Broadly speaking, a car dealer is a company or organization that sells, services, and finances vehicles. While you’ve probably seen car makers’ names on dealerships before, you don't have to be an automotive manufacturer to own a car dealership.

Owning a car dealership can be a lucrative business. You can make a profit through the sale of vehicles, by offering regularly scheduled maintenance services¹, and by operating your own financing and insurance (F&I) department. 

Running this type of business can also be rewarding. You'll be your own boss, and you'll be part of the exciting automotive industry and get to work with the latest technologies and trends.

Starting a Car Dealership From Scratch

Starting your own independent dealership can be daunting, but a little planning and guidance can set you on your way. The key steps to launching a new dealership include: 

• Licensing: Obtaining the right to operate an independent car dealership by completing the relevant licensing requirements in your state.
• Start-up funding: Getting the money you need to launch your business 
• Marketing: Making sure your independent dealership is driving sales and business through the door. 

Success begins with a clear plan, and that plan starts with some version of these easy-to-remember steps. 

Creating the Best Business Plan for Your Goals

No business can get off the ground without a solid business plan in place. A car dealership is a serious investment, and it requires sound strategy from the outset. 

Your business plan should cover²:

• Details about your company and your team
• Your target market area and how you will approach it
• Your market strategy (what sets you apart from the competition)
• Your financial costs and earnings projection

This plan will be the platform from which you launch your independent dealership. 

Obtaining Financing for Your Dealership

You'd be surprised at how many entrepreneurs turn away from owning a car dealership because they think they can't afford it. But a car dealership is like any other business venture in that you can explore a variety of finance options. These include: 

• Outside investors
• Business loans
• Equity partners 

Just make sure you have a clear idea of the startup and running costs associated with opening your own car dealership. Then, present that information to finance outlets in a clear and confident way. 

The costs you'll have to take into consideration when launching your independent dealership include[3]: 

• Business registration 
• Car dealer license 
• Rent/property purchase 
• Payroll 
• Inventory cost 
• Office fit-out and signage 
• Dealership bond

The good news is that these costs can often be financed through a business loan, an investment round, or even through your personal savings. Some costs, like the dealership bond, can be financed directly. For example, California requires a $50,000 surety bond for registered independent auto dealers, but bond companies offer this for as little as $500 a year, depending on your credit score[4].

Get a Dealer License

Almost every state requires auto dealers to obtain a dealer license before they can sell vehicles. This license is designed to protect consumers by ensuring adequate competence and accountability from car dealers. In most cases, you'll need to complete a course and exam and pay a licensing fee. The process varies by state, so start by looking at the department of licensing or colleges in your state. 

You may also have to register your business with the IRS, the Better Business Bureau, and possibly the Federal Trade Commission[5].

Research the Automotive Market Before You Begin

Take a close look at the latest automotive industry trends to see how your dealership can capitalize on the current state of the market. Will you go fully electric or provide a variety of engine types? Do you want to specialize in a particular brand or is there too much competition in your target area?

You can find statistical data online through sites like Consumer Reports and The Bureau of Labor Statistics. You can also find important market insights through OEM press rooms. Understanding coming trends will help you meet your potential customers’ needs with used vehicles too. After all, pre-owned doesn't have to mean "old". 

Location Scouting 

The old adage in real estate is the same when it comes to car dealerships: Location matters. In just about any city, you're bound to have competition—but that's not always a bad thing. Sometimes, a group of dealerships performs well because they create a destination for shoppers. Find well-performing dealerships that can help bolster your new business, but don't try to fit in where the market is already saturated. Balance is key. 

The keys to a good dealership location are: 

• Appropriate population size and demand 
• Well-priced land and facilities 
• Access to major routes 
• Appropriate facilities, like garages and showroom space

Once you have your location, invest in signage and other branding materials that help attract attention to your lot and bring in customers. 

Stocking Up 

No matter what, you're going to need inventory. This is where an online auto auction house like ACV Auctions can help. ACV Auctions is the nation's leading online wholesale automotive auction marketplace for buyers and sellers. Don't let inventory shortages stand in your way. Work with an online auction wholesaler who can find the vehicles you need right away.

Building Your Team 

One of the pillars of your new car dealership business will be its team, and there are three key areas that keep dealerships running smoothly 

Sales

Even at an early stage, you can start scouting top talent. Look for sales professionals who share your company ethos and have a solid track record.

Service

A service team brings in repeat customers and helps you keep your stock moving. Find qualified and experienced technicians to lead the department, and consider adding a junior or apprentice level for a cost-effective way to handle the volume of work. 

Finance and Insurance

The F&I department is one place where independent dealerships can stretch their margins and grow profits. Find an experienced lead to help organize financing for customers to make it easier to sell cars quickly and efficiently. They should also be trained to sell extra features for peace of mind that add to the value of every customer. 

Marketing Your Dealership 

Your new customers need to find your dealership. That's where a solid marketing plan comes into play. You have a physical dealership, but you also need to have a dominant online position. 

Be sure to use social media channels and your website to get top placements on search engines. When people in your city look for new vehicles in the area, they should be able to easily find your services online. Spend time cultivating a presence by posting new listings on social media and online, and also advertise on known platforms, like Facebook marketplace.

Launch Your Independent Dealership

Owning a car dealership is a rewarding and exciting business idea. Start your journey with a solid business plan, follow the steps to acquire your dealer license, and fund your start-up costs. 

Then, stay on top of the latest automotive trends and the demands of the market in your target area, making sure to stock vehicles that suit local demand. With the right team, financing, and inventory you'll be well on your way to success. 

Start Selling With ACV Auctions Today

ACV Auctions makes it easy to stock your new car dealership with inventory. You'll find transparent pricing, detailed reports about vehicle conditions, and a dedicated team that wants to see you succeed. The automotive industry is constantly evolving and this is a great time to register to become a member with ACV Auctions and hit the ground running in your new car dealership.
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Sources:

1. “Productivity up in Just over Half of Industries in 2001 : The Economics Daily : U.S. Bureau of Labor Statistics.” Www.bls.gov, www.bls.gov/opub/ted/2003/sept/wk4/art02.htm. Accessed 20th April 2023.

‌2. Truic. “How to Start a Car Dealership.” HowToStartAnLLC.com, Truic, 28 Jan. 2017, howtostartanllc.com/business-ideas/car-dealership. Accessed 20th April 2023.

3 Cost Analysis of Opening an Auto Dealership, CPA Practice Advisor, 25 Aug, 2017, https://www.cpapracticeadvisor.com/2017/08/25/cost-analysis-of-opening-an-auto-dealership/26872/ Accessed 12th June, 2023 

4. California Motor Vehicle Dealer Bond , SuretyBonds.com, https://www.suretybonds.com/states/california/auto-dealer-bond.html, Accessed 12th June, 2023 

‌5. “How to Open a Car Dealership.” Findlaw, www.findlaw.com/smallbusiness/starting-a-business/how-to-open-a-car-dealership.html. Accessed 20th April 2023