If vehicles are one of your passions – if not your only passion – then running your own used car dealership has probably crossed your mind.
However, owning a used car dealership is not a walk in the park or drive on the freeway; it’s nothing smooth, and it comes with a hefty price. So, if you’re asking how much does it cost to start a used car dealership, then you’ve come to the right place.
This is a crucial post if you’re really planning to start a used car dealership. Creating a business this large is not simple, you need extensive research and viable options for your finances and logistics. Since we’ve been working with many used car dealerships across the country (and soon Canada), we already have a big deal of second-hand information regarding how much it would cost for one to start a used car dealership.
The Cost To Start A Used Car Dealership
Are you ready to start on this business venture? Or do you work for someone who is considering putting up one? If yes, then the very first thing to consider is the cost of starting the business. Not all business niches are alike, so you must first get the idea before presenting it to a business partner.
On average, the cost to start a used car dealership is more or less a hundred thousand US dollars.
However, you shouldn’t start by asking how much it costs to start a used car dealership. Instead, you should focus on the most essential aspects of the business, consider predicting the cost. Knowing how much money you should shell out as a whole won’t help you. In fact, it would only increase the chances of going over your proposed budget. When you first start with the little things, you would have a better idea of how much you should really place on your budget.
To help you out with that, here are the vital car dealership aspects that you should take into account when you build your budget to start your own car dealership.
Rental Property For Displaying Vehicles
This is the first and foremost aspect of your business that you should consider budgeting before anything else. If you already have your own place for that, then skip this. If not, you have to consider the size of the property.
How big should it be? Does it have a vast parking lot to display the vehicles? Does the property come with a garage and space to hold business? Most rental property owners use per square feet when they rent out car dealership spaces so plan accordingly.
Beginning Inventory
How many cars should you have as starters? This is crucial since you have to consider your property if all your vehicles can fit in it. If you know how much you would display at a time, then stick to that budget. Most car dealerships spare up to $100,000 for their starting inventory alone.
Employees
Unless you’re planning to display three to five cars at once, you need some staff to look over your business. You should think of hiring mechanics, salespeople, and a bookkeeper among others. Do research on how much you should pay each of your employees and save a budget for six months worth their salary. That way, you’d be able to give them pay even when your business is still picking up speed in the beginning.
Office Stuff
Office equipment such as printers, phones, and computers are needed nowadays. Without these office items, it’d be difficult to track sales and communicate with potential customers. For these items, you need to have around $5,000, depending on the type and technology you want.
Dealer’s License
A dealer’s license is needed and should be added to the essential costs to start a used car dealership. Almost all states require a dealer license for each type of vehicle you sell. That’s why it’s important to know what types of vehicles you sell, be it cars, trucks, or recreational vehicles. Most licenses average between $100 to $200, but sometimes it can go higher. In Texas, for example, a dealer’s license costs around $700.
Dealer Plates
You can’t just offer customers a test drive. You need a dealer license plate before your potential customer can take it for a ride around the neighborhood. Depending on which state you’re from, a dealer plate can cost you more or less $100 each. Do your research first before placing a budget for plates.
Marketing Materials
Your business won’t kick off if you’re not going to let everyone know about it. Marketing materials vary, and you should check which marketing strategy that would seem significant in your area. Some will go for the traditional type of advertising materials, such as TV and print, while some go for the modern route, which utilizes social media. Either way, it helps create awareness for your brand so people will come and do business with you.
Surety Bonds
Surety bonds are equally crucial for protecting your customers’ interest when they do business with your used car dealership. Most insurance companies require dealerships to have a $25,000 surety bond intact. Each bond varies between 1% and 3% of the value.
Business Formation Fees
Last but not least, to start a used car dealership there are business formation fees. A used car dealership is still a business, and therefore you need to register for a business license. State departments require entities to form either an LLC, a partnership, or a corporation. Fees to form a business vary from state to state, but it averages around $1,000.
Before You Go
Although used car dealerships haven’t changed much when it comes to products and services, a lot has changed. It’s not like the used car dealerships three decades ago, the ones we’ve all come to know. Back then, the costs of used car dealerships can be returned within just a few months. It’s because, during this time, dealers could simply buy cars at auctions and sell them right away with a good profit. Nowadays, used car dealerships struggle with increased costs and will continue to be that way for the years to come.
The best way for used car dealers to keep the business thriving is to cut down costs. And one way to cut down used car dealership costs is to take advantage of new technology. If you have no idea how to do it yet, below are some ways to use technology to your car dealership’s advantage. Please note that these may be additional costs to start up a used car dealership, but its returns can be exponentially high once you optimize its benefits.
Create A Website
A website is a business’s best weapon when it comes to marketing. When you have a used car dealership, you will have plenty of competition around your area, unless you’re lucky. For you to perform above half of your competition, a well-designed website can help. That said, you need to make sure that your website has all the information a prospective buyer needs to know. Also, make sure that the design complements your brand.
Be Visible In Social Media
Most social media platforms are free to use, so that’s already a great thing. One would spend hundreds, even thousands of dollars just to send a message across to customers in a day. Now, with social media platforms such as Facebook and Instagram, you would be able to interact with people without taking too much money from your pocket. Though these platforms are free, if you want to optimize the effect, there are specific options that you have to buy from them. So, use these options accordingly.
Use A Recon Tool Software App
A reconditioning tool software app allows you to check on the recon tool anytime, anywhere, by just using your device. With this software, you can save time by going from department to department to check on your used vehicles. You can also earn more profit using this device by selling cars even when they’re in the recon process. To learn more about this reconditioning software tool, click on the link.
