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5 Golden Rules of Starting a Car Dealership

5 Golden Rules of Starting a Car Dealership

Your love of cars and business has led to the idea of beginning a car dealership. Thankfully, you have landed in a sector that offers easy accessibility and potentially ample financial rewards. Plus you don’t have to be a fanatic about motors – all it takes is the charm, passion, and marketing ability to start shifting cars off your lot.

Although before you can begin dreaming up witty opening lines and doing car deals, there are various aspects to take into account for launch. Below are five golden rules to follow when starting a car dealership.

New or Old?

One of the first decisions you need to make is simple: will you sell new or old cars?

The decision is simple in the sense that one option, new cars, requires a substantial initial outlay. This will usually scare off any newcomers to the dealership world, although selling new cars does generally come with much larger profit margins per sale.

While you won’t make much for each vehicle with a used car dealership, it does benefit in other ways. As already highlighted, it is much cheaper to start a dealership with used motors. As you will likely have less inventory – especially when starting up – property leasing will also be better for your bank balance.

Research the Market


Before you start planning on buying used cars, it’s vital you do your research. If you are already set on starting up in a certain town or city, analyze the local car market. Which brands are selling well? How much do the vehicles usually sell for?

It’s also advised to take a closer look at the local competition. See what they are doing right (or wrong), and implement this into your own strategy.

Choose the Right Location

When you have conducted research, you will have a clearer picture of where your dealership will be located. With that said, more should go into the decision than simply being situated in a town/city of your choice.

For example, you will want the business to be situated in a place where it is easily visible by potential customers. A corner lot positioned at a major intersection is the ideal scenario. Although beside a road also works – basically any location which isn’t too obscure or hard to find.

Arrange Licensing and Insurance


If you want to sell vehicles, you will first require a dealer’s license. The type of license you choose should be one that permits the opportunity to sell an unlimited amount of cars each year.
As for insurance, thankfully, there is an all-encompassing choice in the form of motor trade insurance. If you get motor trade insurance from Tradex, all vehicles under your dealership are covered. This means you can sell or purchase as many vehicles as you wish – and it won’t significantly affect your premium.

Get Your Business Plan in Order

When you’re armed with all the knowledge you need, the next step is to put your business plan together. This business plan should accurately reflect your costs, projections, company structure, and so on.

If you require financing from a lender, the business plan needs to be as detailed and truthful as possible. This will give you the best chance of securing the funds you need to start your car dealership dream.

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