You need an estimate of $950,000 to successfully set up a medium scale used car dealership garage in the United States of America. Note that this amount includes the salaries of all the staff for the first 3 months of operation.
Used car dealership business as the name implies is all about selling used cars to willing buyers. Asides from the fact that the owners of used car dealership shops are known for selling used cars, they also go out of their way to source for sellers who want to sell their cars.
They buy used cars at favorable price and then re–sell at a good price that guarantees profit for them. In a nutshell, they are in the business of buying and selling used cars.
When starting a used car dealership garage business, you just have to get your costing cum economic analysis right if your intention of building the business is to generate profit, grow the business and perhaps expand the business and start exporting used cars to other countries of the world.
When conducting costing and economic analysis for your used car garage business, you just have to critically examine these key factors; place, product, pricing and promotion.
As a matter of fact, you would have to continue to review these key factors at regular intervals while running your used car dealership business.
As a used car dealership garage owner, you just have to have a proper grasp of your competitive landscape if indeed you want to maximize profit and be in the front-line of the industry.
It is important to note that spare parts replacement cost is one of the most important factors contributing to the overall cost of a used car dealership garage business and should be considered as a major factor when carrying out your costing and economic analysis.
Over and above, when it comes to starting a medium scale used car dealership company, you should be prepared to either rent or lease a standard and centralized garage facility with good human and vehicular traffic; this is going to be one of the areas where you are expected to spend the bulk of your start–up capital.
Estimated Cost Breakdown for Opening a Used Car Dealership
These are the key expenses you are expected to make when starting a medium scale but standard used car dealership business in the United States of America;
- The total fee for registering the business in the United States of America – $750.
- Legal expenses for obtaining licenses and permits (Health department license and business license) and permits (Fire department permit, Air and water pollution control permit, and Sign permit et al) as well as accounting services (CRM software, Payroll software, P.O.S machines and other software) – $15,300.
- Marketing promotion expenses for the grand opening of the used car dealership company in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
- The cost for hiring business consultant (including writing business plan) – $2,500.
- The cost for insurance (general liability, theft, workers’ compensation, auto insurance, and property casualty) coverage at a total premium – $30,400.
- The cost for leasing a standard garage facility in a good and centralized location along a major road – $150,000
- The cost for remodeling the facility – $100,000.
- Other start-up expenses including stationery ($500) and phone and utility (gas, sewer, water and electric) deposits ($6,500).
- The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
- The cost for start-up inventory and the purchase of used cars – $500,000
- The cost for store equipment (cash register, security, ventilation, signage) – $13,750
- The cost for the purchase of furniture and gadgets (telephone, fax machines, printing machines, computers, tables and chairs et al): $14,000.
- The cost for building and hosting a website: $600
- The cost for opening party: $8,000
- Miscellaneous: $10,000
You will need an estimate of nine hundred and fifty thousand dollars ($950,000) to successfully set up a medium scale but standard used car dealership garage in the United States of America. Please note that this amount includes the salaries of all the staff for the first 3 months of operation.
Starting a small scale but standard used car dealership garage business with minimal used cars that are put up for sale in the United States of America will cost about two hundred and fifty thousand dollars to five hundred thousand dollars ($250,000 to $500,000).
When it comes to starting a standard and large-scale used car dealership garage with several outlets in key cities in the United States of America, a used car garage that has the capacity to export used cars to other countries, and a company that has the intention of selling franchise, then you should look towards budgeting well over two million, five hundred thousand dollars ($2.5 million).
Factors That Determine the Cost of Opening a Car Dealership
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The Type of Car Dealership
A major factor that will determine the overall cost of starting a car dealership business in the United States of America is the type of car dealership business that the owner of the business wants to build.
A car dealership is a business that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary.
It can also carry a variety of Certified Pre-Owned vehicles. For example, if an entrepreneur choose to start a car dealership business that sells used cars, he/she will spend less starting the business when compared to selling only brand new cars. So also, the brand of cars the car dealership business is involved in will influence the cost of starting the business.
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The Choice of Location
Another major factor that will determine the cost of starting a car dealership business in the United States of America is the location you want to locate the car dealership showroom. In business, location is a key part of what determines the success of the business.
As a matter of fact, there are business consultants who are specialized in helping people choose an ideal location for their business; a location that will guarantee them profitability and to breakeven within the shortest possible time frame.
So, you will now agree that location can influence the cost of starting a car dealership business. For example, renting or leasing a car dealership showroom facility in a location that is off – the city center or off a major road will be less expensive when compared to renting or leasing a car dealership showroom facility in a highbrow area.
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The Required Licenses and Permits
In the United States of America, you cannot open a car dealership without first applying for mandatory license and permits. Of course, you would need a building license, zonal permits, car dealership auction license amongst others.
These licenses and permits cost money and it will influence the overall cost of opening a car dealership business in the United States of America.
Note that there may be several inspections you must pass before you can be issued your licenses and permits and this will also cost you money.
In order to get the overall cost of licensing and permits associated with opening a new car dealership showroom in the United States, we will advise that you reach out to your city local council or the state government office to find out what you need for your car dealership business. You also need to consider state and federal requirements.
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The Type of Facility
The type of facility you want to run your car dealership business in is also a major factor that will determine the overall cost of opening the business in the United States of America. Most car dealership showrooms are located in buildings or parking lots that are converted to showrooms.
The original layout of the building will affect the physical layout of a car dealership. The more money that has been invested in a facility, the more it resembles a dedicated car dealership showroom. Regardless of the floorplan, there are features every car dealership showroom will have.
You have the options of renting, leasing, or designing and constructing your own car dealership showroom. As regard renting and leasing a facility, you only need to modify the facility to fit into the picture you have in mind, but there is a limit to how far you can go and it will be dependent on what the landlord of the facility wants.
Let us assume that you want to construct your car dealership showroom from the scratch. It means that you will buy the land or a property, construct and equip the car dealership showroom to fit into what you have in mind.
With that, you will agree that you are going to spend way more when compared to people that rent or lease a facility. This indeed will greatly influence the overall cost of opening your car dealership business.
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Menu and Additional Service Offerings
As expected, a car dealership, or vehicle local distribution, is a business that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary.
It may also provide maintenance services for cars, and employ automotive technicians to stock and sell spare automobile parts and process warranty claims.
In essence, another key factor that will determine the cost of starting and operating a car dealership business in the United States of America is the additional services the car dealership business will be offering.
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The Cost of Hiring and Paying a Business Consultant and Attorney
If you want to get your business started on the right foundation, it will be a wise decision to hire the services of a competent business consultant and perhaps an attorney.
A business consultant will help with drafting a workable business plan document, a marketing plan and strategy, comprehensive SWOT and other advisory services.
An attorney will help you with registering the business, drafting contract documents, and offering you all the legal expertise that will help you start the business on the right foundation.
Of course, you will agree that these services will cost you money and it will indeed influence the overall cost of opening a car dealership business in the United States of America.
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The Cost for Branding, Promotion, and Marketing
Car dealership businesses are profit-oriented businesses, that is why it is important to spend money on branding, promotion, and marketing of the car dealership business.
This means that the cost for branding, promoting, and marketing the car dealership business is yet another key factor that will determine the overall cost of starting a car dealership.
Trust me, if you need massive results as it relates to competing and winning a fair share of the available market in your city, then you must be willing to pay for effective branding, promotion, and marketing of your new car dealership business.
As a matter of fact, it is not cheap to come by an expert in branding, promotion, and marketing that will help you compete with brands that are already determining the market direction of the car dealership business and the automobile industry in your city.
So, if you add the cost of paying a branding and marketing expert, it will surely increase the cost of starting your car dealership business.
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The Cost of Furnishing and Equipping the Car Dealership Showroom
Another factor that will determine the cost of opening a car dealership business is, of course, the cost of furnishing and equipping the car dealership showroom. Trust me the cost of furnishing and equipping a car dealership showroom is relatively high.
Before you can open a car dealership showroom, you should budget and buy (Flat Screen TVs, sound system, DVD players, Satellite dish and decoder, furniture (table, stools, and sofas), telephones, filing cabinets), store equipment (cash register, security, CCTV, ventilation, signage), and fancy displace platforms and chains.
All these will cost money and it will influence the overall cost of opening a car dealership business in the United States of America.
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The Cost for Insurance
The cost for paying for insurance policy cover is yet another important factor that will determine the overall cost of opening a car dealership business in the United States of America.
Interestingly, in the United States, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from.
Thus, it is imperative to create a budget for insurance policy cover and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your car dealership business.
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The Cost for Registering the Business
The cost for registering the car dealership business is yet another cost that will influence the overall cost of opening a car dealership showroom in the United States of America.
As a matter of fact, you cannot legally operate any business in the United State without registering the business with the government.
Although, the cost of registering a business is affordable, but it will add to the overall cost of opening a car dealership business in the United States of America.
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Cost of Recruiting and Training Your Staff
The fact that you are opening your car dealership as a new business means that you are expected to recruit and train your staff.
The training will help you sell the corporate culture of your organization to the new employees. As expected, it will cost you money to hire an expert trainer and that will add to the overall cost of opening a car dealership business.
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The Cost of Purchasing and Customizing of Uniforms
Another factor that will determine the overall cost of opening a car dealership business in the United States is the cost of purchasing and customizing of uniforms. Your staff are expected to have different uniforms and they are expected to put on these uniforms when they are on duty.
All these uniforms will cost you money which is why it must be part of your budget if you are looking towards opening a car dealership business.
How Much Does It Cost to Buy a Used Car Dealership Franchise?
In the United States of America, the Average Cost of Purchasing a Used Car Dealership Franchise is $50,000. Examples of 3 Well – Known Used Car Dealership Franchising Companies in the United States of America are;
- Thrifty Car Sales–Franchising Company
- The Payless Way–Franchising Company
- com®