Starting a Car Dealership Business

Summary: Are you thinking of going into the business of selling new or used cars? Then this guide is for you. Learn the ways you can start and operate a car dealership business, what licenses to secure so you can operate legally, how much potential yearly earnings to expect and more.

You can start a car dealership business by selling new cars, getting a franchise to sell some manufacturer’s new and used cars, selling used cars bought wholesale or brokering the sale of cars.

Car dealership here means selling or trading of cars for profit. It is different from being a salesman or an employee of a particular company and working by commission.

You can become a car dealer by owning a local franchise to sell cars in your area. As a franchiser you are protected by franchise laws regarding competition with the franchiser and against abuses such as abrupt closure when a car manufacturer decides to phase out some models. New car dealers don’t get as much cut for the sales they make and so they often extend their income generating potential by repairing and maintaining old cars. The industry touts an average of close to $200,000 yearly in profits for selling less than five cars a week.

Getting a Car Dealer License

If you go the other way, you can enter into this trade by selling or brokering the sale of used cars. Usually, independent car dealers start as sales people for a car dealer. Then they rent a lot to display used cars for sale. The most discussed subject in this area is obtaining a car dealer license. A dealer license allows the holder to buy used cars in wholesale or new cars with closed bids. You can find plenty of resources in the Internet to help you get a car dealer license. To ensure you are getting the right information, go to the Web site of your state Department of Motor Vehicles.

Among the requirements for getting a car dealership license is attendance in a dealer education program by your state DMV, passing their exam and their background investigation for possible convictions or crime related to vehicle dealership. Accurate disclosure in your application, therefore, is extremely important when applying for a license. Your place of business will also be inspected to see whether it is established and not temporary, and used regularly for the business. Your books and records will also be inspected as well as the signage advertising the business. The signage is required to be permanent and in compliance with local zoning or licensing requirements.

Brokering Used Cars

The requirements for obtaining a license as a used car broker is the same as that of somebody operating with an open lot. The established place of business in this sense could still be a lot or a broker's office. This is the same for someone wanting to operate an online car dealership.