Starting A Car Dealership

Starting A Car Dealership: Understanding The Business And Financial Implications

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  • Are you an entrepreneur looking to start your own profitable car dealership business in the next couple of years?
  • Do you know what are some of the financial implications of starting a car dealership in your region?
  • Have you decided between the two types of car dealerships that you can start- new versus old?

The car industry is booming. If data is to be believed, the used car industry raked in more than $120 Billion in sales in 2019. With year-on-year growth expected to be in the 5% region, starting a car dealership can be a very profitable enterprise. 

If you are passionate about automobiles and want to make your passion into a business, now is the right time to invest. With the pandemic putting into place norms that do not encourage people to use public transport, the auto industry is expected to see a major boom. 

In this resource article, we look at the business and financial implications of starting a car dealership. 

Factors to consider while opening a Car Dealership

1. What kind of Car Dealership do you want to open?

The first thing you need to decide is what kind of dealership you would want to open. This means deciding between a new one and a used one. Both come with their own set of pros and cons. However, experts believe that used car dealerships are free from the interference of automakers and not subject to such critical rules and regulations.

2. Location of the Car Dealership-

This is probably one of the most important things you would need to consider when opening a car dealership. You need a big enough area to show off the vehicles in their best possible fashion. You can also step up the services by providing an excellent customer experience with an office that has air conditioning. It has to be visible and centrally located to gain attention. 

3. Work on a solid Business Plan and Model-

What does your business hope to achieve? What are the ways you are raising capital? How big do you expect your revenues to be? What are the steps you want to take to promote the car dealership? All these questions need to be written down and codified in a business plan. This will also help you raise investments or take loans from banks and financial investors.

4. Rules, Regulations, and Licenses-

If you want to become a professional car dealer in Singapore or any other part of the world, you need to get adequate licenses. Most car dealerships have to adhere to strict rules and regulations from different governmental bodies. They need to update the licensing and permits every single year. This is another factor that you need to consider when starting a car dealership. 

5. Specialize in the kind of Dealership you want-

As someone who is thinking about starting a car dealership, you can zero in on a niche. This means that you can think about a particular style of car, brand, make, or model. For example, you can specialize in SUVs only or C-Segment Sedans. This can help you emerge as an authority in the niche and become the go-to person when people are looking for the best stocks. 

Financial Risks of Starting a Car Dealership

Many leading experts point out that while starting a car dealership can be a very lucrative opportunity, there are some risks involved. Like any other business, you need to be aware of them.

According to experts, here are some of the major risks- 

  • There are a lot of regulations around the environment that used cars can be subject to. This means that you need to be aware of whether the cars can ply on public roads according to a particular model year.
  • Most used car dealerships are unable to get established banks and lenders on board. This makes it very difficult to satisfy the customers who want the vehicle but are unable to take completely finance the vehicles on their own.
  • A new car dealership requires a massive one-time investment including a huge deposit that you would be required to make with the automobile brand. This is something that you need to watch out for when starting a car dealership.

The Bottom Line

Once you have been able to go through the article, you will be in a much better position to make an informed decision. If you want us to specifically talk about any point in the article, let us know in the comments section below. We would be more than happy to answer all your doubts about starting a car dealership. 

Also Read: Top 10 Highest Priced Stocks in America in 2021



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