With some exceptions in specific urban pockets, America is a car culture. Selling passenger vehicles is a good way to make serious money, even in 2023. It’s never a sure thing, though, so you need to know what’s involved in starting your own car dealership.
5 Tips for Starting a Car Dealership of Your Own This Year
The sheer volatility of the current auto market makes it a very interesting time to start a car dealership, so you should know what you’re getting into in advance.
- New, Used, or Both: Many dealerships before the current backlogs and shortages dealt only in one or the other, but many have blended their lineups just to have inventory available at all times. Figure out what kind of cars, trucks, and SUVs you want to sell.
- Service Center or No: You have to have a mechanic or garage to take care of your inventory, but will you also offer service center appointments to customers?
- Cozy Up to a Competitor: This one might seem counter-intuitive, but if you can, put your dealership right beside another one. Anyone out car shopping is going to love the chance to just walk over to another lot and keep looking around on the same trip.
- Advertise: While high visibility on a busy road helps people see your business, you can’t rely on consumers that pass by your dealership on a regular basis to be all your business. For one thing, many of them already have cars or trucks. You have to do market outreach to everyone in your area, especially those that don’t have a reliable ride they use every day.
- Emphasize Customer Service: Anyplace a customer buys a car from is going to be a place where they spend lots of money, possibly tens of thousands. If they’re going to actually make the decision to do that, they’re only going to reward a place that treats them better than any other. Your dealership’s customer service can make or break your business.
Don’t Just Be Local
One advantage that modern dealerships have over car sellers of decades past is the ability to do business more than just locally. You can use car shipping companies in New York or other states to both have vehicles brought to your dealership and delivered to your customers. With its high population, there are lots of people selling cars in New York online that you might be able to use to fill the spaces in your dealership lot, particularly if they’re moving to urban areas where they won’t need a car anymore. Likewise, if your dealership is located in a cheaper part of the country, you might be able to sell your vehicles to New York residents who want a cheaper deal than they might find locally, depending on the shipping costs.
According to TRUiC, one aspect of starting a car dealership that many don’t know about is how they have to get bonded. Regulations vary from state to state, but there can be several different kinds of bonds that might apply based on the kind of dealership you decide to establish.
These surety bonds are basically designed to make sure that both the state and customers are defrauded by a dealership. A DMV bond is a common starting point, but there might also be specific bonds for dealers who work with used cars, wholesale cars, RVs, and even motorcycles.
The costs and fees of these bonds will vary on several factors. How much you need each bond to be will matter a lot, and your own personal credit score and financial credentials will determine many things. Whether you choose to finance your premiums can also have a considerable impact on your start-up costs.
There’s Money to Be Made
Some entrepreneurs are thinking about dealerships right now because passenger vehicle values are so high. However, inventory is also really tight. Prices are likely to stabilize as time goes on, but that doesn’t mean there’s less money to be made. In fact, it means inventory will be easier to procure and there will be more people buying vehicles as prices come down.