Car Dealership



Car dealership is a business that sells new or used cars. It employs automobile salespeople to sell their automotive vehicles. It may also provide maintenance services for cars, and employ Automobile sales people to sell their automotive vehicles. Maintenance services may also be provided. It employs employ automotive technicians to stock and sell spare automobile parts and process warranty claims.

How to step up a car dealership

Initial Process

1.Kind of Dealership

Before starting a dealership business it is required to be determined if you want to start a new car dealership or a used car dealership. In the case of used car dealers, the customer spends less on the purchase of used cars but the charges on the repairs and maintenance of used cars is high. If you choose to start a new car dealership, it’s important to keep in mind that the initial investment is substantially higher than a used car dealership. This means you’ll likely need an investor or financial backing from a bank. Starting a used car dealership, on the other hand, doesn’t require such a large initial investment, but the earning potential is lower.

2.Conduct a market research

It is required to identify the demand for your product and service. It is also necessary to identify how to pull customers to your showroom. Try to conduct a survey to find out how many cars have been purchased in that area, if purchased, how many were new and how many were used. Assess the existing car dealers in the market. This analysis will help you determine if there is a need for a new dealership in your market.

3.Business Plan

Once you decide on the dealership, it is necessary to formulate a business plan. If selling both new and used cars is a possibility, it’s also important to include this in the business plan. Other business plan stipulations include determining business equipment costs, researching manufacturer car costs versus used car prices, calculating employee salaries, lease and sales agreement costs, and planning your advertising budget.

4.Licensing, Bonding and Warehousing

The main hurdle is obtaining the dealer’s license. If you want a full-fledged dealership, then you need a dealer’s license that permits you to sell an unlimited number of vehicles a year

As for bonding, you’ll want a surety bond for your dealership, which protects you from contract defaults with vendors, vehicle suppliers, and wholesalers. Surety bonds are an effective way to safeguard transactions that take place between your dealership and any outside party you do business with.

All car dealerships require comprehensive insurance coverage whether they deal with used cars, new cars, or both. Typical car dealership insurance coverage includes general liability, lot coverage, and comprehensive plans that cover everything from property damage to inventory loss.

A dealer’s license will be required if a person conducts the buying, selling, brokering, leasing, negotiating a lease, or dealing in 5 or more vehicles in a 12-month period. The type of license you need depends on the type of business you intend to operate.

  1. A licensed new vehicle dealer buys and sells new vehicles under a franchise agreement or contract with the manufacturer of the new vehicle.
  2. A licensed used vehicle dealer buys and sells used vehicles
  3. A licensed used vehicle parts dealer buys or otherwise acquires late model major component parts for resale, either at wholesale or at retail. The dealer may also acquire whole vehicles to dismantle for the resale of parts, selling the remainder as scrap.
  4. A licensed broker is a dealer who, for compensation, brings a buyer and seller together, negotiates the terms of a transaction, or displays a vehicle offered for sale
  5. A licensed distressed vehicle transporter dealer may buy, transport, and sell vehicles only to a Used Vehicle Parts Dealer; Scrap Metal Processor; or Automotive Recycler.
  6. A licensed vehicle scrap metal processor dealer processes vehicles into scrap metal by shredding, shearing, fragmenting, baling, or similar means.
  7. A licensed vehicle salvage pool dealer stores and displays damaged or distressed vehicles for insurance companies.
  8. A licensed foreign salvage vehicle dealer is licensed in another state and is engaged in this state in the business of purchasing, selling, or otherwise dealing on a wholesale basis in salvageable parts or late model distressed vehicles.
  9. A licensed automotive recycler dealer buys or otherwise acquires late model major component parts for resale, either at wholesale or at retail. The dealer may also acquire whole vehicles to dismantle for the resale of parts, selling the remainder as scrap.
  10. A licensed wholesaler dealer engages in the business of buying and selling used vehicles from and to licensed vehicle dealers. Wholesalers may not buy, sell or otherwise deal in vehicles to a person other than a licensed vehicle dealer

5.Hiring Perfect Salesman

It is necessary to hire the right staff to drive success to the business. The dealership owner maybe a good planner but he might not be able to sell the vehicle to the customers. So a good salesman needs to be hired to convince the customer for the purchase.

6.Choose the Right Location

It is important to ensure that the right location is picked for the business. The larger the population, the larger the percentage of sales. The location’s visibility also needs to be taken into consideration. Also since car dealership involves vehicles, there needs to be enough space to display vehicles for the public.

7.Handle Your Inventory Properly 

You can track your car sales and get a good idea of which makes and models seem to have the quickest turn around. You need to identify what stock to purchase and when you would need it.

Secure financing

It is necessary to determine the cost of initial vehicle inventory and operating cost for 12 months. The financing opportunities available are to be determined. Visit a bank and find the opportunities available for the business.

  • A dealership involves lot of investment on designing, maintaining the showroom, in addition to spending on the inventory. In the case of used car dealers, a repair centre is also necessary.
  • Since employees will be hired, funds will be required to meet their payroll expenses every month.
  • If you borrow money, you’ll need to provide sufficient collateral for your loan. You may need to pledge personal assets as collateral to obtain your loan. The bank will also need to see detailed financial projections. These projections will explain how your business will generate a profit and repay the bank loan.
  • The building needs to be set with furniture, cubicles etc.

Find a location

It is required that you need a place to start a business. It is necessary to determine if you want to lease a place or purchase a commercial place for business. Since it is a car business, a large place would be needed to display vehicles. It should be ensured that the place suits your business needs and it complies with all the regulations.

Filling out Required Paperwork

It is required that necessary paper work be completed and the requirements of the local government are met. After receiving approval from your local government, you’ll need a surety bond, which you can secure based on your credit history.

Apply for a license.

A license is required to run a dealership business.  All the relevant legal documents that are required for the license need to be submitted. The licensing authority will inspect the premises to check if all the obligations have been met and only then grant the license.

Obtain inventory

In the case of used car dealers, the dealers can attend auctions conducted by local government agencies or banks to obtain vehicles that have been seized as part of criminal activity or nonpayment. You can maintain inventory levels by continuing to visit auctions as well as accepting trade-ins from customers seeking to purchase a vehicle from you.

Hire Staff

Recruit sales staff to work with customers and get them to purchase vehicles from your dealership. Hire a finance manager to set up customers with loans if you offer financing through your dealership

Promote your dealership

Utilize Internet advertising by developing your own website or Face book page. Place some of your best vehicles or deals near public roadways or sidewalks where people passing by can see them.

Regulatory Requirement

Every state would require that a license be obtained for the starting up of the business. A Car dealer sells many cars to different people in a year hence he needs a license to operate.

A surety bond will also be required to protect the car dealer against any kind of fraud.

Other Considerations

Most dealerships also offer car repairs along with auto parts sales. The parts and service side of the business—referred to as “fixed operations”—can be very profitable if managed correctly, so it’s wise not to overlook this part of the business.


The best way to keep customers is to work hard. If correct business decisions are made and all the procedures are followed appropriately, business can be successful.

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