Most people use a car for business or personal use.If you use a car, you need to have it serviced.Consumers need to seek out car dealers to buy and get their cars serviced.The cost of opening and operating a dealership can be millions of dollars.Think through the entire process before opening a car dealership.
Step 1: Market research is recommended.
Determining if there is a demand for your product or service is the first step in any business venture.To attract some of the customer demand, you need to determine the demand.Determine the number of cars sold in your area.The typical car buyer is willing to visit a dealership within 10 miles of their home.Determine the number of cars sold within a 10-mile circle of your proposed dealership.50,000 cars are sold in that area each year.You should research the purchases by category once you know the total number of cars.How many cars are purchased?How many cars are used and how many are new?You may be able to determine the number of cars by model.Take a look at the existing car dealers in the market.3,000 Hondas are sold in your area each year.You are looking at a Honda dealership.How many Honda dealers are in your area?Of the Hondas sold, how many were purchased by consumers who went online and bought a new car from a dealership outside of town?If there is a need for a new dealership in your market, this analysis can help.
Step 2: Determine who your ideal customer is.
Businesses need to identify their ideal customers.Your ideal customer is a summary of the characteristics that your best customers have in common.It is possible to design your business to meet the needs of the ideal customer.The age, gender, occupation, and income of the customers you are trying to attract should be looked at.You might want to open a Honda dealership.Determine the type of people who buy a Honda by doing some research.The ideal Honda customer is a male between the ages of 27 and 50 years old.The customer is a white-collar professional.A Honda customer has a family member who owns a Honda.Many car dealers give a service department and sell cars.Some people go to the car dealer to have their vehicle serviced.Find out where the ideal Honda customer gets their car serviced.They can either go to their dealership or their local repair shop.This information can be used to create a service department.
Step 3: The size of your market can be calculated.
To determine if there is enough demand for your product is the goal of dealership market research.You need to know the dollar amount of sales for your product, and estimate how much of that customer demand you can attract.3,000 new Hondas are sold in your area each year.You could also sell used Hondas, which sell 2,000 each year.Your market is 5,000 Hondas.Based on your research of existing car dealers and customer demand, you believe that your new dealership can attract 20% of the existing Honda car market.5,000 new and used car sales equates to 20% of the total.The average profit per car is assumed to be $500.If your dealership sold 1,000 cars, it would make $500,000 in profit.You estimate that your service department would make $300,000.The profit for your dealership would be $800,000.
Step 4: It is possible to open a franchise for your business.
Most of the larger car dealers are franchises.The franchisee pays a fee to the franchisor.You also sign a franchise agreement.A long process is needed to open a Honda dealership.If you want to open and operate a Honda dealership, Honda requires you to provide extensive financial disclosures.The franchisor gives you the right to use the Honda logo and other marketing tools to operate a franchise.You will be involved in local advertising and promotion of Honda cars.The process to supply your dealership with Honda cars will be agreed on by the franchisor.It gives your car dealership credibility if you enter into an agreement with a popular car brand.Sales can be generated by that credibility.There are many restrictions on how you can advertise and sell their cars in the franchise agreement.You have to follow the requirements to comply with the franchise agreement.
Step 5: Sell new cars, used cars or both.
Two types of consumers can be served if you sell both new and used cars.It will take a bigger investment of time and money to sell to both markets.Customers who want to spend less money on a vehicle will buy used cars from you.They can buy a used car instead of a new one.More service and maintenance is required for used cars.You might be able to grow your service business if you sell more used cars.A growing number of people shop for cars online.When a customer enters your dealership, they may have looked at 4 or 5 other dealerships.Competition for new car sales can be heavy.If you want to drive total car sales, you may need a used car department.
Step 6: Determine if there is a need for a service department.
Everyone needs to have his or her car serviced.A service department is a good way to build a relationship with a car owner.Customers who bought their vehicle somewhere else can develop relationships with you.They might buy their next car from you if you do a good job on their car.There is a need for service on your car.It is hard to be without a car while it is being fixed.Customer service can help reduce anxiety.Stay in touch with the customer after you service them.Emails and mailers are used to promote car sales.Your efforts will increase your chances of selling a car in the future.
Step 7: The costs needed to start a car dealership are listed.
It can take millions of dollars to open and operate a car dealership.Your inventory of cars will cost you the most.The cost of vehicles on your car lot is referred to as the floorplan.You will need to buy or lease property in addition to the cost of your floorplan.You might build a showroom or repair department on the property.The car company will charge an initial franchise fee if you operate a franchise.You will have to pay annual fees for your franchise agreement once you are operating.To explain new car features to customers, car dealers have to constantly train their employees.You pay a lot of costs for training.
Step 8: Do you want to finance the cost of your dealership?
It is a huge commitment to finance your dealership.You have to think about how you will find the money to open the dealership.The majority of car dealers finance their cars through a bank.The cars on the lot are used as security for the loan.Huge costs may be incurred to design and build a repair center.You may need to hire a lot of employees.Cash is required to meet payroll each month.If you are going to take out a loan, you need to be able to pay it back.If you want to get a loan, you may need to pledge personal assets.Financial projections will need to be seen by the bank.Projections show how your business will repay the bank loan.
Step 9: The regulatory requirement to start and operate a dealership should be considered.
There are requirements for your state, county, or city to operate a dealership.Many of these rules are put in place to protect consumers who are making a large investment in buying a car.You have to get a license to sell cars in your state.A car dealer who sells many cars a year will need a license.Building permits are required for your dealership to be built.Your state will require you to have several types of insurance.A surety bond is required for certain types of insurance.The bond is put in place to protect the car buyer from fraud.