How To Open a Car Dealership

Car salesman

Opening a car dealership requires many things. Like other businesses, you need a lot of capital, a great location, sales experience and people skills to be successful. There is a lot of money to be made if you know what to do.

Here are some basics on how to open a car dealership.

  1. You must meet the requirements to open a dealership. You must be of legal age and have no criminal record. You must have the required documents and permits to start your business. These vary by state. You need to be a licensed dealer if you want to sell more than five cars a year. Go to the Department of Motor Vehicles to get a dealership license.
  2. Get a motor vehicle dealer bond. This is a surety bond for your business. It is valued between $10,000 to $50,000, depending on your state requirements. You need an MVD bond to be issued a dealership bond by the DMV. There are companies that specifically issue Auto Dealer Bonds. You may check online for a list of resources.
  3. Get financing for your business venture. You need capital to start your business to pay for the lease of your space, purchase office equipment and pay for fees and insurance you need. Talk to your bank for a business loan. You will also need to establish a floor plan or line of credit so you can buy inventory. There are specific companies that provide floor plans for auto dealerships.
  4. Register for auction. Let the auction place know you are a new dealership. This will allow you to purchase vehicles to sell in your lot and is open only to registered auto dealers. To be able to register, you will need to present your dealership license, the MVD bond and your business financial statements
  5. Get liability insurance. You may talk to the company that issued you the surety bond. You need indemnity protection not just for protection for calamities and disasters, but also in case of lawsuits brought against you in the course of your business.
  6. Find a location. There should be enough space on the lot to handle your inventory of cars. You should be able to park at least five cars but the more the better, plus have ample space for customer parking. It should be in a commercial area but easily accessible by residents in the area. Allow for an office building where you will conduct your business.
  7. Hire your personnel and set up the office. You need an office administrator, someone to handle accounting and sales people. Your sales people need to have a valid driver’s license since they will move the cars around on the lots and go on test drives. You will need an accounting system in your office. There are specific computer programs used by auto dealerships to track sales, invoices, accounts payable and receivables and inventory.
  8. Ensure that the paperwork of the vehicles is complete and accurate. You need buyer’s order, buyer’s agreement, odometer readings of the vehicle, transfer title documents and other forms needed to sell the vehicle. You must also have your dealer tags, and any other decals.
  9. Educate yourself. Learn ways and tools to develop and market your business. There are different resources to teach you promotional strategies. The auto market is dynamic and competitive so learn ways to develop new customers.

Once you get your dealership open, maintain an honest reputation to be successful. Good luck!


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