How to Open a Used Car Lot

Opening a used car lot can be a financially rewarding business. You gain access to exclusive dealer auctions, get to drive almost any kind of car you want and have an opportunity to make a name for yourself in your community.

Things You'll Need

• Business location
• Dealer license
• Capital for inventory or floor plan

Instructions

1. Purchase or lease a property suitable for business. High-traffic locations are ideal because that will increase inventory visibility. The property must have suitable lot space for the number of vehicles you plan on keeping in inventory. It needs an office as well, but the office does not have to be large. Consider the number of employees you will have (if any) to determine how much office space you need.

2. Set up a telephone line at the location. The number must be in the business name. Multi-line systems are preferred, but a single commercial phone line will work if you are starting off small. You'll also need a sign for your business displaying the telephone number and name. This is required to apply for your dealer license. Printing companies can help you make an attractive, professional looking sign or you can make one yourself.

3. Visit the Department of Motor Vehicles to apply for a dealer's license. Fees vary state-to-state, but generally range between $500 and $700. An inspector will visit your property to make sure you have complied with the property requirements. After you have your license, you will need to purchase a fleet insurance policy. Insurance coverage for dealers can be customized depending on how many vehicles you plan to keep in inventory.

4. Apply for floor-plan financing if you need a line of credit to purchase vehicles. Dealer floor-plans hold the titles of vehicles in inventory until they are sold. The titles are released based on the wholesale purchase price plus interest. The retail price you sell the vehicle for is your profit.

5. Register with local or national auctions to buy vehicles (see Resources). You will need to provide them with your license and floor-plan information to purchase vehicles.

Tips & Warnings

• If you are starting off with with a large inventory, you will probably need to hire at least one salesperson to help. If you start out smaller, you can always expand your business and add employees later.

References

• Dealer Fees

Resources

• Manheim Auctions
• Adesa Dealer Auctions