USED CAR DEALERSHIP BUSINESS

Getting a new import car dealership up to speed can be slow. You must secure financing for millions of dollars in property and comply with state, federal and local laws before opening an import car dealership. Don’t expect to hand the keys to your first buyer soon, either. The average car dealership requires $11.3 million for real estate, inventory and working capital, according to a 2008 study for the National Automobile Dealers Association. As of 2010, 17,700 new-vehicle dealerships collectively employed 892,300 workers for a total of $42 billion, or an average of $2.39 million per dealership, according to the NADA. Imported cars must meet federal emissions standards as well as other environmental and safety regulations. Expect a long ride before you make your first sale.

Step 1

Research the local market and its economic conditions using the U.S. Small Business Association's compilation of useful sites (see Resources). Focus on the number of potential buyers and their average income so that you may identify the best cars to sell by price as well as the location that is closest to the most potential customers.

Step 2

Write a business plan that includes all of the expenses for running your import car dealership as well as its potential sales and profits. Include all importing certifications, insurance, capital expenditures and operating costs. Also include a marketing plan so that you and any potential lenders or investors will know how you will hit your sales goals.

Step 3

Contact the National Highway Traffic Safety Administration at 202-366-5322 for information on becoming a registered importer or check its guide in Resources. You cannot import a car made outside of the U.S. unless it was originally manufactured to comply with all federal motor vehicle safety standards, the National Highway Traffic Safety Administration decides that it can be altered to meet those regulations, or you are a registered importer or contracted with one that can modify the automobile so that it complies with federal standards. If you sell new cars for a major foreign manufacturer, its automobiles should already meet federal motor vehicle safety standards.

Step 4

Review your choices for foreign manufacturers by using the National Automobile Dealers Association’s NADA Dealer/Manufacturer Industry Relations Yearbook (see Resources). The yearbook includes the number of U.S. dealerships for each major manufacturer as well as the number of cars sold and telephone numbers for additional information. Consider which makes and models may sell best in your market as well as the most attractive terms and locations that manufacturers may offer.

Step 5

Seek financing. Manufacturers may require you to invest at least 15 percent of the costs of a dealership. Ask your manufacturer about financing options. Also look for private lenders who would help you based upon your business plan and common underwriting factors such as credit scores. Pursue floor plan financing to buy cars, using them as collateral. Align the actual borrowing costs with those you projected in your business plan as closely as possible.

Step 6

Build out your dealership and order your first cars. Hire sales and service staff. Start promoting your dealership through advertising. In 2009, the average dealership spent $2.35 million on payroll; $292,010 on advertising and $398,456 on rent and equivalent, according to the NADA. Average sales were $26.38 million, including new and used cars and service. Net profit before taxes was $398,067.

 

Customers attraction

Incentives

Incentives such as a free lunch or tickets to a movie with every test drive draw customers to your showroom. While many tire-kickers may come just for the rewards, you'll greatly increase the number of real potential buyers, too. Offer loyalty reward points that current customers can use for additional rebates and deals when they return. Provide your current customers with incentives such as cash or a free tank of gas to make referrals. Advertise your incentives and mix them up for variety. Give away a set of floor mats with every new car purchase one week and two free oil changes the next week. Build a buzz about your place that has the community wondering what you'll come up with next.

Do More

Provide other special offers that car buyers often look for when making a purchase. With options such as an onsite repair shop and a slew of outside financing options, you can attract customers who need more than just the car. Build partnerships with a wide range of financial institutions so you can offer customers with bad credit options for financing as well as prime lenders, who can give the best rates to those who qualify. Market your service department separately to develop another sector from which you can draw new car buyers.

Training

An effective sales staff does more than just stand around and wait, looking eager and well-groomed. With sufficient training and the proper tools, your sales staff can generate traffic just as well as your weekly newspaper ads, even better in many cases. Require salespeople to make cold calls, to utilize lead-generation companies and participate in local networking events where they can generate business. Insist that salespeople follow up on every sale and maintain a relationship with customers. They should send out birthday and holiday cards, call to check up on how the car is doing and give current customers a heads-up on specials and new products. Every time a salesperson talks to a current or potential customer, they also should be trained to ask for referrals.

Product

While it may be expensive, you've got to keep a healthy, balanced inventory on hand that gives drive-by customers something to ponder. A well-stocked lot, filled with the latest models, a variety of colors and options, and a deep inventory of used cars attracts customers with the message that you have something for everyone. Keep the latest models on hand for curious shoppers to test drive. Time your purchases to coincide with manufacturer roll-outs and national advertising campaigns. When a customer sees the latest model on a Super Bowl commercial, for example, you need to have it on hand the following Monday for all the shoppers whose interest is at an all-time high.