A new or used car dealership is a business that buys and sells cars. Car dealership businesses are very complex with many moving parts, including inventory, staff hiring/training, financing options, marketing strategies, and more. A successful car dealership will have the following components: an eye-catching showroom; quality vehicles at competitive prices; experienced salespeople who can close deals quickly; satisfied customers who come back for repeat purchases or referrals.
Car dealerships are expensive to start because of the large investments in inventory, real estate, technology infrastructure, and staff training. It’s common for startup dealerships to borrow money from banks, but some owners try to fund their own dealers without any financing help. Most dealerships rely on local advertising to attract customers, but some dealers have found success with national advertising campaigns.
The following guide is intended to present an overview of what it takes to start a car dealership, from concept development to the grand opening. If you’re thinking about becoming a car dealer, get more information on how to get started and how much it costs in our comprehensive new car dealership guide. If you’d rather just browse through our inventory of new or used cars for sale, we’ve got plenty of options there as well.
How much does it cost to open a new car dealership? How do I finance my business? What are the startup expenses? Here’s what you need to know when evaluating your potential startup costs—whether you plan to finance your startup yourself or seek outside financing.
New Car Dealership Startup Costs – An Overview
New car dealership costs vary greatly by region, sales volume, and whether you plan to work with a financial partner. On one end of the spectrum, low-volume dealers need just $50,000 in capital to get started; on the other end of the spectrum, well-established luxury brands cost $10 million- $15 million in startup costs. For franchise dealerships, total investment can well exceed $20 million. A new or used dealership typically requires between $1 million and $5 million to open its doors (more for high-end brands).
How much it takes to start a car dealership will depend upon factors: real estate location size of inventory financing options available advertising budget staffing needs. In most cases, you will need to have a net worth of at least $1 million and liquid assets between $300,000 and $500,000 to qualify for a small business loan from a bank. Your credit history will be a major determining factor in the approval process as well. If you don’t have a proven track record of relevant experience, you might consider partnering with an experienced car dealer who has the capital needed to finance your dealership’s startup costs.
How Much Does It Cost To Ship Cars
You can start a used car dealership from the ground up with no capital by buying cars at an auction and financing each sale. In most cases, you would purchase cars on an in-house dealer consignment contract for a cash price that is slightly higher than wholesale value. Your gross profit margin will be small, but it’s possible to make a good living in sales and finance without any capital. Once your business grows, you can add inventory including new car trades, manufacturer buy-backs, and certified pre-owned autos sold via outside advertising.
With the change in car buying over the past years, more people are now searching for their next vehicle online rather than on foot through local dealerships. This isn’t necessarily a bad thing since it allows everyone to find exactly what they’re looking for with ease and convenience, but it does present an interesting challenge for dealerships that want to stay afloat in today’s market. If you’re a dealership looking to ship nationwide cars to your place of business and customers as well, this article by Montway gives a great overview of car shipping quotes.
Car transportation is a great way for dealerships to attract customers outside of their geographical location while simultaneously boosting traffic and sales to their dealership, but how much does it cost? While people searching online for a new car may be located across the country from your dealership, they will still pay top dollar for a car that you ship to their door.
Running a car dealership can be a lucrative business if you take all the right steps when starting it, and then continuing to improve on your processes over time. Follow these steps, and you can break into the car dealership business.