Starting a Car Dealership as a Family BusinessMarch 11, 2015
So, you’ve decided to set up a car dealership as a family business, but don’t know how to start. Establishing one is not too complicated. All you need to do is pay attention to the business requirements that are unique to the auto industry, in addition to general guidelines that apply to all types of businesses. Here are some of the things that you should take into account:
Type of Sale
With car dealerships, you can decide on whether you want to go retail or wholesale. If you decide on retail, you will be selling cars to customers. On the other hand, if it’s wholesale you decide on, you will only be selling cars to other dealers. Regardless of the type of sale, you have the choice of going with new cars, used cars or a mixture of both.
According to DealFinder, a company that specializes in automotive BDC solutions, to set up a dealership, you would have to obtain a dealer’s license from your local Department of Motor Vehicle (DMV) office. The license authorizes you to sell a certain number of vehicles for profit; without it, you cannot be a car dealer, and you could get into trouble if you try to be one without a license. To get the license, you would have to pass an exam that’s comprised of the automobile industry laws and practices.
Insurance and Warranty
Besides a license, you need insurance, which protects you from unsuccessful deals. Also, it is required that you have one of two types of warranties. As outlined by the Federal Trade Commission (FTC), you can get a warranty of merchantability, which ensures basic functions of the vehicle; or a warranty of fitness, which applies to vehicles with specified functions, such as hauling or off-roading.
Consumer Rights and Safety Laws
The laws covered in the licensing exam are consumer rights and safety laws. Two of the most well known ones are the Federal Used Car Rule and the Magnuson-Moss Warranty Act of 1975. The Federal Used Car Rule stipulates that you, as a resident of any U.S. state except for Maine or Wisconsin, disclose vital information on every car you sell. Such information includes features and technical specifications, mechanical or electrical problems, and warranty status. The Warranty Act is more commonly referred to as the federal “lemon law,” which protects customers from vehicles that repeatedly fail to meet performance and quality standards.
Location and Inventory
Of course, you would also need to determine where your dealership will be located, as well as the amount of space you are allowed to have by law. You can start with your local zoning office or planning agency to guide you in terms of ideal site location, size, accessibility, and proximity to potential customers. For inventory, you can go to auctions to buy vehicles from wholesale dealers.
Customer Relationship Management (CRM) software has steadily become the dealership industry standard for integrating and streamlining dealership operations. It makes the dealership operate more efficiently, as managers and sales associates find it easier to accomplish core tasks, such as making and receiving phone calls, tracking inventory, and preparing financing documentation. CRM software also provides affordable direct mail, which can be used as a marketing tool for discount or promotional sales.