How to Start a Car Dealership Business in 10 Steps

If you have a thing for automobiles, then you can consider starting a car dealership business. As a car dealer, you sell different brands of cars to people. There is always and will continue to be a high demand for new and used cars. As a car dealership business owner, you sell cars that match your consumer’s specifications.

Is Car Dealership Business For You?

How do you know if a car dealership business is for you? A car dealership business is for you;

a. If you have a thing for cars. For instance, you are always fascinated and follow happenings in the auto industry. Also, you know about cars manufactured in the last few cars and can say more than a few things about each make.

b. Also, you must be good at selling to become a good car dealer. Most times, you have to convince a consumer why a particular car or brand is good for him or her.

Also read: How to Write a Business Proposal Like A Professional

Factors to Consider When Starting a Car Dealership Business:

Before starting a dealership business, there are some factors you need to figure out first. These factors will shape the way you run your business. They include

a. Your Clientele: Who will be your clients? Your clients will determine the brand and make of car you sell. For instance, if your clients are high-income earners, then you will sell super luxury and sports cars. If your clientele is made up of average income earners, then you will have to sell used cars. Ensure you figure out your consumer before you start.

b. New or Used Cars: The second thing you have to figure out is if you are going to sell new or used cars. Both new and used car dealerships are profitable. The major difference is that the capital requirement for starting a new car dealership business is on the high side. Also, the profit margin for used cars is on the low side.

c. Car Make: Will you sell a particular car make or different makes? This is another thing you have to figure out before you start a car dealership. The make of a car is the brand of the car.

How to Start a Car Dealership Business in 10 Steps

Step 1: Business Plan:

A business plan is the first step to starting a car dealership business. A business plan is a document where you outline every aspect of your business. A business plan is an essential part of your business because it serves as a map for growing your business. Also, if you intend to raise funds from investors or banks for your business, they request for a business plan most times. What are the contents of your business plan? Your business plan for a car dealership business should contain information like your financial projection, competitions, and brand formation. Also, you have to outline milestones to achieve in your business both short-term and long-term.

Step 2: Incorporate the Business:

The next step is to handle the legal aspect of your business. To run a car dealership business, you need to incorporate or register your business as a company. But first, you have to choose a business structure for your business. A business structure is how you intend to run your business. You can learn more about business structure from this post. After you’ve chosen a business plan, go ahead and incorporate your business. Before incorporation, remember to draw up all the necessary documents like the Articles of Incorporation for filing. Also, if you intend to start a used car dealership, remember to observe provisions of laws like the Consumer Rights and Safety Laws and the Federal Used Car Rules.

Also read: Business Structure: Types of Business Structures

Step 3: Obtain the Necessary Licenses:

To become a car dealer in most states, you have to obtain some licenses to run your business. They type of license you need for your business depends on whether you want to sell used or new cars. Also you need to consider if you intend to sell as retail or a wholesaler. For instance, to want to become a major used car dealer, you need to obtain the used car dealer license. This license removes the limit on the number of cars you sell annually. Some licenses you need to start a car dealership business are, used car dealership license, new car dealer license, wholesaler license, rebuilder license, reconditioner license. Ensure you apply for and obtain these licenses before you start your business.

Step 4: Obtain Bonds:

In addition to obtaining the necessary licenses, there is a need get a surety bond in most states. The bond is designed to protect the state and consumer against fraud. The type of bond you pay for depends on factors similar to that of obtaining a license. Types of bonds available for car dealers are, used car dealer bond, wholesale car dealer bond, DMV bond, RV bond, and motorcycle dealer bond.

Steps 5: Go for Business Insurance:

The next step is to go for business insurance. You need a business license to cover for liabilities and damages you incur in the process of running your business. General liability insurance comes in handy in this business.

Step 6: Obtain a Business Bank Account:

There is a need to keep your finances separate from personal funds. Thus, you have to open a business or corporate bank account for your business. This post outlines the process of opening a business bank account for your company.

Step 7: Choose a Location:

One factor that is very important in this type of business is your location. The location of your business matters a lot and can determine the success of your business. You have to find a site that is accessible, visible and with less competition. A car dealership located in a busy location will perform better than a similar dealership in a countryside. Getting such a location requires high financial commitment, but it is an investment that is profitable to your business growth.

Step 8: Hire your Team:

It is possible to run a car dealership alone on a small scale, but that will be super stressful for you. This is the time to hire your team. For starters, you need to hire a sales team. Always look out for track record of past performance before you hire.

Also read: Simple Ways to Finance your Small Business or Startup

Step 9: Tax:

You owe it the government at the state and federal level to pay your tax. Your business structure determines how your business is taxed. Always ensure that your tax is well taken care of to avoid issues with the law.

Step 10: Promote your Business:

There is a need to promote your business to bring in sales. First, you have to create a brand for your business. That will involve creating a website, company logo, and presence on major social media platforms. Also, your sales team will go a long way to promote your business. You can also sponsor an event in your community as a way to promote your business. Check out this post on creative ways to market a small business.