Starting Up A Used Car Business
If you are interested in starting up a used car business, you first need to know that the difference between a used car dealer and a private auto dealer is the number of units sold annually. Every state in the US has a precise limit on the cars that can be sold by a private person before they need a car dealer’s license. This legal issue is only one aspect of how to run a used car business that can entice new entrepreneurs. A used car dealer must find a property, get sales assistance and hire a good mechanic for making money in this tough business.
The first step would be to start searching for the area where the dealership will be. It is advisable to search for a commercially area lot that is relatively flat in order to make paving and construction of the dealership not only easier, but more relaxing on the wallet. Do not forget to keep copies of all the documents that you obtained during the purchase and closing process in order to help you during the acquisition of the license.
The next obvious step would be to get the dealer’s license which can be obtained from the DMV in your state. Most of the states in the US require passage of a written test, an application fee as well as a completed application before obtaining the license. Just as well, you might need to have the deed to your proposed lot as some of the states in the country will limit the dealer’s licenses to legitimate business entrepreneurs.
In order to fully protect your potential customers from shady auto deals as well as to meet the local state requirements, it is highly advisable to get a surety bond of at least $25,000 of coverage. These bonds will protect your clients from lemon cars or other vehicles that have hidden problems. Some states will require a renewal of the bond at certain moments for administrative purposes.
If you want to get a solid inventory right from the start you should go to wholesale car auctions where you will find some good deals if you know what to look for. Such auto auctions will allow you the possibility to gather various cars, SUVs and trucks from different car manufacturers for a greater selection on your personal lot, increasing your chances for a solid sale. Other places where you could grow your vehicle inventory would have to be at police auctions, private auctions and estate sales.
Your next step in starting up a used car business would have to be to think about whether your dealership will purchase and trade used vehicles from community members. Although you will still be capable of holding the inventory level at a steady figure with buybacks and trades, the condition of these cars might not live up to your expectations. For this reason, it is highly advisable to get a copy of the famous Kelley Blue Book and figure out if you can meet a portion of the listed price tag on cars in your collection. If you are not able to offer substantial amount on the newer cars, it is advisable to bypass purchases in the early days of the business.
Don’t forget to get in contact with one of the local banks in the city in order to establish a professional relationship as a primary car lender for your dealership. Make sure that the same loan representative will work on all of the purchases you make so that it will speed up the transaction for your customers. In case some of the customers have certain questions, it would be recommended to have bank information and loan applications at hand to offer the necessary answers.
To ease your efforts, it would be wise to acquire the services of a mechanic as well as a salesman. The first one will be responsible for checking the cars on a regular basis, ensuring that they are in a good condition when the customers leave with them from the car lot. The salesman should work during the night and on weekends as these are considered to be the peak hours of the week.
It is highly recommended to scale down the vehicle advertisements so that you will be able to attract the target audience. For catching the eye of local drivers, try to use an interesting logo, sidewalk signs and colorful streamers. If you feel the necessity to expand outside of the neighborhood, you should submit small ads both for alternative newspapers and the weekday editions of the daily newspapers in order to keep your costs to a minimum level.
It is best to give the tax, expenses and sales figures information to a certified accountant in order to avoid late tax payments penalties. You will be obliged to pay business taxes, property tax as well as other fees. Try to find an accountant that has experience in the auto industry so that you can avoid confusion over invoices and purchase documents.
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