Starting Your Own Used Car Business? Here’s What You Need to Know
Business 101: Starting a Used Car Dealership
When you think of used car lots, what usually pops in your head? Many people have an image of that cheap suite wearing scammer trying to sell you some beat up clunker that looks like it will expire shortly after driving off the lot. That’s an image that’s leftover from the 70s and 80s, and I can’t exactly say it wasn’t accurate for the time. Fortunately, with the help of a brand positioning agency, you can and should project a much more refined image than your early 70s predecessors.
But that was then, this is now. The used car market has exploded over the past decade. With inflation being what it is, working families are having a tougher time than providing for their basic needs. Often, a brand new vehicle is way too expensive for many families to consider. A used car is the only way to go. Thankfully, that also means that the shady car salesman has given way to professional consultants who actually match you with the perfect car.
If you’re looking to break into the used car market, you’ve picked the perfect time. The demand is there, people are more supportive than ever to support small business, and the benefits are numerous. With that said, there are a few things you should know first.
You Need to Answer This Question: How are You Different?
I’m sure it’s not surprising to you that you’re going to face some stiff competition. The business world thrives because different businesses offer different values on their goods and services. If it weren’t for competition, there would be one business offering goods and services at one price under one policy. It would be the only option consumers would have.
With that being the case, if you can’t confidently answer why your used car business is different from the fella just down the road, then hold off. It costs around $150,000 on average to open a new business, to say nothing of the investment of time and other resources. That guy who already has his own lot has an advantage because he’s already established. Investing all that time and money without a clear idea of how you’ll beat him just means you’re wasting your time.
You Need a Solid Plan to Secure Funding
Speaking of money, unless you’ve already got plenty saved up, you’re going to need some startup funds to launch your business. That means you’ll either need a small business loan or investments from parties who support you. What do they both want to see? A solid business plan.
Your plan is your roadmap to business success. It outlines what your business is about, what sort of pricing model you’ll have, your analysis of the market, your strategy to market and beat out competitors, etc. Your business plan will be what makes or breaks your pitch to secure financing, so make sure you keep the following in mind.
Passion is Good – Delusion is Worthless
You’d be amazed at how many poor chaps tell lenders or investors that their business will succeed because “They believe in the power of their dream.” Poppycock! If dreams were enough to make a business thrive, everybody who wanted to act would be on T.V., now wouldn’t they? You need to exude confidence when you present your plan but that confidence comes from selling points you can back up with data and research.
It Needs to Be Concise
Do you enjoy reading over 100 pages of business lingo? Me either. No one does, and if your business plan runs that long, no one’s going to read it either. You need details in your plan, but you can present them without writing a novel. Keep it to about 20 pages or less.
Remember Who You’re Talking To
There’s a very strong possibility that your lenders or investors don’t know the first thing about cars. They’re money people – they care about whether your business will make money or not. Avoid using industry jargon in your presentation, and keep your sentences short and concise.
You’re Not Limited to a Physical Lot
Before the Internet, your only real option for finding a used car was heading to the nearest dealership and seeing what they had. Now, you can instantly do an online search to find specific makes, models, years, and features available. Plus, the web has made it entirely possible to sell a car, even if the customer has never laid eyes on it.
There’s a growing market for used car sales conducted completely online. By establishing yourself in the online market, you stand to save a lot of money from renting or owning real estate, paying insurance on a property, and paying for facility maintenance. It also means you can conduct your business from anywhere. Plus, if you’re a brick and mortar only, your customer base is limited to who is willing to come to you. When you’re online, everyone in the world is a potential customer.
As a used car dealer, you can easily setup an online store to sell vehicles through your website or you can simply display your inventory without the viewer being able to actually make a purchase with a static or blog style website. While the concept of selling or buying a car strictly online may seem far fetched, companies like Carvana are doing so with great success.
To Be a Great Used Car Seller, You Need to be a Great Used Car Buyer
When people shop for a used car, what matters the most to them? It’s typical for used car dealers to answer questions like:
- What kind of fuel economy does this car get?
- What’s the accident history on this car?
- Have there been any recalls for this model?
- Has anything been replaced on this car?
- How safe is this vehicle?
- Which cars are the most popular?
If you’ll notice, these are likely the same questions you’d ask yourself if you were buying a used car. Great salesmen are also great buyers. They know how to spot a great deal versus a poor investment. If you’re not well-versed in buying used cars before you start selling, you’re already behind in the game.
Start Practicing Now
The good news is that you’ll have plenty of opportunities to refine your car-buying skills. To start and grow your business, you’re going to have to build up your inventory. That means talking with private sellers, other used car lots, car rental agencies, and others to see what you can pick up. Each one will require a different approach to get the best deal possible. You’ll be able to get some successes and failures under your belt before you start pitching to customers. If you aren’t quite ready to dive into a running a used car dealership just yet, there are also plenty of other ways to make money from your car passion.