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Old 11-22-2007, 10:48 AM
10,672 posts, read 39,853,937 times
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Originally Posted by Nashcash23 View Post
Hi, I would like to one day open my own buisness and would like to ask a question. Is starting a car dealer costly? I would like to start my own new car dealer, but I am not sure how hard it would be to do that nor how much it would cost..
miu, I think the OP made his concern pretty clear about "new car dealer".

Futher concerns about buying and re-selling cars ...

1) there's a huge difference between finding a now-and-then "good deal" on your retail internet sources and having a continual supply of quality merchandise with an upside available to sustain a dealership sales volume. Do you honestly believe that you could find 10-20-30 (or more) cars per month that were "good deals" with enough upside remaining on each to sell through your dealership?

2) most states have clamped down on casual car dealers due to consumer fraud/liability/insurance/ethics/paperwork issues, as well as lost sales tax revenues from car transactions. For example, WY ... where I live ... used to allow a private individual to have 12 car transactions per year and be "private"; now it's only 3 transactions per year. More than that, and you are ... by law ... a "dealer", and must have a business location, insurance, bonding, and follow all the laws regarding title trail.

3) The dealer requirements are to protect the buying public from defective vehicles or fraud that are sold without accountability. So, more and more ... you simply can't be a "dealer" from your house on a casual basis. Zoning laws in many residential areas (as well as HOA's) prevent you from running a commercial business from your home. It's one thing if you're truly a private party selling a car you've owned for awhile for your personal use ... it's another situation entirely when you actively seek to buy/re-con/sell cars for an income without complying with motor vehicle dealer licensing laws. The states are aggressively shutting down those "casual dealers".

4) the days of dealing in cars with "open titles" in your inventory held for re-sale is long past in most states. Why? because the sales tax people want their due on each transfer of a vehicle, and the Motor Vehicle Dealers' Board wants control of cars sold on other than regular titles (to protect the public). Additionally, the Car Licensing department wants you to register/license/insure your cars in your name for public safety and revenue issues. The only way to avoid the registration issue is to truly be a car dealership, use dealer plates, and have correct dealer/business insurance.
They're trying to shut down those cars that are bought for re-sale, but driven on the streets without insurance on either no-plate or mis-used plates by a casual dealer.

5) We now have "S" titles, for example ... where a car has been "salvaged" for many possible reasons (theft recovery, physical damage, etc.). A lot of "great deal" cars are on "S" titles (or should be), or otherwise in pretty poor condition. Many people would not knowingly buy a car with an "S" title ... consider the huge number of cars coming out of flood damage situations ... many of these are seriously defective cars today, but still in the marketplace instead of at the crusher's. They may have safety, performance, and emissions issues which the general buying public cannot discern on looking at a well prepped and detailed car .... available at a back of retail market price.

As a pro repair shop, I, too, made a lot of money (years ago) taking a couple of wrecked/damaged cars and putting one back out on the street that was complete, correct, and proper (specialized in BMW's and MB's) ... but those days are long gone where the resulting car was titled on a regular title. I knew wholesalers who specialized in buying all the insurance salvage cars of these marques in several states for years, and then creating a serviceable car out of all the parts ... but again, that business is dead, long gone. "S" title cars don't sell very well in today's marketplace to knowledgeable buyers ... they have no manufacturer's warranty and aren't elegible for aftermarket warranties. Nor, in some states, be eligible for insurance. There's a lot of unknowns about these cars.

The bottom line is that the days of "casual" professional car dealings are rapidly coming to an end. With everybody from the EPA, DMV's, Sales Tax departments, manufacturer's liability issues, lenders, insurance/dealer bonding issues & public protection concerns all coming into play ....

I'd say "congratulations" on your success, miu, in finding and selling a car to your profit on a onesy-twosey basis, and the same for your friends who have apparently made a buck or two doing this. But there's a huge disconnect between doing this activity and sustaining a viable, profitable, dealership.

Oh ... and your friends with that car repair shop that turn a car or two now and then? In today's business/legal/DMV/insurance situation ... they're now a professional car dealership ... and need to have all of the overhead costs associated with that business met. If they don't, and your state DMV is on the ball ... they're looking at some rather prohibitive fines and loss of business license. Include in the list of people who would actively seek to shut them down the legitimate dealers who bear all those costs of a proper dealership and resent the intrusion upon their turf ....

The automotive world has moved on from the days of "horse trading" now and then. There's too much consumer/public liability at stake, too much tax revenue at stake ... and the states are aggressively seeking to regulate all of that to the benefit and protection of the car buying public.

Sidestep all those efforts and you might find yourself in very hot water with the regulating authorities in your state when the day comes that you've got a dissatisfied buyer (with cause or not) with a car you've sold who finds out that you've been acting as a dealer without proper business documentation and a legal place of business. It may get very expensive for you very quickly.

Last edited by sunsprit; 11-22-2007 at 11:02 AM..
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Old 11-27-2007, 07:38 PM
2 posts, read 40,244 times
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Originally Posted by miu View Post
I don't think that it'd be too difficult to start off with being a small used car dealership. But you'd better be very mechanically inclined. One just gets a dealer license, then buys used cars carefully through craigslist, auctions and other dealerships. Then you would want to go through the car completely and make sure that all the mechanical and electrical systems are sound. My old mechanics would occasionally sell a good used Honda purchased from their customers that they knew the history of. Then they would put in a fresh battery, change the fluids, replace the brake pads, make sure the catalytic converter isn't clogged and that the car would pass inspection. I believe that they sold those used cars with a 12 month warranty. And being a garage, it was no big deal for them to stand behind the car mechanically.

Otherwise to become a new car dealership would be very very expensive. And it would be easier to buy an existing franchise, than starting from scratch and staffing it.
I would like to get some information on probably starting my own small used car lot. I'm from a very small town, and have in the past been selling cars on the side and making a very good profit. But, that's before the laws have changed about buying and selling vehicle without a dealers licence etc. I really think in my area that I could do pretty good selling used veh. with high mileage at a good affordable price. I have even thought about owner financing vehicles. Give me some feedback or even direction on the next move. I know it's not easy finding good deal etc. I'm looking to do this on the side because I do work full time. reply back thank you
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Old 11-27-2007, 08:00 PM
2 posts, read 40,244 times
Reputation: 12
Default How to start a used car dealership

I would like some information on starting my own used car lot. Is there anyone with some helpful information. I have question plenty of question. How to purchase vehicle either thru pubic auctions vs. dealers auction. I have sold vehicle in the past just sitting them in the front yard, but time has changed and I would even like to expand and become a used car lot with maybe inhouse financing. Let we know what you think. Thank for your time
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Old 11-27-2007, 08:36 PM
10,672 posts, read 39,853,937 times
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Orlandodoc ... your approach to this business, as stated, is a little shaky.

You're either in this car business ... or you're not. Assuming that you do, in fact, comply with the dealership laws of your state with a retail business location, insurance, bonding, utilities, dealer plates, etc. ... you've now got a significant monthly fixed overhead expense. Even if it's inexpensive to open a business location in your "small town", you're also looking at a "small town" sales volume. And you've picked a specific niche market ... affordable high mileage cars.

As a pro dealer, you're now going to be held to a higher level of knowledge and performance than a private party selling their old high mileage car as is/where is. For example, a private party can sell a car that's not in compliance with FED Emissions standards ... while a dealership must sell cars that are in compliance (all required OE factory equipment in place and working within the model certified standards) or sell them as "tow away" (not roadworthy vehicle). You can't even give the new owner a "temporary license plate" for the "tow away" car, because it's not street legal. You, as the dealer, face substantial FEDERAL Fines for selling a car not legally compliant; in many states/locales, you'll also face State fines for a non-compliant vehicle without a current and valid emissions inspection. Don't try to get cute with this ... for example, a vehicle with a current emissions decal in the window but you know (or should have known as a dealer) that some equipment is not functioning which would disqualify it now. Most emissions inspection locales will require a new emissions inspection upon transfer of title ownership ... oh, that's another reason why the states are cracking down on "open title" sales. Let you state dealer board rep come out to your lot and find cars there for sale on open titles or without a title/bill of sale assigned to the dealership, and you'll soon be seeking the best lawyer in town to keep you out of significant fines and potential criminal charges.

So think ahead ... what are you going to do with the high mileage car that has legitimate faults discovered upon being placed into service by a buyer who bought the car in good faith from you? Are you (1) going to fix the car?, (2) refund the buyer's money and take the car back?, or (3) tell the buyer he bought it and it's his problem?

Having been in this business since 1964, I can assure you that unless you're prepared to stand behind the merchandise you sell, you'll not get a good reputation. Especially in a "small town" where the news of problems with your merchandise travels fast.

I don't believe that you can afford to stand behind high mileage cars today if you're buying them very cheaply and selling them at an "affordable" price point. There simply isn't that much margin to be made to afford your overhead and give you a decent ROI, day-in, day-out. This is almost a niche market dominated by the "buy here - pay here" used car lots ... who make most of their money preying upon folks who cannot otherwise afford a good car or have bad credit; these car lots make most of their money by selling cars for a modest down payment (which is typically about what they've got into the car) and then collecting weekly payments until the car gives out and is abandoned by the buyer or the buyer gives out and the car is re-possessed (to be sold again).

Think, also, about your "part-time" business with a full time overhead expense. Who will go to the wholesale car auctions to buy the merchandise? Who will show it to prospective car buyers during normal business hours? Who will do the title and legal paperwork, the F&I paperwork during normal business hours? Who will detail, prep, and clean the cars on the lot each day as needed every business day? Who will be the "buyer" when a private party car comes up in an ad, and must be seen/bought during normal business hours when you can get certified funds/cash and get a title (which may need to be released by a lender or other interested party to the title)? If you're doing on-site "buy here - pay here" car financing, who's going to keep after and collect the weekly payments? Who is going to do your repossessions? Who is going to work on the cars mechanical problems? Who will take care of the alignments, tires, and routine small items that can make/break a car sale (light bulbs, wiper blades, windshields, window regulators, squeaky brakes, etc., etc.)?

Again, the point I'm making is that you may have successfully bought and sold a few cars on what were essentially private deals (skirting around the dealership business laws), and found a "good buy" with a decent upside to it when you had no real business overhead, operating, and inventory expenses. Did you, in fact, have the car(s) you bought for resale titled into your name and pay all the sales/ownership taxes ... or did you transfer the cars on an "open title"?

That bears no relationship to the "real world" economics of turning your car interest into a business.

Now, OTOH, if you've got realistic answers to how you're going to consistently find cars, open a business location, operate a real business, have adequate operating and investment capital, and you believe there's a real market for your resales ... good luck to you. There is good money to be made ....
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Old 11-28-2007, 09:22 PM
Location: Nashville,Tn
355 posts, read 2,430,106 times
Reputation: 260
Default Thanks everyone.

It's the O.P. here. I'd like to thank you all for your comments. I never realized how much a car dealer could cost. I was just thinking about opening my own business once I leave my dentistry practice. I have also thought about opening a restaurant of some kind. The car dealer idea is out.
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Old 11-29-2007, 02:22 PM
10,672 posts, read 39,853,937 times
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NashC ... now you're really into the "fire from the frying pan".

Opening a restaurant from scratch is one of the most popular ways to lose lots of money known to mankind. It's the highest failure rate business in the country, even by folks who are seasoned pro's in the business with full knowledge of every aspect of the game for many years.

Unless you have strong people management skills, hospitality skills, marketing skills, business skills, some culinary skills, a good labor supply, and a burning desire to work an incredible number of hours every week ... a job purchased with your investment dollars ... you'd be better off just taking a briefcase full of your cash and tossing it into the woodstove and be done with it. You'd get a warm happy feeling for awhile and there'd be a foreseeable and predictable outcome for your money and the process would happen with a lot less brain damage.

You'd have a substantially better chance of a return on your money by taking all of it to a casino and putting all on one simple bet on the roulette wheel ... and a better ROI, too, if it paid off.

IMO, if you've got a substantial amount of discretionary investment money burning a hole in your pocket from your current profession and you need a business to invest into, I'd suggest you seek out a competent investment counselor. Even with conservative investments today, you'd have the income stream to go play at the recreation you really enjoy .... or find a going business that needs a "silent partner" investor where you might be able to bring your capital and existing skills to the benefit of the business.

The last thing you want to do is to start out in a tough, capital intensive, expensive and high risk business in an area of which you have no expertise ..... unless you want to invest as a silent partner in a modest organic/natural lamb production ranch business, in which case I have a low profitability opportunity for you here in Wyoming. If the coyotes quit eating our profits, we might even make a few dollars next year as we are expanding our operation now.

Last edited by sunsprit; 11-29-2007 at 02:31 PM..
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Old 11-29-2007, 02:57 PM
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
19,650 posts, read 35,943,812 times
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Originally Posted by sunsprit View Post
NashC ... now you're really into the "fire from the frying pan".

Opening a restaurant from scratch is one of the most popular ways to lose lots of money known to mankind. ....
so true,

x-professionals that I've found to be happy and well taken care of,... sell their businesses and retain the commercial property for a very nice monthly cash flow. A good friend that lives near Sunsprit sold his business in Long Beach in 1968 and now collects well over $10k/month in rent from just that one property (which was paid off in 1970). He has lived 2000 miles away for 40 yrs, and has not had significant issues. Commercial tenants need to keep the property up to retain their business, and they pay triple net rent to cover the escalating taxes and utilities.

If you desire to do the car thing OR the food joint, do yourself a favor and help someone out that is in the industry. As Sunsprit mentioned in 'the other' restaurant post... it is better to learn the ropes on someone else's nickel / dime / $1,000,000 capital investment... There are some really interesting career / investment opportunities in 'angel investing' that probably don't have as much risk as food service. While there are droves of folks flocking to alternative energy, it is a good opportunity and something that would make one's time / expertise of higher social value. I find working with professionals in that field very encouraging and an interactive learning process. Energy is of global interest, so very enlightening to pursue when traveling internationally. (as is food service, but not autos... Europe gets the really good cars...USA consumer taste is far too generic to be much fun)

good luck with finding your niche,
lamb production is a lifelong learning process and will absorb lots of capital. Or if you like buffalo, it sounds like Ted Turner might need some help on his newest spread in NE. (he owns 475,000 acres in NE alone ! ?? Wow, tough on the ole time ranchers having to pay increased taxes!)
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Old 05-26-2009, 01:31 PM
1 posts, read 18,436 times
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Default Auto Info

There is a DVD coming out very soon, maybe in the next 3-4 weeks called either THE BEST TIME TO OWN AN INDEPENDENT DEALERSHIP OR THE SIX MOST IMPORTANT STEPS TO PLANNING A DEALERSHIP. It will be sold everywhere, wal mart, amazon, barns & nobel etc... Look out for it.
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Old 05-26-2009, 04:38 PM
10,672 posts, read 39,853,937 times
Reputation: 13518
Originally Posted by autoinfo View Post
There is a DVD coming out very soon, maybe in the next 3-4 weeks called either THE BEST TIME TO OWN AN INDEPENDENT DEALERSHIP OR THE SIX MOST IMPORTANT STEPS TO PLANNING A DEALERSHIP. It will be sold everywhere, wal mart, amazon, barns & nobel etc... Look out for it.
Yeah! What a great time to enter this industry!

There's only a couple of savvy long term operators out there with experience, funding, connections ... who are being curtailed by their manufacturers. All of them are just going to go home and give up, right?

I don't think so. They know the car business very well and will be providing independent sales and service to that market segment that the manufacturer's are abandoning at this time. They've got locations, finances, reputations, equipment, advertising, and long term track records of service and business dealings.

While there's lots of opportunities in the aftermarket at this time, I think the manufacturers are channeling a lot of very capable and qualified people already in the business into that segment. I think they'll be taking the lion's share of the aftermarket away from the smaller independents in a lot of markets.
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Old 05-26-2009, 07:39 PM
Location: Houston, Texas
10,425 posts, read 42,824,369 times
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Originally Posted by autoinfo View Post
There is a DVD coming out very soon, maybe in the next 3-4 weeks called either THE BEST TIME TO OWN AN INDEPENDENT DEALERSHIP OR THE SIX MOST IMPORTANT STEPS TO PLANNING A DEALERSHIP. It will be sold everywhere, wal mart, amazon, barns & nobel etc... Look out for it.
First of all, you are responding to a post so old it is growing fur. Second, what a completely ridicules thing to say. We are in a falling economic depresson. The big 3 auto manufacturers are forcing many independant dealers to close down. With 10 million jobs lost in the past 2 years, who the hell can afford to buy a new car? And you think now is a good time to open a car dealer? There is not a bank on the face of the earth who would loan money for this losing venture. Even if a lender raised their hand to the task, no car manufacturer would give a floor plan.

So who is going to buy this book? How many people among us 300 million Americans would buy this book? Maybe 3?
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