Starting a Used Car Dealership – Picking a Location
When setting out to open a dealership, one of the biggest and most important decision to make is where to set up shop. This one decision can have enormous influence on the success or failure of your venture. Car dealerships have special considerations that other retail businesses do not have to worry about. Let’s take a look at some of the major things to consider when selecting a location for your dealership.
This by itself will severely limit where you can set up shop. Every city and state has different zoning laws. In some, a dealership can be in any commercially zoned space, in others it has to be zoned for retail, and furthermore, some need to be zoned specifically for car dealerships. If you’re working with a real estate agent, they should know the local laws for zoning and will be able to help you with it. If you’re doing it on your own, check with your local planning office, they should be able to at least point you in the right direction for zoning requirements in your city.
Unlike most retail businesses, car dealerships need space, and lots of it. A dealership is not something that can be tucked away in a strip mall. A Dealership needs a good sized front lot where the cars for sale can be prominently seen, an office and possibly a showroom, and a back lot where cars can be received and prepped. It’s good to consider how many cars you want on your lot at a time. Having a smaller lot full of cars can look better than a large lot with only a few cars. Just be sure not to overcrowd your lot. Customers should be able to comfortably open doors to look inside a car. It also should not be a puzzle game to pull a car out for a test drive. Make sure, too, that there is plenty of room for customer parking.
Office and Showroom
Consider, along with the size of your lot, the size of your office and/or showroom. For a small dealership with only 1 or 2 employees that sells only 3 or 4 cheaper cars a month, a trailer is probably fine. A trailer would not be a good fit, however, if you specialized in high end luxury cars. A used luxury dealership would be better fit to a large office, probably with a showroom. Most dealerships probably fall somewhere in between those two extremes. Maybe a lot with 1 or 2 small offices and maybe enough showroom space for 1 or 2 cars. Only you can decide what will work for you. Buy what you can afford and what will work for your business. Just keep this in mind, if you start small and grow, it can be a major expense to move and moving can even cause losing a customer base, so think about the future when you choose your location.
Proximity to Your Customer Base
Picking a location is going to have a lot to do with what type of cars you want to sell. If you are setting up a buy here pay here lot with cars under $10,000, an upscale neighborhood with a lot of BMWs and Porsches driving around is probably not for you. For such a lot, a lower to middle class neighborhood is probably the right location. Of course the opposite of that is true as well. If you are selling high end luxury cars, you probably want to be in a more established neighborhood. Think about the price of cars you’re selling and how you’re selling them and match the area for your dealership to that. Look at what kinds of cars are in the neighborhood you’re thinking about setting up shop in. Do those match the cars you want to sell?
Proximity to Other Dealers
This one can be a double edged sword. How close should you be to other dealers? There’s no right or wrong answer to this question. In some areas, where there are specific zoning laws for dealerships, you want have a choice but to be in close proximity to other dealers. In places where zoning is a little more laxed, you may or may not be wise to set-up shop near other dealerships. Many cities have areas where there are a lot of dealerships in one spot. While competition is more fierce in these areas, most customers recognize these areas and come to them when they are looking for a car. Being out on your own away from other dealers, you have less competition, but it may not receive as much traffic as a designated “autoplex”.
Consider both how easy it will be to pull into and out of your dealership and how much street traffic it will get. As far as ease of access, avoid one-way streets and divided roads. You want travelers in both directions to be able to be able to pull in quickly and easy without having to u turn or follow a maze of one-way streets. As silly as it is, those kinds of things can be enough for someone to drive past your dealership and go to another one. Think about how busy the street is for your dealership. Busier streets cost more, but you will have far more visibility and thus more walk up and drive-by traffic. Also consider how close you are to public transit. Many people buying a car may not currently have a car at all. It’s good to consider being close to a bus or other mass transit stop, especially for a dealership with lower end cars.
Safety and Lighting
Finally, research the crime rates in the area you are looking to set up shop in. Don’t set up in high crime areas, cars on a lot are easy targets for both vandalism and robbery. Consider how close you are to police and fire stations. If a call came in, how quick could emergency services be to your location? Also when shopping for a location, pick one that is well-lit. Installing lighting on your location after purchase can be an expensive and difficult operation. Many people don’t do their car shopping until after they’re off work, and it can often be dark outside when that happens. You want customers to be able to see your cars in a bright, well-lit location. Good lighting also deters crime.
Make sure you know what kind of lot you want, how you plan on selling cars, and who you want to sell to. Write down a list of requirements before you go out looking for your lot. Call a real estate agent and find yourself a lot. It’s one of the first things you’ll need, and in many states your location is required before you can get your dealers license.