Opening or starting a car dealership business requires a lot of careful and meticulous planning. Future dealers need to take into consideration the specific legal requirements that they need to comply when opening a dealership business in their area.
They also need to consider other aspects of the industry, including the local market, whether they are planning to offer brand new, second hand or a combination of the two, what expenses they will be facing, and how to organize and develop a reliable and effective business plan.
Future business owners need to consider all the areas mentioned and more if they want their business to succeed and keep going for a long, long time. Listed below are some of the essential things people need to consider when starting a car dealership business.
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Location
The location of the business has a significant impact on how many sales and how much profit you can make every year. Some areas are more profitable than others, and it can provide a better business climate to make it successful. What makes and area an excellent place to open a car dealership?
The cost of related to opening this type of venture, average annual sales, as well as the average weekly staff salaries in the area and payroll cost, are all crucial factors that future owners need to consider carefully. At the same time, there are some downsides to opening this kind of enterprise in profitable states or areas in general.
For example, despite a huge demand in bigger cities or states, conditions are not always easy or optimal. Entrepreneurs also need to factor in the GDP or gross domestic product growth, yearly payroll expenses, operating or overhead costs, as well as the crime rate in the area.
Not only that, if they do succeed in opening a dealership in these business-friendly areas, but they also need to compete with a lot of competition. In picking the location, entrepreneurs also need to think about the kind of dealership they are planning to open. NADAs or the National Automobile Dealers Association‘s annual and mid-year reports can offer owners a lot of vital information to make informed choices.
Kind of dealership
Entrepreneurs need to know what type of car dealership they want to open, whether they are planning to open a new or a franchised car dealership, or if they are planning to specialize in secondhand automobiles, exclusive foreign, or luxury cars. It is related to the area of the business, as well as its target market. Some areas in the United States, like Florida, are known to prefer Asian brands over American ones.
When it comes to pre-owned vehicles, while most states preferred pickup trucks, other areas in the United States prefer buying Sports Utility Vehicles or SUVs and crossover cars instead. In other words, knowing local preference will be very important to the success of the dealership.
Another thing entrepreneur need to consider at this point is whether they would want to include a shop that can offer repair work and maintenance work. According to the National Automobile Dealers Association data report, part sales and services all over the United States have nearly doubled or tripled their sales or earnings for the past eight years.
It resulted in a total of $115 billion in sales for brand-new vehicle dealerships. It could be a great source of added income for the business. One of the essential things to bear in mind is that whatever future entrepreneurs choose will determine whether the enterprise will be successful or not in the future.
For example, starting a new automobile dealership requires a large amount of money as a startup budget, while a used-car dealership requires less capital to start and operate. Still, it is less likely to produce adequate sales or profit. To know more and understand about dealerships – whether it is for brand-new or used auto – and what makes them great, you can read articles, social media post or check out forum sites. Make sure to equip yourself with information before making the leap.
Licensing
When applying for a license, you need to provide a bond, usually a surety bond in a specific amount, which usually the amount of maximum compensation that the bond can cover in case of claims against the bond. Knowing and understanding state and federal laws that cover the business is practically a way to stay out of any costly claims.
According to the Federal Trade Commission’s Used Vehicle Rule, owners need to create a Buyer’s Guide for each car they are selling that includes different types of important information related to the vehicle, the business, and car warranty. Not doing it can result in penalties that can be disadvantageous for the owner in some instances.
On the other hand, lemon laws, although they are usually mistaken to apply to dealers, the rule applies to defective automobile manufacturers. Second hand vehicle lemon laws can apply to the buyers only if they are located in states that implemented this law. These states include New York, New Mexico, New Jersey, Minnesota, Massachusetts, and Connecticut. Some states also have warranty requirements for used car sales, so you need to make sure to consider this.
