Guidelines for aspiring car dealers – how to open a dealership

You’re not the only car enthusiast who dreams of becoming a car dealer. And you have many reasons to start a business in the automotive industry because it’s one of the titans of the world economy. There will always be a need for cars (new and used), at least until people come up with a more efficient mean of transportation. Who knows, maybe one day we’ll get from London to Barcelona in 10 seconds with the help of a portal? But for now, vehicles are the best way of traveling on short distances. 

The need for cars puts dealers in the position of consistently being in demand. But it doesn’t mean there are no challenges. From finding the right audience to picking the right models of cars and finding a dealership, there are plenty of obstacles. 

Even if no one can provide a full proof business model, some guidelines may give you the basics of starting a successful car dealership. Let’s discover them

Evaluate the market

If you plan to sell used cars, you need to evaluate the local market to determine if there’s a demand for used vehicles. Don’t limit to your town; research how many used cars are sold within a 20-mile radius. When people are looking for a car to buy, they’re willing to travel short distances to get one. 

To have a better understanding of the market, refine the search to identify the types of vehicles people prefer. Write down the most sold brands and models. 

And don’t forget to check the competition, take a look at the other dealerships in your area and the vehicles they sell. Do they have both a physical site and a website? What services do they provide?

Identify the target public

If you want to attract buyers, tailor your services to their needs. Understand who they are, what their needs are, what vehicles they prefer, and how much they are willing to spend on buying a used car. 

Once you identify the types of cars you’ll be selling; you can also search for the age, gender, family structure, and income of the average buyer. These details help you determine what the best methods are to market your services. Don’t make assumptions when you start a business. Base your decisions on real data. 

Your public determines the services you provide. For example, families don’t buy sports cars, they prefer vans and sedans. Lately, more and more families prefer SUVs because they provide enhanced security and reliability. 

Have you ever considered franchising?

You’re new in the industry, and it can prove challenging to compete with seasoned dealers. But if you choose the franchise route, you associate your name with an established and popular brand. Alongside the brand recognition you get when working with a franchise, you also sign franchise agreements with automotive manufacturers that provide you with high-quality used cars and supply you with marketing materials and established branding. 

But for a franchise to accept you as a member you need to prove you are a resourceful and talented dealer who can boost their sales. 

Research to find the costs associated with running a franchise dealership because the process involves some fees. 

Pick a physical location

Even if online research is the first step when searching for a used car, people always visit the dealership to inspect the vehicle before closing the deal. The location of your dealership influences the number of sales and profit you make. Some areas are more profitable because they provide a better business climate. 

So how can you say what place is right for opening a dealership? Check the costs associated with opening the dealership, the average yearly sales of the other dealers located there, the average payroll costs and the employee salaries. 

Constructing the dealership site close to a busy town is a smart move because it encourages clients to visit you. When starting a dealership in a state with harsh winters, it’s wise to construct a building to roll up the vehicles during rain and snow. Your clients don’t want to freeze walking through cars and inspecting them. A closed space offers comfort and attracts buyers. A company like UK Forks can help you construct the building because they rent telehandlers that can transport large materials. A dealership building should be high and spacious to allow natural light to enter. Natural light is crucial when selling cars because it enhances their look. 

Your first instinct may tell you to open the dealership in the most profitable area, but there’s a downside to this decision. In some regions, despite high demand for vehicles, the business conditions aren’t optimal because of the crime rate, payroll expenses and GDP growth. And if you start a company in a business-friendly state, you’ll get plenty of competition. 

The type of dealership you want to open and the model of vehicles you wish to sell, determine the perfect location for your venture.      

You need business and financial plans

When you try to put together the dealership puzzle, the business and financial plans are two critical pieces. They include information with regard to the goals, budget, location and type of business you want to start. These plans tell you how to run the business and how to finance it. 

To develop an effective business plan, you need to focus on the following aspects:

  • Business strategy
  • Business vision
  • Business structure
  • Product range
  • Market and SWOT analysis
  • Employees number
  • Location
  • Expenses
  • Marketing 

If this is the first business you develop, consult a specialist to help you put together a business plan. Before contacting them for creating a business plan, think why you need it. Do you need a strategic plan to guide you during the process? Do you need it to convince investors to fund your business? Do you want to get a business plan? 

The same goes for your financial plan. You need to present all the business details to prove that your dealership is profitable. 

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