expensive, these seem to be somewhat cheap at auction considering and I think that is why I have been able to turn 16 cars with limited inventory. I know I should sell Hondas and Toyotas, but it seems here in California the price some of these guys are paying at auction, don’t know how they can even make a profit. I guess what I am trying to figure out is I know there is risk on every car you purchase, but is there anyway to limit the risk? I have sought out a few wholesalers to purchase from, but they are much higher than auction cars, so do I pay more and make less profit or just do what I am doing and roll the dice and figure you win some and you loose some. Just loosing sucks on my last 4 deals. Any advice would be appreciate!

    thanks in advance

    • High line autos that show up at auctions with a cheap price should not need any explanation. Buy under a green light drive only if the auction offers such. An auction can cost a new dealer a fortune paying for the lessons it will deal out. At an auction if you must go to one should be a visit the first few times with no purchases, and time spent finding out the good guys and the bad, the games that are being played and the double bidders each week. These thing will drown the newby dealers. Try to find more wholesalers and offer more for their checked out cars. Try to buy from the public-run a “cash for cars” ad listing the kind you want to buy, or add a consignment or park and sell feature to your operation. More inventory this way with no cost but same profit. You are fighting against the current trying to do as you are now. If the high lines were worth a dang they would be a lot higher or would not be at a sale to start with.

    • R N Taylor Motors

      You are doing well. You started at a point of the year where it is a sellers market. Patience and smart money management will prevail. There will be opportunities throughout the year. The $ market that you are trying to conquer is the most popular. Advertise to buy inventory. Wholesale what you don’t retail.

    • Ed, spend $100 on the diagnostic tool, can purchase from autozone, do your research at the auction before hand, once it gets into the lane it is too late. Regardless if they green light the car it could still have issues. Plug that in and it will bring back all the codes associated to issues with the car. My first car i bought was 99 Honda Accord for $1800, I thought I had a steal, until i got on the highway and the transmission slipped and almost threw me through the windshield. The next day i went out and bought the tool, one mistake is all it took.

  60. I have noticed a lot of replys stating the severe time requirements, knowlegde of the market, and the hard work required to start a dealership. Statements about the difficulty in every aspect of this business seems to be a common pattern.
    Well I’m here to tell you it doesn’t take a rocket scientist to get in the auto business, it doesn’t take a rich person to open that dealership, and it doesn’t take a years research of the market to determine what to buy. Scare tactics are either made through iggnorance or fear of competition. Anyone can open a dealership with almost any level of investment, they can get a view of their market from the local auto tax accessor’s office on last 3 months auto sales from their community. You can ope a dealership with 1-2 autos or a 100, and still make a profit. It is only hard work or difficult for those that make it so. It is a fact that it can be a highly profitable business for the small guy as well as the large operations. There are really no rules to the car business. There are dishonest dealers that make a fortune, and there are honest dealers that do the same. That is your decision! But it is simple to understand. Everyone needs transportation-autos are the normal means of getting from point a to point b. You buy autos to provide the means for people to travel daily. You buy at one price, make them ready to sell, add a profit, and sell and collect the money-which should provide a profit for your service. Pretty simple itn’t it? Anyone with a little determination and common sense can operat an auto selling business.

  61. Good article. I will be facing a few of these issues as well..

  62. Yeah pretty good i sold out 7 cars last year then my friend told me about the rules then i thought that if I can sale 7 cars in a year then I can start my own business at the age of 21 so i consulted to http://www.myautolicense.com and took precious information from them and applied for a auto dealer license now at the age of 22 I am auto dealer and have sold after taking me license almost 12 cars .I am very happy about my carer and thank you for providing us a great information

  63. Jessica Kinder

    I am in the process of obtaining my dealership license in Missouri and am looking for a mentor, you could say, to give me some advice and knowledge on the things that I unfortunately can not find a lot of info on. If anyone is willing and knowledgeable on the laws in Missouri please send me an email! kinderco@live.com

    Thanks so much in advance!

    Jessica

  64. SeeTheCar.com

    This Domain name is available for Rent.

    Contact Ryan @ ryan_dulina@yahoo.com

    SeeTheCar.com

  65. SeeTheCar.com

    #1 Domain name in the Automotive World!

    The only way to sell a car is by getting people to SEE THE CAR!!!

    SeeTheCar.com

    ryan_dulina@yahoo.com

  66. you young guys who are just starting out, good move you first get a dlrs lic in your state then sign up at the auctions now your in buissines then most auctions have people set up with displays that will give u a line of credit depending on your credit history and some auctions will give you in house line of credit where you have 90 days to sell the car then when you pay for car they will give you the title that will cost you about six dollars a day interest un till you sell the car. good deal if you sell the car fast. And they dont care how your credit is. on most occasions they will start u up with a $10,000 line of credit for six months trial then increase limit if your a good boy or girl. good luck jeff forty years seen it all and done it as you all know you old timers it runs in the blood and u cant stop

  67. Hello my names Anthony but everyone calls me “Tony” . I just bought a car lot in PA and was looking for a little insight from one that is familiar with the industry out here, Now i have a little over 100k to play with and my girl is in finance i just sent her to Detroit to learn a program for one of our bank reps and was wanting to know a little more aspect of an auction now Ive never been to an auction to buy a vehicle i was thinking of starting out with 15-20 cars any help will do while am waiting for dealers licensing to go through
    my email is. thopes@ymail.com
    Thanks

    • Hi Tony my name is Robin my father and I recently acquired our dealer license here in Texas. All I have to say it’s alot of work much harder than we thought it woud be. We both have other careers and live in seperate cities. I just wanted to be a silent part who dabbled in it from time to time. Very time consuming to pull the Run List from the many Dealer Auctions not to mention actaully going to a auction and bidding half the day away. And depending what Floorplan (credit Line) you have you usaually only have 30 days to Sell the car. i know I probably sound like I’m whining. I’m just saying it’s hard work. you can email any question at rlhughey@gmail.com

  68. My name is Jonathan, live in Florida and will be starting my online based dealership this month. Have tried the trade with local purchases. Did well on the first batch. I am starting with 25k. I believe I have a strong knowledge in marketing, via video production and high definition pictures. Would love to hear some insight on focusing on niche market and industrial based vehicles. My email is jperque@comcast.net. I set up a 3 year growth plan and would like to compare it to other individuals that are up and running.

  69. Please email me with your number.

  70. I have been planning to start car dealership and looking for valuable insights as how to start te same. Thankfully I got the suggestions and clarified my doubts.

  71. How long does it take to get a dealers license once you send your application off in AZ. The DMW told me it could take 3 months!? What is your guys experience with this as I wanted to get going in time for tax season! Thanks in advance

  72. Hi. This is an excellent blog with lots of info. I’ve commented about having a used car dealership every time I purchased a car over the past 30 years. The sales tactics the reps here use are high pressure. My idea is to price cars at the KBB value and make around 15% on each sale. The value to the customer would be a realistic price and not having to run the pressure gauntlet. The value to me is less time negotiating and expecting to sell a car every day. Being a volume seller pays the monthly bills plus a nice profit. My down side is keeping an inventory and posting all autos on the web. Any Thoughts on this strategy would be appreciated. I’m not afraid of the hard work or the time commitment. I’ve already done that in my military and corporate careers. I’ve always had the car dealer idea in the BACK of my mind. Thanks.

    • SALES PRICE HAS LITTLE TO DO WITH CUSTOMER SATISFACTION. YOU WOULD BE BETTER SERVED TO SELL SERVICED READY TO GO. IT IS FAR EASIER TO SELL FEWER CARS AT A HIGHER PROFIT EACH MONTH, BUT MAKE SURE THEY ARE ABSOLUTELY AS YOU REPRESENT. USUALLY THE CUSTOMERS THAT ARE THE HAPPIEST WITH BUYING FROM SOMEONE ARE THE ONES THAT PAID MORE FOR THEIR VEHICLE BECAUSE THEY TRUSTED YOU AND HAD MADE FRIENDS WITH YOU. ALSO WHEN YOU SELL A CAR THAT MAKES THAT LITTLE AMOUNT AND SOMETHING GOES WRONG WITH IT THE NEXT DAY, WEEK, MONTH AND THEY WANT YOU TO HELP FIX IT-YOU ARE SCREWED OR GO INTO YOUR OWN POCKET. DON’T SELL CHEAP, SELL GOOD VEHICLES AT A GOOD PROFIT. UNHAPPY CUSTOMERS WILL FORGET THE CHEAP PRICE WHEN SOMETHING GOES WRONG, BUT YOU CAN BET THEY;LL RMEMBER WHO SOLE THEM THE VEHICLE.

  73. Al contrar. Sales price has much to do with customer satisfaction. I’ve walked on plenty of dealers and individual sellers who were unwilling to deal on a vehicle. Also, Are you saying that selling on a 15% margin and a quality auto are opposites? I believe I would have to offer serviced ready to sell autos to gain quick credibility in an industry whose customers inherently distrust the reps. My plan is to price my product in order to turn the inventory quickly-not to offer junk cars at low prices. I think your point about having money from each sale to make repairs is certainly a concern with my proposed business model and needs further consideration. What am I missing?

    • I’ve been selling auto’s for a very long time, and enjoy probably the best reputation with buyers in this area, having sold well over 10,000 vehicles. My inventory is road tested, serviced (new inspection emission sticker, oil & filter). I personally drive every auto in stock and list the nedded service. I check batteries, electrics, a/c, radio, power accessories, exhaust, brakes, tires very closely. I do not have problems after the sale, and sell inexpensive vehicles that normally have more problems than more expensive vehicles. I almost have zero after sale issues, and have had for more than 40 years. Make the vehicle right, make it clean, represent it correctly, and sell honestly to the customers. They will pay more for a car in this condition, plus they will drag their family and friends to you to buy. My average profit on sold units is about 1700.00, but recently with a slow market it is less. The average customer is not as concerned with paying 500 to 1000 more for a good car as they are with getting a good trouble free car. Most of the vehicles I buy are in the $2500-$4500 range plus any reconditioning. I expect to spend $400-500 per car on just service, detail, make ready, and this is added to any major problems that might show up. This method always works for me. Buy your vehicle-put it in good shape, sell honestly and make enough to help the customer after the sale when necessary.
      Here is an example of my method. I recently purchased a 2002 Ford ext cab pickup for $3500, spent $420 making it ready, listed it retail for $5950.00 plus T.T.L. Sold it for 5600 plus fees. customer was happy, said it was the best one they had looked at and I made approx. $1700. This is the correct way to sell cars and build up customers. Many dealers and salepeople think a customer knows what a car is worth-this is not true, even the dealers can’t agree on the values. Sell the dealership, sell the vehicle then talk price.

  74. That example is what I’m proposing. And, an example of a sale i have yet to find in the Jackson, MS area. You listed and sold for less than the KBB value of $6,000 (I made a few assumptions on the truck). you still made 30% on your money by buying the truck at a decent price. The customer was happy with a good ride and you can pay the monthly bills and take some home to mama. That truck would have listed above $7,000 here and I would have to negotiate hard for more than $500 off which, unfortunately, is still way above the KBB value. I think I can do better than these dealerships in this area.

    • I do not go to auctions. As far as I am concerned you need to take a jar of vasoline with you if you go to one. There are more cheaters, patchers, mile cutters,etc at the auctions than I car to deal with. They know they can misrepresent a vehicle and get away with it most of the time, and they also know that the less they spend on their cheater cars the more they make,and lower priced cars can be sneaked in under the no-drive rule, or the over 100k rule. I know some dealers have no options but auctions, but I would never buy an auction car without an auction guaranteed ride and drive and would check out all the components before I bid that are not covered in the ride and drive. I buy from wholesalers, individuals, companies, etc. I pay the wholesalers a little more profit than they normally make, but I don’t waste my time at an auction. They do the dirty work, I just service them and sale them.
      This has woorked good for me. I spend my time where the most money is-selling cars, not going to a different auction every day. I also got a little pi@%#d with the auctions running the prices you pay for the cars up with invisiable bidders just to help one of their buddies or big dealers. My suggestion if you are going to sell good cars and build customers is to find a way to buy your inventory somewhere else than an auction.

  75. I’m looking to start a small auto dealer in a warehouse in Florida. The lease space is 650 monthly plus utilities. Any idea on how much liablity insurance and the bond would cost.? I’m 22 years old and my business partner is 24. We plan on marketing online via eBay and Craigslist. Do you think I have a chance at this? We plan on only having bout 4 cars at a time and marketing online. Thank you.

  76. I forgot to mention we would be focusing on $3000-6000 cars.

  77. Hi im only 15 and I really want to start a New car dealership when im about maybe 23 but I know it costs alot of money to start one so I want to start saving up now my e-mail is shakeelmalik99@yahoo.com If there is anyone who can help me maybe tell me about how much the actual cost is such as the franchise and lot and cars. I would also apreciate if someone could tell me how it works after the dealership is opened and how much i would make

  78. I live in PA and am trying to move forward with starting my own dealership. I want to start a used car business primarily targeting the online market. I didnt really want to have a huge location, but maybe just a small little garage that i can fit two cars in to prep the vehicles for sale. however it was very disheartening to see that in order for me to obtain my license i would need a detached building that could fit at least 5 cars as well as a sign for the building. that really screwed me up with having to invest more towards the building than i would have liked to. Is there anyone else who has started a dealership towards the online market and has had better luck or any other tips. my email is tillotsonray01@gmail.com and any help would be greatly appreciated.

  79. Have you ever thought about publishing an
    e-book or guest authoring on other sites? I have a blog based on the same topics you discuss and would really like to have you share some stories/information.
    I know my visitors would appreciate your work. If you are even remotely interested, feel free to shoot me an email.

  80. Do you need a loan if yes email us today at accessloan7@gmail.com with the information below,

    Name:
    Country:
    State:
    Age:
    Loan amount:
    Loan duration:
    Phone number:

    Note: If you need this ;loan urgently then you are to fill the form below.

    Mr Cosby Dave
    MD

  81. I’m not sure the place you’re getting your information, but good topic.

    I needs to spend a while finding out much more or working out more.
    Thanks for excellent info I was on the lookout
    for this information for my mission.

  82. My partner (a private investor) and I are starting a luxury used car dealer, currently getting tax id and llc setup-then dealer license. We want to start slow and have 100k max capital to start. The business is not required to make money the first year, just pay expenses.
    I was thinking online sales and storage at a warehouse in the far out burbs, or a small dealership property to lease closer to city (20 cars max capacity).

  83. Does anyone have advice or can any experienced business owners chime in?

  84. I am Frank Looking for a good partner to start a new dealership here in Beautiful Southern california all investors will be on the business Liscends and become Company Empolyees Maui Motors LLC will start in 2014 Cadillac Chevy GMC we are also http://www.nhra.com storng send all serious email to uvallejrf@gmail.com God Bless

  85. I hope to see you at the track

  86. I am Looking For A Business Partner To start A new Dealership here in Beautiful Southern California Maui Motors LLC will start in 2014 and be affilated with http://www.nhra.com all serious People reply to uvallejrf@gmail.com and feel the POWER we sell Cadillac Chevrolet GMC models God Bless

  87. In order so that it will license music, you write and supply better ones.
    This is when the personalized music for kids
    is important.

  88. India has a very vibrant mixture of culture and tradition under
    the influence of religious and spiritual themes. Anamudi, the largest peak in the southern Himalayas is
    located within the park. Otherwise, you’ll need to stuff your fancy shoes into a bag to ensure they’ll stay with you.

  89. I like dons and seths comments the most. don you seem very reliable. Im in california, i am developing excellent credit to get a huge credit line for my dealership, who and what companies do i stay away from?

  90. Brandon Wright

    Hi, my name is Brandon Wright. I am seventeen years old, a senior in high school. I’ve had an interest in cars my whole life and my ultimate dream in life is to own my own car dealership. I would like to pursue this dream as soon as possible. After I graduate high school, I’m going to college to major in business in order to fully understand the process of a business. I have taken business courses such as accounting, marketing, and banking my whole high school career. I am good with numbers, math is my favorite subject. When I have acquired my degree in college, I plan on starting a career in a well established corporation in order to gain experience in the process of managing a business. I am currently living between New Jersey and Delaware due to my parents having multiple houses. The idea location for my car dealership would be in Delaware. My parents are willing to assist me with coming up with money to start a dealership. My parents combined have a yearly salary of a little more than $300,000. I am willing to put all my efforts into the business in order to be successfull. Please give any suggestions, opinions, etc. on how I should pursue this goal. Thank you!!

    • Best training you can get is to work around a few used car lots and learn the trade. Learn about make ready and what to do to test drive and judge an auto’s needs. Learn the sales methods of several dealers and see which suits your personal tastes. Learn the title work and drafts or purchasing methods. Study the mechanic issues that used cars have and the cost of repair. to be a good car dealer, you need to learn some of these things before you start, mainly because the cost of learning can get expensive if you just jump in. I tell interested people it does not cost much to get into the auto business. What costs is the amount you lose from dishonest sellers, dealers and auction scams. Learn a little before you invest much. It will pay big dividends when you go full time.
      Doing this will not keep you from buying and selling a few autos on the side as you go to college or work at a dealership. You need to decide the type vehicles you want to sell: High end, trucks, economy, cheap, mid price or junk. Each has a different style of business.
      An excellent way to learn the business is to start while in college selling a couple a month to students. Study the market of what they drive, the prices they pay and the overall condition and mileage they will buy. This is an excellent approach to getting your feet wet. If you decide to do this, you should keep your investment low, buy only ready to go vehicles and make a decent markup. On a vehicle costing a few thousand dollars but in good condition and reasonable miles should net you about $1500 to $3000.00 per sale. this is after a good cleaning, if needed, oil change and road test. Make them ready to sell in most cases.
      The car business is an excellent industry to take a small amount and turn it into a large business, if you learn what to do and treat your buyers honestly. By the way you can also make a pile of money if your sell dishonestly, but if you have a conscious it’s hard to live with that kind of reputation–but many do. If you are a liar and thief and a mile cutter and dishonest in the car business you can get rich in a hurry, provided someone doesn’t shoot you or send you to jail.
      I have sold over 12,000 vehicles in the county where I live and never have customer problems and enjoy a great reputation in auto sales. I prefer this type of selling.

      • Brandon Wright

        Thanks for your help Don. I’m not one to rob people of their money. I actually want to sell cars at a more reasonable price that will not empty the buyers’ pocket while I’m still earning some profit. Thank you very much Don! I am just curious, what state do you operate in?

  91. Brandon Wright

    Thanks for your help Don. I’m not one to rob people of their money. I actually want to sell cars at a more reasonable price that will not empty the buyers’ pocket while I’m still earning some profit. Thank you very much Don! I am just curious, what state do you operate in?

  92. Don thanks for sharing your experience…I have a small car lot in Mo,which i started with very little funding. I have recently figured out my bond has been based on my credit which wasn’t so great an cost me 3700 a yr to be bonded. yes,a real big chunk from a little business started with no outside funding.After paying that on top of my insurance and other expenses the past couple of years it seems as if I am at a stand still. I have been considering applying for a small line of credit or even inhouse line of credit.Not sure if those options are out of reach at this point while I am in the process of fixing my credit or not. Is there any certain company i should avoid? Any helpful information or advice would be greatly appreciated.

  93. My name tyler. I’m 15 and going on 16 in highschool. I’ve recently asked my uncle about the world of car dealing. I know i’m still really young. But reading more and more on car selling and dealing. I’m looking to get a job at a car dealership after college maybe highschool. I plan on working at a dealership for several years and eventally have enough to start my own used dealership if thinks go as planned. Yet im still young and have allot to learn. I was hoping if anyone could email me to help me learn more about dealing cars. Please email me ar lilt_2016@yahoo.com

  94. Don, thank you for being so open and honest about the do’s and dont’s of the business. My husband and I are very interested in opening a dealership as well. My husband has been in the car business going on 20 years. Honesty truly IS the best policy! We are in Texas as well. Tyler to be exact! Thank you again

  95. Pingback: Guidelines on Starting a Used Car Business | Classic Motor Mania

  96. HEY Guys…
    Its a very nice blog.I recently started a Used Car Dealership Business in Delhi. Any extra advise would be helpful.

  97. nice blog, Small bits of content which are explained in details, helps me understand the topic, thank you!

    • donricemotorco.com

      I have made some adjustments to the way I get cars ready to sell, and thought I’d pass them along.
      If I intend to retail the car, I drive it a good distance or home and back (10 miles one way) for a couple of days to get the feel for everything.
      I change the oil and filter on “EVERY” vehicle I sell. No exceptions. This way I can tell if the motor has been filled with dope or whatever. I short the oil one quart and add a bottle of LUCUS engine additive. This additive will never hurt but it will take up some of the wear in your lifters and bearings. I live in a emission area and because of dealer problems of buying stickers for cars that will not pass, I inspect EVERY VEHICLE I sell and put a new inspection sticker on them and include a copy of the inspection report in the paperwork to the new buyer. I do this on every car that has a outdated inspection sticker or one that goes out in the next few months. On the cars that have a good sticker, I still run a scan text for any problems.
      If I have a transmission that shifts a little hard I add a can of SEAFOAM to the fluid, drive the vehicle a couple hundred miles and have it serviced. Usually hardened seals are helped with this produce. Again it will never hurt a transmission.
      By the way I tell every customer I have added the LUCUS and SEAFOAM before they buy the car. There is no hiding of repairs or service around here.
      I check the hoses, wires, vacuum hoses for visible problems.
      Here’s an interesting way to find a problem. Many cars now have vacuum leaks and the vehicle has vacuum hoses everywhere. This triggers codes on the computer. You can send the car out to a shop and spend several hundred bucks or use this method to find the leak. Hook a hose to a vacuum port on the intake or other place and have someone that can stand to puff a cigar to lite up. Get the cigar puffing good and blow the smoke into the hose, continuing to fill the hose and cover the end between the puffs. A sensor or hole in a vacuum hose will eventually start to leak smoke out the hole. Pretty neat and cheap.
      I check the power windows, door locks and ac and radio for condition. I drive the car on rough roads and the highway to check the shocks and alignment and brakes.
      Now if I find an item I decide not to repair, I list it on my worksheet.
      When a customer wants to know about a particular car I show them the report on that car, I also show them what I fixed, and what I haven’t fixed.
      If they buy the car part of the deal on the worksheet will list the items I think might need future repair and the customer signs that they are aware of these issues.
      I also offer to finish anything I have spotted or things they wish to be done at my cost of parts plus my handyman’s labor ($9.00 per hour).
      Now this is really overkill but it works for me.
      Making your inventory ready is 85% of the selling process. If they aren’t ready do not show them. A lot of dealers disregard this way of doing things and sell a lot of vehicles, but I expect they have some dissatisfied buyers and ones that don’t return.
      I tell my customer’s this: We drive’em, service’em, fix’em & warranty’em; so you won’t have to worry about’em!
      Sure I charge more for this type cars, but the buyers are tickled to death with the service and lack of problems with their purchase.
      I allow about $500.00 per car for make ready. Some cost more-some less.
      In the car business the repeat and referrals is where you start to really pile up the cash, but if you cheat them the first time they will not come back nor send their families and friends.

  98. We stumbled over here from a different page and thought I might check things out.
    I like what I see so now i’m following you. Look forward to looking into your web page for
    a second time.

  99. Thanks for one’s marvelous posting! I certainly enjoyed reading it,
    you could be a great author. I will be sure to bookmark your
    blog and will eventually come back very soon. I want to encourage that you continue
    your great work, have a nice afternoon!

  100. Thanks for your great information, the contents are quiet interesting.I will be waiting for your next post.
    auto brokers license

  101. I stumbled upon this blog while looking into opening a dealership. I enjoyed reading all the post, I will be visiting from time to time. I plan on opening dealership in Va. I will be attending the required dealership course next week. I decided to do this because I will be retiring from my current profession within the next two years. I have partnered with a mechanic that has a few shops to help with all the mechanical and cosmetic issues. I have decided to bring my son in, He has been working since he was 16 but has not decided on a career. The surprising thing that I heard is stay away from auctions, a few months ago I was under the impression that this is where the deal is, because the profit is made when you buy the car. There are alot of car dealership where I live, so alot of competition and some have given the car dealerships a bad name. I believe this will be my biggest hurtle.
    Thanks for the blog.

  102. Well, many of my friends also started their own Used Car Dealerships, however the only thing which I see they enjoy are Selling Cars. There’s definitely good money in there, but with the enjoyment & passion in selling cars. Though I don’t sell cars, I do support startup car dealers with an affordable online solution, like a fully functional great looking website with full Inventory Management system. I call it AcuteAuto. Please feel free to visit http://acuteauto.com to find out more.

  103. There are a lot of them abroad are” full of fat cheap holidays Britons”.
    Park in Crantock village, and walk the coast path past the
    golf course at the rear.

  104. Wow, wonderful blog layout! How long have you been blogging for?
    yyou make blogging look easy. The overall look of your web site is great,
    as wwell as the content!

  105. It’s great that you are getting ideas from this post as well as from our discussion made
    here.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s