Many grow up dreaming of fixing up their own cars, or even having their own auto dealerships where they sell or maintain cars for other people.
Did you know starting your own auto dealership can take millions of dollars? Before you start the process of this long-term investment, think things through carefully using this helpful guide.
First things First: Financial Planning
1. Figure out how much it will cost to start your dealership
As noted above, the typical dealership requires millions of dollars to open and operate. Your biggest cost will be car inventory.
Your Floorplan
Floorplan refers to the cost of the vehicles you have on your lot.
Property
You will need to build or renovate buildings on your property for a showroom and possible repair department.
Security/Surveillance
Auto dealership security is a necessity to prevent theft and vandalism on your property. Look for security companies that offer the most up-to-date, 24/7 remote video monitoring solutions for auto dealer surveillance.
Franchise Fees
If you are part of a franchise, you will owe the company an initial franchise fee plus pay annual fees as part of your franchise agreement.
Employee Training Costs
Car dealers have to constantly train their employees on new car features so that they can explain them to customers, and the employees must be paid for their time.
2. Decide How you will Finance your Dealership
Loans
Think carefully about where you will get the money to start your dealership. Most dealerships work with a bank with the cars on the lot serving as collateral for a loan. The bank will need you to show detailed financial projections, so be prepared to provide this type of data.
Next, Assess Customer Needs
1. Do Market Research
- Figure out how many cars are sold within a 10-mile radius of your proposed dealership
- Then, research those purchases by category. How many of those are cars, and how many are SUVs? How many are new and used? Etc.
- Consider the number of existing dealerships in your market. If you are considering a Volvo dealership, how many Volver dealers are there?
2. Determine your Ideal Customer
Your ideal customer is a summary of the traits your best customers have in common. Identifying the ideal customer helps you shape your business to meet their needs.
Demographic Traits
Look at things like age, gender, education, occupation, and income level of your ideal customer.
Historical Data
Look at the information on the kinds of people who have bought what you’re selling (Volvo’s, etc.) in the past.
3. Assess the Level of Demand
There are scholarly articles available for free, as well as paid automobile demand tools available for download, which can help you use math to determine if there is sufficient demand for a new dealership in your proposed area.
Decide what Kind of Dealership you want to Open
1. Franchises
Nearly all the larger car dealerships, especially those with recognizable names, are franchises.
To open a Volvo franchise, for example, Volvo require you to provide “extensive financial disclosures to determine if you have the financial means to open and operate a Volvo dealership.”
The franchiser grants you the right to use the Volvo logo and other marketing tools to operate the franchise. The franchiser is responsible for providing you with Volvo cars. You are responsible for things like auto dealership security surveillance.
In sum, if you enter into a franchise agreement with a popular brand, it lends you credibility in the marketplace. However, it comes with many restrictions.
2. New or Used
Selling both types of cars will appeal to more customers, but it requires a greater investment of time and money.
Used Cars
Used cars typically require more service and maintenance, so if you sell used cars you have the opportunity to grow your repair business.
New Cars
New Cars cost more, obviously, so you will earn more money by selling them. They also have a better image.
3. Service Departments
Even if you only sell new cars, everyone needs to get his or her car serviced eventually.
Relationship Building
Opening a service department is a good way to build ongoing relationships with your customers. You can also foster relationships with customers who come to you having bought their cars somewhere else. If they like you, they may even buy their next car from you.
Keep in Touch
After you service someone’s car, make sure to stay in contact with them. Promote your car sales and service business through email, social media, and mailers to increase the chances of seeing them again.
Elite Interactive Solutions offers the best options in auto dealership surveillance. Elite’s Remote Video Monitoring system involves highly trained professional, security professionals responding to live, high quality video information about what is happening on your property in real time. Contact Elite today to learn more about a security system for your dealership.
