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How to Start a Car Dealership When You're Low on Cash


July 24, 2019 ( Newswire) Starting a car dealership sounds capital-intensive, which may discourage the average Joe. You may be thinking that starting a dealership would require you to lease a place, buy a couple (or a lot) of cars, pay for insurance, run operational costs, and still have to put money aside for advertising and marketing. That sounds like a lot of things to take care of - things that will cost a lot of money before you're able to sell one car.

You'll be glad to know that starting a dealership doesn't have to leave you penniless. There are ways to set up dealerships that provide all the great services people love, on a budget. Here are some things you should know beforehand.

New vs used cars

A dealership that sells new cars enjoys higher profit margins but is expensive to set up. In other words, this may not be an ideal option for someone low on cash. Used car dealerships, on the other hand, require less in terms of startup costs, but also offer lower profit margins. These margins, however, are not too low that turning profits becomes a problem.

The average American buys used cars. This is because the cost of new cars are above the price range of the majority of people. About 40 million used cars were sold in 2018 alone, so while used car businesses may turn lower profits per sale, they have the numbers to make up for it. Used car sales constitute 50 percent of all automobile sales in the US.

The middleman

Unlike selling new cars where you'd have to get in touch with manufacturers who'll be willing to supply you, pay premium insurance for all motors delivered to your site and all other hassles that come with it, you can opt to be a middleman who merely facilitates sales of used cars between sellers and buyers.

In some cases, you may not need to purchase the vehicles you aim to sell. You only need to get in touch with both parties and negotiate the deal. This rests on the condition that your dealership is known for providing quality services.

On the other hand, you could purchase used cars for affordable prices and sell them at a markup on a lot. There are several companies and businesses that auction auto wholesale. These are called dealer auctions and they are a great tool for any successful auto dealer.

Create a business plan

After deciding what type of vehicles to sell and where to get them from, you can then move into action. A dealership, like all other businesses, requires a plan. You need to know how much it costs to start a dealership. You'll need to carry out a market analysis, cost and profit projections, a SWOT analysis, and create a business structure. In addition, you'll need to be familiar with marketing, accounting, and management, and because you are trying to start your dealership with minimum costs possible, it may not be in your budget to hire personnel with these expertise.

You can, however, learn these skills and obtain a degree - you don't even have to spend tens of thousands of dollars to do so. Online universities and regular universities that offer courses at an affordable price. You can get an online business degree and handle all your business' accounting, marketing, and management tasks yourself. With such options, you won't have to waste time driving to campus or even limiting yourself to local options. Instead, you'll be able to make the most of technology and enroll in a reputable program while you operate your business.

Position your business

Positioning your business involves setting up your business to take advantage of market trends. It could also mean getting a suitable, physical location like setting up your dealership in a low income areas where people cannot afford new cars.

Different states require different legal documents, licenses, and permits before operations may begin. You can find out what the documents for your location are and how to obtain them.

Starting a car dealership is never completely free or cheap, but the costs can be greatly mitigated if you take all these points into consideration and read up on the industry.

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