How to Start a Used Car Business

Growthink.com How to Start a Used Car Business

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If you’re looking to open or start a Used Car Dealership, you’ve come to the right place, since we’re going to show you exactly how to do it.

We’ll start with key Used Car Dealership industry fundamentals like how big the industry is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Used Car Dealership, but succeeding in it!

Before we continue, here’s where you can access your car dealership business plan template since having a plan will be key to your success.
 

How Big is the Used Car Dealership Industry?

IBISWorld reports the Used Car Dealership industry has had a net decline over the past five years, due to the Coronavirus, at an average annual rate of -1.6%. In 2020, the industry’s 129,553 businesses are forecast to see $99.1 billion in collective revenue.

 

What are the Key Segments of the Used Car Dealership Industry?

Used cars account for over half of industry revenue. This excludes vans, minivans, and trucks.

The remainder of industry revenue is generated from other used vehicles, parts and repair services, and financing and insurance..

 

Facts About Used Cars

 

What External Factors Affect the Used Car Dealership Industry?

A number of factors affect the performance of the Used Car Dealership industry. These drivers include:

Per capita disposable income – When consumers have more money to spend, they become more willing to spend on expensive discretionary items, such as used cars. 

Price of new cars – Buying a used car is a more affordable alternative to purchasing a new car. 

Aggregate household debt – Consumers are still less likely to invest in nondiscretionary items such as cars when debt is high. 

Average age of vehicle fleet – As the average age of vehicle fleets increases, it represents greater pent-up demand for vehicles. 

World price of crude oil – High gasoline prices tend to decrease new and used vehicle sales.  

 

How to Finish Your Used Car Dealership Business Plan

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Used Car Dealership Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

 

Who are the Key Competitors in the Used Car Dealership Industry?

The Used Car Dealers industry is highly fragmented, with nonemploying dealerships representing more than 80.0% of establishments in 2020. As a result, the industry exhibits a low level of market share concentration, with the four largest operators accounting for an estimated 19.3% of industry revenue in 2020. In fact, just one company holds significant market share in the Used Car Dealership: CarMax, with a 17.9% marketshare leads the industry, while America’s CarMart, Carvana Co., and Enterprise Car Sales each command just a fraction of the market.

 

What are the Key Customer Segments in the Used Car Dealership Industry?

The largest customer segment (37.5%) in the Used Car Dealership industry is consumers who have prime credit scores. Other segments include Subprime, Nonprime, Super prime, and Deep subprime customers.

 

What are the Key Costs in the Used Car Dealership Industry?

Purchases are the greatest expense for Used Car Dealers, and account for over 84% of revenue. In addition to purchasing used cars at auction and from customer trade-ins, used car dealers must also repair and recondition these vehicles.

Wages are also a major expense, but increased automation with regard to inventory management and online cataloging has resulted in minimal wage growth.

Marketing costs can be significant for used car dealers. According to the National Independent Auto Dealers Association, car dealers spend 33.6% of their marketing budget on internet advertising.

 

What are the Keys to Launching a New Used Car Dealership?

Decide what type of Used Car Dealership you want to open: Chain Used Car Dealership, Franchised Used Car Dealership, Independent Used Car Dealership, Online Used Car Dealership, etc.

Research your competition. Know what your competitors are selling, for how much, and then make sure you plan to offer something they don’t.

Find a great location. Car dealerships tend to be more successful when they locate in or near new developments, and in high-traffic areas. 

Have a business plan. This will help you set goals and give you a roadmap for achieving those goals. It will also help if you plan to approach potential investors.

Legal considerations. Find out the regulations for running your dealership. You will need to know the specifics of the regulations concerning consumer protection laws before you open your dealership. Obtain the required licenses and certifications. 

 

What are the typical startup costs for a new Used Car Dealership?

Initial startup costs:

  • Building lease or purchase and renovation
  • Equipment and professional installation
  • Store fixtures and office equipment and supplies
  • Licensing
  • Surety bond

 

Ongoing expenses:

  • Inventory purchases
  • Inventory repairs / service
  • Wages
  • Marketing
  • Leases for building and/or equipment
  • Equipment and building maintenance

 

How to Finish Your Used Car Dealership Business Plan

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Used Car Dealership Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

 

How much do Used Car Dealership operators make?

 

Advice for Used Car Dealers

 

Growing a Successful Used Car Dealership

 

Startup Car Dealership Success Story

 

Used Car Dealership Merchandising Examples

 

Additional Resources in the Used Car Dealership Industry

For additional information on the Used Car Dealership industry, consider these industry resources:

National Alliance of Buy Here Pay Here Dealers www.bhphinfo.com

National Automobile Dealers Association www.nada.org

National Independent Automobile Dealers Association www.niada.com

Used Car News www.usedcarnews.com 

 

How to Finish Your Used Car Dealership Business Plan

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Used Car Dealership Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

 

 

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