How to Start a Car Dealership

How to Start a Car Dealership

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How to Start a Car Dealership Business

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

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

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

How Big is the Car Dealership Industry?

There are 18,391 car dealerships in the U.S.with revenues of $834.4 billion.

What External Factors Affect the Car Dealership industry?

A number of factors affect the performance of the car dealership industry. These drivers include:

Consumer Confidence Index – It is expected that consumer confidence index will increase as the economy recovered and unemployment reduced making consumers willing to make big purchases like a new vehicle resulting to potential opportunity for the industry.

Average age of vehicle fleet – Increase in the age of vehicle means suppressed demands for new vehicles. When a rise in disposable income and demand for affordable fuel-efficient vehicle increases, average age of vehicle decrease all at the same time. But since quality of vehicles has improved and can now last longer in running condition it is then expected that average age of fleet will shoot up.

Yield on 10-year Treasury note – The yield on 10-year treasury note is expected to increase as automobiles are usually financed, therefore the need will likely regress and interest rate is expected to flow and change. Reason behind financing vehicle becomes costly due to high interest rate.

Per Capita Disposable Income – When there’s a high disposable income expect a high discretionary spending however this is also the time where consumers’ is confident to go and get debt-funded consumption such as buying new vehicle. It is then expected that per capita disposable income will as well increase at any time.

Automotive Market Trends



Who are the Key Competitors in the Car Dealership Industry?

In the U.S. there are only two major competitors in the car dealership industry and they are as follows:

  • AutoNation Inc.
  • Penskie Automotive Group Inc.


What are the Key Costs in the Car Dealership Industry?

Purchases – An overwhelming majority of revenue by new car dealers is spend on inventory purchases. These are vehicles held for sale.

Wages – New car dealerships require salespeople, technicians and office workers to operate. Labor costs have slowly declined over the past five years, reflecting the increasing use of automation by industry operators. Parts and repair service workers account for a growing share of revenue and payroll..

Marketing and Advertising – Beyond wages and purchases, new car dealers must maintain substantial advertising efforts to draw in customers. According to the NADA, the average advertising cost per-vehicle-sold was $654.00.

Why Should Auto Dealers Care About Social Media & Reviews



What are the Keys to Launching a New Car Dealership?

1. Do Your Research
It is important as first step to figure out your market before opening a new car dealership business. Part of your market research includes number of prospects in the area, types of cars purchased by category, and if there is competition in the area.

2. Choose Your Location
One of the biggest initial investments that you need to make concerns your retail location. In some states, you are obliged to have a physical office, while in others, you can start without it. Your retail location can be just a showroom, or a showroom plus a service center.

3. Deciding the Type of Dealership you want to open
Decide what type of car dealership you plan to start. Car dealerships can be franchises, selling new cars or used cars or it can be both. Also, evaluate if a service department is needed along with your car dealership enterprise.

4. Obtain Proper Financing
This is the most crucial part of starting a car dealership business. Make sure that you are well funded since car dealerships are one of the most expensive start ups. Consider all types of financing that can help you best in getting you the amount of money you need to start the business.

5. License and Bonding
An indispensable requirement to start your dealership’s operation is obtaining your auto dealer license. As with other items on this list, the licensing fees vary greatly between states. In some states, you need to pay additionally for dealer plates and licensed salespersons.
Obtaining a motor vehicle dealer bond is required by all states in order to get licensed as an auto dealer. This is a surety bond that guarantees your business’s compliance with state regulations.

6. Market Your Product
Employ an integrated strategy that will reach your target market segments. Utilize marketing, public relations, sales and advertising efforts to gain brand recognition and ultimately drive revenue.

How to Identify and Leverage Local Influencers to Drive Car Dealership Sales


What are the Typical Startup Costs for a Car Dealership?

Estimate start-up costs for a new car dealership are approximately $100,000 – $1,000,000.

How much do Car Dealership operators make?

New car dealers typically make around two or three percent of either the invoice or the sticker price of the car.

Online Reputation


Helpful Videos

Getting Started In The Car Sales Business – How To Be Successful Selling Cars

How to Close a Sale – 5 Reason Clients Don’t Buy

How To Sell 30 Cars A Month – Car Sales Training – Become A 30 Cars A Month Sales Person



Additional resources in the Car Dealership Industry

For additional information on the car dealership market, consider these industry resources:

 

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How to Start a Car Dealership
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