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