Do you want to start a used car dealership business? Find in this article step by step guide to starting a successful used car selling business.
Used car dealership business is a profitable business worldwide. In the United States, less than 30% of car purchases are for new vehicles. More than 70% of people prefer to buy used cars. The reason for selling a used car is primarily because of the too high purchase cost of new vehicles. The other reason is the fast depreciation of new vehicles. The moment someone buys a new vehicle, the selling price of the new vehicle reduces by 10% or more and then steadily depreciates with time.
Used car dealership business can be started from home with little or no money. Here in this article, we guide you step by step in starting a successfully used car dealership business.
Steps to Follow to Start a Used Car Dealership Business
1. Understand the Market
Research the local market as much as you can. Unless there is a local demand for used cars, making a good profit out of the business is going to be difficult. Talk to car dealers and existing car repairing shopowners and collect information of car trading.
You also must research which cars are selling most of their model numbers.
2. Create a Business Plan for your Used Car Business
Developing a business plan is essential for starting a used car selling distribution business. More so, if you are looking for finance in funding your project.
2. Choose the Location
It is the most important decision main part of starting a used car dealership business. You need a good amount of parking space to display your cars for sale to the customers. There is also a need for an indoor space for office work. Therefore, it is extremely critical to estimate how many cars you intend to display and thereby select the space accordingly.
It is preferred to have a good frontage for your dealership location.
2. Buy Used Cars
There are two most important entities in the used car selling business. One is the one where you will source the used car and the other one is the buyer who will buy that car.
You must create an effective network of sourcing used cars. Talk to car repairing shop owners, mechanics, independent car owners. Attend auctions wherever you find happening.
3. Talk to Financial Institution
Calculate your start-up costs. Broadly you will be in need of money buying vehicle inventory and working capital cost for at least 12 months. Talk to financial institutions or money lending companies and place your loan requirements.
4. Find a Location for your Business
Finding a proper location is extremely critical in making car selling business profitable. You need to find a location where you can have your office as well as sufficient space to display cars to customers.
A commercial location is always preferred. However, check your finances, how much you can afford and then talk to real estate brokers and let them know your requirement.
5. Business Structure
Before you approach for permits and licenses, you need to decide on the business structure of your used car dealership business. You can start as a sole proprietorship or partnership if you have someone.
6. Arrange Licences & Permits
Talk to local authorities and learn what kind of licenses and permissions are required to start a legally compliant car dealership business in your locality. It is advised to talk to a consultant and get the job done.
Also, check your used car dealership abides by the Federal Used Car Rule. In addition to this, you follow the Consumer Rights and Safety laws, and used car dealership lemon laws.
7. Hire Manpower
If you are yourself a car mechanic, then u may not require the same to start your used car selling business. But if you are not then hiring a car mechanic is a must. You need someone to check the cars you are purchasing or selling. It will help you in setting the right buying and selling price of cars.
Other manpower u will need will be an accountant and sales personnel.
8. Promote your Used Car Selling Business
Networking is the key to be successful in this business. Having presentable sales personnel with good communication skill goes a long way in converting prospects into buyers. Consider creating a media kit for your business.
You can also place an advertisement in the local newspaper and magazines. In today’s world having your own website is a must. It also helps in creating more confidence in your reputation in the customer’s mind.