Used Car Business? Need info...

[Komelika]

I have a persistant interest in starting a business, but I have struggled in developing any ideas that stick. I develop ideas that initially get me interested and thirsty for information but never fully materialize before I lose interest. The one thing that comes back to mind is cars. I have read several times that you have to like what you are doing in order for a business to be successful and well... I like cars.

By nature, I bore easily. Because of this trait I have sold several cars over the years. I have also bought several used cars over the years and like many people I dreaded the experience. I can't tell you how many times I have experienced buyer's remorse. As I matured I started to educate myself and realized the shady nature of many dealerships. My interest in the business stems not only from a desire to be independant, but also because much like myself, I believe the average person simply wants to be dealt with honestly and respectfully during the process of buying a car.

I have a wonderfully supportive wife. She stays home with our three year old daughter. We've been together for eight years now and over the years she has seen this interest in running a business flare up and simmer down. She listens to my ideas and although she has questions and concerns, she never discourages me. I told her that I would take a year to educate myself about the process of starting this business, the legalities of running it, and the money it would take to get it started. If in that year the idea fizzles out then it wasn't meant to be. She agreed. So now I am on the hunt for information. Any suggestions on where to start? Would any of you in the business be willing to share any insight?

Thank you!

[paul2145r]

A used car business is a good fit for many, but takes dedication and determination. Call around and research the laws regarding becoming a used car dealer in your city, county, and state. Each will have their own say as to what you can and cannot do as a dealer. In some states, you have to have your building, land, etc ready for inspection prior to receiving a dealership license. Your building must meet a large number of requirements: Disabled parking and access, adequate parking spaces for cars and for customers, insurance (liability, building, etc), bonding, etc.

In order to start off, make sure that you have the capital to meet all of these requirements, and still be able to purchase the first cars that you will have for sale. If you are the breadwinner in the family, have enough set aside to cover approx. 6 months worth of bills and other household (personal) requirements. It will take at least 3-6 months to start turning any kind of profit; expecting to instantly start making money is naive in today's economic climate.

If you have not done this before, it may behoove you to work as a salesman or manager at a used car lot to learn how to price and inspect vehicles, the laws regulating the industry, and other such things that only come from experience. If you are wanting to get a running start, bring in a partner that has run/owned used car lots in the past to lend a hand.

Good luck with your ideas, and I wish you the best! Many entrepreneurs have 'itchy feet' when it comes to business, and aren't sure what direction to go in. Make sure, though, to always put the needs of your family first. If you focus on giving them what they need, rather what you personally may want, you'll be able to stay on the right track and grow.

[Komelika]

Thanks Paul! I have looked at the laws for the state of New Mexico and it is a bit tough to get the required license. I have considered taking a job as a salesman on a lot as well. I have 3-4 days off per week so I think a sales job will be relatively easy to find when the economy starts shows some improvement. As for now, I have ordered three books from Amazon.com regarding the sales side of the business.

As for capital, I have equity in my house which would probably be a better choice than cashing out my 401K. I would prefer to do it without a partner and simply hire an experienced sales manager. I will keep my eyes open for opportunities though and if the right person comes along that would make a good partner then I would consider it.
The positive side of a having a reliable sales manager with experience is it may allow me to keep my regular job (pay and benefits) until the business is turning enough profit to quit. I'm hoping it would be turning a decent profit within the first 12-18 months. Keeping my regular job would allow me to spend 2-3 hours at the lot on the days that I work and full days on the lot on my time off. If I am able to find a sales job then I will be constantly looking out for potential managers. In the meantime, I will keep my eyes open for opportunities to learn the business enough to keep people honest when the ball starts rolling.

I appreciate the advice about family. In my mind, this business idea is nothing without their involvement. My wife would make an incredible administrator with her organizational skills and I would love for my daughter to learn the business and take the keys when the time is right. They will come first, always.

[DerekS]

Selling cars is an extremely involved business, definitely not the kind of thing you'll want to dedicate just part of your day to. Especially when your home's equity is on the line.

I strongly suggest working in the industry for a year, at least. Not only will you have to learn to sell (if you already don't), understand financing, understand the product, and understand business logistics- you'll also have to face the prospect that you're now hugely liable for the successes/failures of both you and your employees. The margins in car sales can be very thin and it's a volume business.

I've spent my whole life around the car business. My dad got in the business in 1979 and was a general manager of a Chevrolet and a Mitsubishi dealership for most of my life. In the late '80s, he and the owner of the dealerships were going to partner up to open another Chevy franchise. At the last minute he got cold feet and backed out. Had he not, my family would probably have filed for bankruptcy when the bottom fell out of the market towards the end of the '80s.

My dad never really had the stomach for entrepreneurship but he certainly knew how to sell cars. He also knew how to run dealerships. He had all the ingredients, just not the stomach to put it all on the line. It's awesome that you've got the guts, but keep in mind that it takes ALOT more than gumption to suceed in the car business. It's definitely cutthroat.

Definitely spend some time working for a dealer. Once you've got the tools in place, you can take that initiative and wisely invest your nest egg.

Good luck!

[Komelika]

Thanks for the input DerekS. I won't take it lightly. I understand that I do have a lot to learn and maybe I am a bit naive when it comes down to it. When I think of a used car dealership I have a small lot with 20-30 cars in mind. I'm thinking volume will be relatively easy with the mindset that I really do want to offer good deals and not try to milk people for their last cent. I want to make an honest dollar and not send people off the lot oweing far more than the car is actually worth. I think reputation will go a long way in the business and referals will come if the deal is good and the customer is treated with respect instead of having all the typical tricks thrown at them to basically pressure them into buying a car.

The last time I bought a car from a dealership, the salesman started with those tactics. He left me and my wife in that office for ten minutes to go "talk to the sales manager". When he came back in with his asenine offer, I countered. As he got up to leave again, I stopped him and told him that if he isn't back in five minutes that we were walking out the door. We left one second after that time limit. He tried to stop us in the parking lot. Three days later I returned. He was very happy to see us, but I walked right passed him to another salesman. He gave us the deal we intitially offered three days before without a single counter offer. He did that because even though it was good deal for us they were still able to make a profit. Again, maybe I am naive, but that is the type of business I want to run and I think customers will appreciate it.

[Southern_Lenders]

Maybe when I get my business up and running I can help you with Financing I'm in Alabama though, so I'd probably need a NM lending license.

How much would it cost to start up something like that?... not to mention you need a revolving door of credit to buy new cars.

Also what are you going to do differently?....whats so special about your idea? You may have a hard time overcoming guys like Carmax.

- nathan w

[rogercbryan]

There are a few posts on here about the car business. I found a link to one old one. I do consulting for auto dealerships and auto auctions. If you have any specific questions I would be happy to help you. I work with dealerships that sell 200 cars a year and a billion dollar auction company that sells 1,000,000 cars a year... so I have experience at all ends of the spectrum. rogercbryan @ gmail . com.... let me know how I can help.

Old Thread sort of on topic.
Anyone in the Automotive Business?

[rhondimon]

some insight:

1. niche car dealerships do well right now
2. Its not how much you make, its how much you spend.
3. Develop your sales plan. Make it challenging but not impossible. Success is the key.
4. You don't have to work at a dealership to start a used dealership. It would be nice to run thru the paperwork for a deal once or twice before you open the doors but if you cant figure 8 documents and their flow- your gonna fail anyway.
5. Just Do it!

If this is your first business, it really doesnt matter. Your gonna fail anyway. What's really important is what you learn from your failure. Don't borrow any money and don't sell your family for the business. Enjoy the ride. Success won't happen until you bump your head at least once or twice. The difference between entrepreneurs and those that aren't are basically when a business fails -The real entrepreneur gets back up, does battle assessment and takes inventory. Acknowledges his/her shortcomings and then goes back out and tries again. The UN-entrepreneur goes back to the rat-race.

I was in the used car business for 5yrs. I started w/ one car that I bought at an impound auction. The 2nd year, I went thru 700 vehicles. The third year, I added a salvage yard to the business and the 4th year - the Gov't came after me for land issues that were out of my control. I failed for all the right reasons :-) I had no idea about politics. Actually, I'm still coming to terms w/ it.

I know the business pretty well however I have no more interest in it as I used it as a stepping stone. Good luck.