How Much Money Does It Take to Start a Car Dealership?

car keysIf it’s been your dream to own your own a car dealership, then you’ve picked a lucrative industry to jump into—even if you opt to sell used cars. People will always need cars to get around, and there are a few benefits to selling used ones in particular.

Unlike brand new vehicles, used cars are pretty much recession-proof. If the economy crashes, people stop buying new cars because they’ll find them too expensive and loan interest rates will be too high. Used cars have higher interest rates than new ones, but because they’re much cheaper they still sell well during turbulent economic times.

Starting a used car dealership is also cheaper. Continue reading to learn more about what you need to have to start your own used car dealership.

The Cost Of Being Official

There are a lot of steps involved in actually getting your business established, and each stage comes with its own costs. When you’re trying to open a used car dealership, your first priority is to make sure your business is registered in your state. Registering your business is just declaring that your company exists as an entity—kind of like its birth certificate. The cost of registration depends on what state you’re in and the difference varies greatly—ranging from $50 to around $800.

Your next step is to find a location. A lease on a decent lot for used cars can range between $6000 and $50,000 annually depending on the location.

Once your business is born—at least as an official concept having the right to exist, a name, and an address—you need to start paying attention to your financial planning. You may think that it’s as simple as subtracting your overhead costs from your gross revenue to get your bottom line. If so, you need an accountant badly.

You’re going to have a lot of money coming in and out and have to deal with a lot of employees, customers, and other businesses. An accountant should be able to help manage all of that—plus keeping your lights on—for about $100 to $450 an hour. As with all business expenses, their prices depend on their locations among other factors.

Once you have an accountant, it’s time to get your business licensed to do business. Remember, your registration was just declaring that your business has a right to exist. Your license gives it a right to operate. Depending on whether you register as a sole proprietor, LLC, or corporation, the cost of this ranges between $50 to $500. You’ll also most likely have to obtain a surety bond, and that will run you anywhere from $5,000 to $100,000.

The Cost Of Being The Boss

One of the best things about owning your own business of any kind is that you’re your own boss. But as the owner of a car dealership, you have to be the boss of other people as well. You’ll need salespeople and mechanics with automotive and diesel certifications to help you run it all.

When it comes to buying a car, people have tons of questions. Customer service is crucial, but you can’t expect your employees to be there around the clock to answer them. The good news is that technology has solved that problem for you.

Contact center software can handle all of your customer service solutions from chatline assistance to over-the-phone assistance. It’s offered as software as a service, meaning you don’t have to manage it yourself or hire an IT team. The vendor manages it, potentially saving you thousands of dollars on personnel.

The Cost Of Stocking Your Inventory

Filling your lot with automobiles is probably going to be the most expensive part of the process, but you can find cars at steeply discounted rates at auctions. If you’ve never been to an auto auction or watched one on television, then you’re in for quite a surprise. Vehicles go for an alarming fraction of what they’re actually worth. You can normally expect to spend upwards of $100,000 for your inventory, but buying from auctions could save you thousands.

In total, you can expect to spend anywhere between $200,000 to $500,000 to start your car dealership. Location is the largest cost factor. You may have to make a large investment, but the goal of business is always to make more money than you invest.


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