Things to Consider When Starting a Dealership

The first thing to consider is space. Where will the dealership be? You need a space, preferably, with an interior large enough to showcase five cars. Of course this isn’t a necessity but showing cars inside the dealership will add to the showmanship of the sales floor and will definitely improve the ambiance of the entire dealership. Lot size is also a concern depending on how many cars you want to stock at one time.

Once a decision has been made on the property, you’ll have to obtain a several forms of insurance (surety bond, garage liability, worker’s compensation, etc.) and a line of credit for purchasing inventory. The requirements for these vary by state but are relatively inexpensive and easy to acquire providing you have no criminal record.

The next thing to consider is how to stock inventory. The amount of cars you need to purchase depends on money and the size of the lot and dealership. To buy cars for resale, you should register for an auction, which are available both in-person and online. But be careful here. If you overstock, you lose money, but if you under-stock you’ll be sitting at a dealership with no cars. Either could be fatal. And, particular attention should be paid to what cars are popular at the time. This small consideration can mean large fluxuations in your profit margin.

The main issue that requires the most thought and planning is the business model. This has to be airtight if the business is going to succeed and oftentimes auction houses require balance sheets before providing an auction license. This is a tough economic time so be conservative. But at the end of the day, if you have a stocked lot and all the documentation required to run a dealership, then go for it. There is a great deal of money to be made if this process is implemented correctly and the risk may be absolutely worth it.