The automotive industry is one of the fastest-growing industries in the world. The size of the industry is currently valued at about $5 trillion to $9 trillion. It’s expected to reach $9 trillion by 2030, which indicates a healthy compound annual growth for investors willing to join the industry. Additionally, about 65 million units of vehicles were sold in 2020 alone. This was lower than units sold during the industry’s peak year in 2017 (80 million units sold), but poor sales were attributed to the pandemic. Despite this, 65 million units sold is still a lot of revenue coming from this particular sector, and it shows no signs of slowing down.
Many investors and entrepreneurs are joining the industry. They enter through various means. The wealthiest invest in well-known car manufacturers, while those who are not-so-wealthy start their dealerships. The majority of Americans can’t afford to invest millions of dollars into a particular business, and chances are, the reason why you are reading this article is to see if you can start your dealership. Well, if you love cars and you love selling them, then you’ve come to the right place. The typical cost for starting a car dealership is $11 million, but these kinds of dealerships are the big ones you see on TV. You can start a dealership without needing millions of dollars. You have to choose the right dealership for you.
Used Vs. New Car Dealerships
There are two main types of car dealerships. There are new car dealerships and used car dealerships. Both vary in many ways.
First, let’s discuss start-up costs. If you want to start a new car dealership, you will spend millions of dollars in investment. Most likely than not, you’ll spend near the usual cost of starting a dealership. If you really want to do this and don’t have the money for it, look for investors. Most new car dealerships are corporate-owned and, in some instances, part of a bigger chain. Many are looking for automotive franchise opportunities, and you could easily be one of these people. Franchises are the best way to go for used car dealerships because they don’t have a high overhead cost. You also don’t need to buy brand new vehicles into the dealership. The franchise does it for you. All you need is to invest a decent amount of money and manage the franchise while also giving a percentage of your revenue to it if you don’t have the money for a car dealership looking for a franchise.
The next one is used car dealerships. This particular dealership is much cheaper than the previous dealership we have discussed since you will be relying primarily on trade-ins. Technically, all you need to do is find a decent place to start your dealership, have a couple of trade-ins, and you’re good to go! You can even help your fellow neighbors sell their cars through your dealership. This is the best way to start if you want to enter the industry.
Start a Partnership With Your Local Manufacturer
If you’ve started an independent new car dealership, you’ll have to partner with your local manufacturer. If you’ve started a used car dealership, skip this step.
As an independent new car dealership, you’re not going to survive by yourself. Cars can cost millions of dollars as a part of your inventory. Maintaining them each year will cost you a million more. The only way you can get through this is by partnering with a car manufacturer, preferably someone nearby. Partnering with a manufacturer can lead to discounted prices, which means you can sell your inventory at a lower cost. If you choose to sell only a particular brand of vehicles, that manufacturer can lease you some earlier models. There are a lot of benefits to partnering with a manufacturer, so make sure you do it.
Market Your Dealership
Once you’ve started your dealership, it’s time to market it the best way you can. Most dealerships start marketing locally. Some rely on word-of-mouth, mainly used car dealerships. But what you can do is to let some of your employees hand out flyers. You can also register your dealership in Google, so it’ll be easier to find. Make sure that you spend a decent chunk of your first-year revenue on marketing your dealership because, without this necessary investment, you’ll be losing clients. Remember that your clients in this industry will only be coming back a couple of times, so you’ll need to reach new clients whenever you can.
Here are some things you should know when you’re starting your own car dealership. Starting a dealership can be quite stressful, but you can easily manage it yourself by choosing the right dealership. Just make sure you know your overhead cost and that you don’t get too many expenses.