How to start a Used Car Business

(Used cars parked waiting to be sold)

If you want to start your own car business, learn what you need to do to get your dealership up and running.

Owning even a small used car dealership entails much more than just putting some cars on a lot and waiting for customers to come along. It requires knowledge of the cars, expertise in their features and differences, knowing competitive prices of similar models and how to arrange vehicle financing. Before you even put the first For Sale sign on a windshield, you'll need to select a location, understand local licensing requirements and have a plan for acquiring your first vehicles.

Location Selection

Select a visible location with easy access from main roads. Ensure that your site has plenty of parking for your vehicle inventory as well as your customers’ vehicles. Before you commit to a lease, or make improvements to the property, consult with your local zoning office to ensure that you can legally establish your business at that location.

Dealer Licensing Requirements

Contact your state Motor Vehicle Administration to obtain requirements for a vehicle dealer’s license. Although state regulations vary, you must satisfy criteria relative to building size and location, signage and operating hours. You’ll also need to post a state-determined surety bond. Finally, you’ll need to strictly adhere to state Lemon Laws and deceptive advertising regulations.

In Texas, for example, vehicle dealer licensing falls under the purview of the Texas Department of Transportation. You’ll need a general distinguishing number, which identifies your dealership in the eyes of the state. You must meet several stringent requirements to receive this number. Other licenses and permits may be required as well.

Sales Tax Administration

Sales tax must be collected on all vehicles you sell, and you must remit that tax according to your state-determined payment schedule. Contact your state's Comptroller of Public Accounts to obtain a sales tax permit, and to determine your state’s procedure for the collection and payment of vehicle sales tax.

Staff Selection

Hire outgoing people experienced in handling many types of customers. Although automobile sales experience is desirable, salespeople who have sold other big-ticket items, such as boats or expensive jewelry, may also be prospects. Each salesperson must contact your state’s Motor Vehicle Administration for licensing requirements. Finally, hire a maintenance worker to prepare the vehicles for sale.

Vehicle Acquisition

Ask family, friends and business associates to contact you regarding vehicles they want to sell. Call vehicle owners who have “For Sale” classified ads in local newspapers, vehicle trader publications and online trader websites. Travel to local or regional vehicle auctions to purchase vehicles in good or better condition. Finally, hang signage that conforms to dealership requirements and announces that you’re ready to accept vehicles for sale.

Grand Opening Celebration

Schedule a grand opening event to showcase your spiffed-up cars and trucks. Offer sale pricing that follows dealer guidelines and offers customers an exceptional value. Serve refreshments and feature live music to attract curious visitors who may stop and browse. Advertise your grand opening celebration in the automotive section of local newspapers, and place flyers at local automotive parts and service facilities.