What type of car dealership should I open?
The two basic options of car dealership types are new car dealership franchises or user car dealerships. While new car dealership franchises will generate more in sales, they also have more red tape, higher expenses to start and maintain inventory, and often come with some confusion from customers that you are in fact a part of the dealer corporation. New car dealerships can also sell used cars. Used car dealerships however have lower startup costs and less ongoing regulation, but you will have to exclusively sell used cards which can impact your margins significantly.
How much does it cost to start a car dealership?
Starting costs for a car dealership will differ significantly depending on if you are an independent used dealership or new franchise dealership. To start an independent used car dealership the biggest expenses will be your property which is typically $0.50 to $4.00 per square foot to rent, your beginning inventory which will be between $25,000 and $100,000 and then the first 3 months of salary for necessary employees. New dealerships have those same cost categories but each will likely be higher including an additional franchise free that can range from $30,000 to $500,000 depending on the brands you will be affiliated with.
What type of licenses are required to open a car dealership?
It is often overlooked what licenses and legal requirements there area for a car dealership to open and continue to operate. Each state or provincial government will require you to apply for a business and dealer's license. You'll likely need to pass a criminal background check from a licensing authority. Go through a training course and inspection from specific brand dealers. Obtain several different dealer license plates and follow full disclosure agreements about your knowledge of mechanical issues of your inventory. You'll also need to acquire insurance which you'll have to provide as well as likely have an auto dealer surety bond agreement in place.
Should my car dealership have a service department?
Service departments can be an expensive addition to a car dealership, but they can prove to become one of the most valuable sources of income and building customer relationships. Most obviously, it is likely your existing customers would use your service department if it is priced reasonably and provides good service so you have a built in audience. Your service center can also generate new potential car purchasing customers by providing good service to non-customers. If done poorly, however, the service department could be costly to your reputation.
