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Fancy a future of cutting profitable deals, providing stellar customer service and stocking the very best cars for your showroom? Running your own car dealership can be more than just a dream.
Read on for a step-by-step guide that'll take you through how to make your car business a profitable reality.
Like many retail businesses, a car dealership requires stock, a physical space – such as a showroom or car yard to display your vehicles – and a savvy salesperson or two to sell them.
To thrive in this fast-paced industry, you'll also need fantastic business acumen, stellar customer service skills and a high amount of capital to buy into the market.
To start a car dealership, you'll first need to apply for a motor dealer licence in your state. While the majority of states In Australia don't require any educational prerequisites, in Queensland (QLD) and Western Australia (WA) there's a legal requirement to pass specific courses through a recognised trainer.
These courses are:
Additionally, you could hone your sales skills and gain credibility by completing one of the following optional courses:
These courses typically cost from $5,000 to $8,870. However, the Certificate III in Automotive Sales is subsidised, so it's free for eligible students. Course durations are between six months to three years to complete as full-time courses and these may include the option of studying online.
There are three main business structures applicable to a car dealership. These are:
It can be difficult to choose the right structure when starting a new business, but you are able to change the structure as your car dealership business grows.
You'll need to line up the right licences for your business. By law, you will require a state-issued motor dealer licence, which you can apply for after registering your business and completing any prerequisites required by your state.
The links for each state's online application forms are:
You may also wish to consider some of the below legal documents, which can usually be obtained online from reliable sites such as LegalVision, Lawpath or Sprintlaw.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
The primary equipment you will need to establish a car dealership is, of course, the cars you'll be selling. You can choose to source these in a few ways. These include as follows:
Purchasing cars outright requires a lot of capital, sometimes in the millions of dollars, so most people seek financial backing through a business loan or by finding investors.
Franchising through a manufacturer may be an option for some. However, it can be a challenge to secure a franchise with a reputable dealer in Australia. If you choose to attempt this route, ensure you have a sturdy business plan to back up your application.
It's likely you'll need some additional equipment and software, including as follows:
Factors that influence how you price your stock include whether you're a new or second-hand dealer and whether you are under a manufacturer franchise. A franchise would usually have set recommended retail prices, as would wholesale-purchased vehicles.
For second-hand dealerships, you will have to take into account the condition of the cars, market availability and popularity, extra features, trade-in prices and warranties you'll offer. You can use RedBook as a guide to help you to evaluate your stock.
How much money will I need to set up a car dealership?
Unfortunately, the initial capital required to set up a car dealership is quite high. Second-hand car dealerships would be the cheapest to set up. Generally speaking, you may expect these to start in the low $200,000 range for a very small dealership.
New car dealerships are priced in the high hundred-thousands to millions. Even franchising manufacturers require you to have enough capital to last a couple of years of slow sales. Having said that, there are anecdotal stories online of people starting with just a couple of cheap second-hand cars and growing their business from there. For everyone else, a good business loan may be the most workable option.
Is a car dealership profitable?
People are constantly buying and selling new and used cars, so a car dealership is always a profitable business. Just how profitable depends on the type of dealership, with used-car dealerships making more of a margin, but brand name dealerships profiting from brand recognition, manufacturer support and ongoing after-sales mechanical care.
How should I advertise to customers?
Franchise dealerships will always have support from their manufacturer and brand recognition to advertise, but other dealers should build a strong online presence. You can do this by advertising on social media, along with car sales websites and other online marketplaces. Adding your used cars to auction sales, online and off, allows the auction company to do the advertising for you.
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