Costs Involved With Setting Up A Car Dealership

Car lot

Every curb stoner and Craigslist flipper dreams of turning their hobby in to a legitimate business. Successful salespeople at larger stores dream of one day starting their own business. Before diving in, take a very close look at all of the work and costs involved. Starting up a small business in today’s market is one of the most lucrative personal endeavors, but it’s not without major risk. Not only does it ensure an overall high profit, but it also makes sure that the ones involved can maintain a standard quality of life. In this article we take a look at the costs that are involved in setting up a car dealership.

Principle Investments and Capital

Used car dealership lot

As many might be aware, when it comes to business start ups, capital is one of the most crucial components. Not only does the starting fund matter, but it is also important to use the fund in a judicious manner. To figure out how much one would need to start up the business, there are two things that have to be considered. These are:

  1. Location: As many of those interested in real estate will figure out, the rates of a store or land depend on the location and the state laws. For those who want to start a car dealership, a good portion of the capital will need to be invested in the space that one chooses. Whether it is to buy a plot of land for a permanent store or rent a premade store itself, this is the bedrock of the car dealership.
  2. Population of the Nearby Areas- The location of the dealership is important as it determines what sort of crowd one is catering to. In terms of the clientele, finding a suitable niche is crucial. Whether one is trading in use, vintage, sports or family cars; the capital is contingent on the material that one subscribes to. A rough estimate in these matters is hard to arrive at, but it is safe to assume that the numbers are high enough to consider a number of insurance policies.

Having looked at the first two instances of capital usage, let us focus on the working dynamics of the car dealership. As has been mentioned earlier, the allocation of capital in various avenues is as important as the start up inventory cost. The following section takes a look at the various avenues where one might need standard funding.

Avenues that Need Funding

There are various sectors that need to be constantly funded when it comes to setting up a car dealership. These are:

  1. Official Paperwork: As many experienced dealership owners will tell you, making sure that the papers are in order is one of the most important steps when it comes to setting up a car dealership. The following are the areas that need to be considered when it comes to fund usage in the business.
  • Insurance Coverage: Since a car dealership trades in inventories- that are in this case the real cars and other parts- there is a need for insurance. This will protect the dealership from both man made and natural hazards such as theft, robbery or fires. The first step right after the purchase of the new materials is insuring them. This is both a short term and a long term maintenance policy for further profits and a secure business.
  • Surety Bonds: Many times, the car dealership owner will find that he/she has to contact other suppliers and clients for the goods. In cases such as these while operating on trust is an important thing, it is also a good idea to sign a bond that will ensure that both parties are in on the agreement and do not back out. The warranties come at a nominal cost, but yet are an important addition.
  • Licensing: As regards the official paperwork, licensing from the State is one another important avenue that needs to be looked into. A standard license costs not more than a few hundred dollars and must be bought as soon as the dealership is under way.
  1. Operational Expenses: The other broad area that involves capital is the day-to-day operational expense. This includes:
  • Hiring Professionals: This is a key step towards ensuring that the business remains steady with no bumps on the way is make sure that one hires a few professionals. The two main people that one must bring on board are:
  1. An Accountant who will manage the books, taxes, payrolls and also make sure to update you regarding the tax laws, policies and other State rules. In order to ensure that the business does not fall into financial crisis, hiring an accountant is an important step.
  2. An Attorney: The other professional service one must avail of is that of an attorney. Not only does an attorney ensure that the business does not suffer from legal implications, but will also be of invaluable help when it comes to possible lawsuits etc.
  • Setting up a Marketing Team: whether the business is small or large, marketing is one of the most crucial areas of consideration. The entire business thrives on how well the products are marketed to prospective clients. Hiring a marketing team is a good way to make sure that the dealership is a success.
  • Hiring Decorators for the Space: For any good dealership, making sure that the shop space is functional and aesthetically appealing is an important thing to consider. A good overall design and look is the key in order to attract customers and create a thriving and successful business.
  • Cost of Maintenance: Since this article deals with car dealerships, one of the other areas that need attention is maintaining the cars themselves. This means hiring a small set of working professionals who are well acquainted with the parts and the whole. Next to hiring professionals for official services, this is the single most important operational cost.
  • Day to Day Costs: The other costs that one must account for are:
  1. Stationary and other items of office use
  2. Travel and other expenses related to sales
  3. Printing and facilities that one might wish to employ. This also includes the printing of pamphlets, newsletters and notices.

Beautiful car dealership

When it comes to setting up a car dealership, there is the need to balance capital and efficiency. Many times, one has the sufficient start up fund but due to bad planning, the money tends to go to waste. Hiring professionals to help along the way is a good and sound working plan.

March 13, 2015 - Written by

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