Why A Used Car Dealership Could Be The Right Business Idea For You

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March 1956

One of the most common misconceptions about starting a small business is that the business world is reserved for inventors. Often, people believe that they can’t run a business if they don’t have an innovative idea at the moment, when the most successful businesses are usually run by those who can apply their personal skills to fill a need customers always have. People will always buy cars. And if you’re knowledgeable about vehicles, a strong salesperson, and not intimidated by selling big-ticket inventory, a car dealership is one of the easiest paths to success. Chron Magazine states that cars make up the largest portion of retail sales in American, bringing in nearly $700 billion in the past 5 years alone. Independent used car dealerships offer affordable inventory at affordable prices, and it might be easier to start one than you think.

1. Financing in a New Age

Used car dealer in Miami

It’s understandable why business-savvy people might be skeptical about a business like a car dealership in this day and age, when banks in the recession age are not handing out loans much anymore. But along with a number of private and asset-based alternative loan options, the U.S. Small Business Administration offers a variety of different loan programs to help you secure a location, set up your office, and secure your inventory. According to Entrepreneur.com, the SBA gave out over $50 million to small businesses each day in 2012. That’s a lot of money to be had, which makes it a great time to think beyond the tiny internet start-up into something that could provide security for your family’s future like a car dealership. Not only that, you can use the recession to your advantage when it comes to buying cars for your lot. Car auctions for repossessed vehicles are a huge draw for dealers looking to stock their lot, and you might be surprised at the deals.

2. Finding the Right Location

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Most car dealers will tell you that location is the number one factor in their success, and you might already be living in a prime one. Most people buy their cars within a 50 mile radius of where they live, so if you happen to live somewhere with fewer car dealerships, you’re already guaranteed a certain level of notoriety. Also think about the types of cars people buy. The average age of a car on the highway now is 8 years, and that number has been rapidly falling since the dawn of the recession in 2008. You’ve probably heard on the news how hard it is to sell new cars and homes these days, and that’s only now beginning to change. But just as more people than ever are looking for rental property, more people than ever are looking for affordable used vehicles. Marketing goes hand in hand with location, because customers may associate used car dealerships with being sleazy. But this is a new age, and if you’re not the only used car option around, your marketing strategy can tout not only a convenient location but a reputation for honesty. Customers might be more willing to trust a local business working its way up than the sales people at their brand-named competitor lots.

3. What are the Risks?

LEXUS car dealership

Sure, you can see the advantages of selling used cars because there’s a market for them and always will be. But of course, there are always security risks. Because of the association people have between used car dealers and scams, the possibility of lawsuits is always there. But every small business in any industry faces a high possibility of lawsuits at some point in their life, and used car dealerships are actually more protected than you might realize thanks to lemon laws and other state legislation. If you disclose all mechanical problems with a car before you sell it, you’ll be fine. That’s why it helps to have someone on staff who is a top mechanic and can identify and hopefully fix any problems in your inventory. A strong insurance policy is also a must for car dealerships. You need a policy that covers anyone who is working on cars, driving the cars you own, or test driving them. Insurance will also cover you if your cars are vandalized or stolen, so you don’t risk losing your business after any unfortunate accident or crime. The bottom line is, cars are expensive inventory, but the details of protecting them are no more complicated than any other large ticket item.

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If you’re good with cars, you shouldn’t underestimate the value of that skill. While selling used cars is about more than understanding their engines, it’s a great place for honest salesmanship to thrive. If you’re genuinely interested in helping people afford to drive safely in these economic times, it will show, and you might find becoming a used car sales person doesn’t mean what it used to mean at all.

Karen Boyarsky is a blogger for Traderquote, a motor trade insurance site. You can follow her on Twitter @boyarskykareni.