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Anybody Own A Used Car Lot?

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The Blob

Amorphous... totally
Joined
May 25, 2001
Messages
9,021
Or are familiar with how they work?

My question is simple... although I realize the answer may not be. How much capital would a good, experienced used car salesman need to start an independent lot from scratch? The location would be considered rural.

The reason for the question is to see if a proposal presented to a family member is at all credible and I haven't a clue about the business.

Thanks.
 
Get hold of Shane, I believe he "dabbles" in used vehicles.

sgrim on the board
 
The root of the problem is acquiring vehicles that are worth the effort to sell for less than market value, and not burying yourself in repairing them to make them sell and stay gone. New car dealerships get all the good trades and the only things they take to auction are the "problem children".

Then there's the finance. Is this going to be a "buy here, pay here" dealership that finances in house and repo's the stuff that doesn't get paid for? or is it going to be a case of having to call around and pull your hair out to get someone financed just to make a sale?

It can be done either way, but it's a tough ass business. The reason the successful car dealers are all assholes is because all the honest salesmen went broke.

I'd start a junkyard from scratch before I bought into the established car business that I work for. And junkyards aren't easy money anymore either.
 
I own one and have for 5 1/2 years. I've been in the business for 18 years total. The previous years in a new car dealership. My last position was General Manager.

First you need to decide what market you want to be in. I primarily deal in the $5000 to $20,000 used vehicle now. I started in the $10,000 and under with $100,000 cash to purchase inventory. I had $10,000 set aside to buy office equipment, dealers license, bond and the required insurance for my state. I leased an older car dealership that sold AMC back in the day for $1600 mo. I bought the building a year in to the deal (4 1/2 years ago) and now own it, made my last payment this month. My website is johnsoncarcompany.com if you want to check it out.

You don't want to inventory more than a 60 day turn meaning if you sell 15 cars a month you only need 30 on the ground. It will take time to figure that out in your area.

Advertising is very expensive so I do a couple local ads per month and use craigslist.

You need to put together a system and follow it to be successful. Every car I sell gets a full inspection before I sell it. I fix ALL safety issues and use common sense on cosmetic issues. I don't hide nor patch things together to get it down the road.

Setting up financing isn't that hard. I use 3 good credit unions and do all the loans out of my store just like the new car dealerships. I also provide warranties and insurance products for customers who want them.

Depending on your state you will need a special license to do buy here pay here. This will raise the capital requirement 10 fold. Not a good program in my opinion.

I buy most of my inventory at dealer auctions and so will you. I have been around 18 years so I know how to buy a used car and I still make mistakes. That's why EVERY car gets inspected before the sale so you know what you're selling. I average around $550 reconditioning per vehicle. I factor it in when I bid on the vehicle.

There are many things to consider if you want to make the move. It's not for everyone but if you do it honestly and work at it you will be fine.

If you are serious about doing this feel free to give me a call and I'll answer any question you have if I can.

There's one more thing to consider when going in to the car business or any business that needs to make a profit to stay open. People will take cheap shots at you even when they don't know you and call you an "asshole". You learn to roll with the punches. I take pride in my business and get voted best used car store by the readers in the newspaper every year in my area. There's a lot of goof balls dabbling in the car business because they've watch to many TV shows. That only works to my benefit because I do it right. I have to chuckle to myself when I go see a buddy of mine who owns the local tavern. He makes a killing selling the know it all's a 60 cent can if beer for $2.75 while they complain about high prices and low wages, then they thank him for it when they leave. There's a message in what I just wrote, if you understand it you'll do fine if you're willing to work hard.
 
I google mapped your dealership, nice setup. Did it include the garage in the back with all those bays for 1600?

What are your thoughts about doing strictly wholesale instead of retail?
 
No when I first moved in I only had the front of the building where the showroom is and the 2 wash bays. The back area is 50x100 with 16 bay's. I just use it for my man cave now. I have a 2 post lift in 1 bay that I use to work on my toy's. I farm out all repairs on the lot vehicles. Keep in mind I'm in a town of 8000 people and the people that owned my building were in ill health so their children who were in their 60's just wanted to sell everything and get on with their lives. None of them lived in this town so when their folks passed away they sold it all off. I bought the dealership and 2 1/2 acres it sit's on. I got lucky!!! This facility in a larger town would have sold for double what I paid for it. Plus even though I'm in the city limits I'm still zoned county so my property taxes are half what my neighboring businesses pay. Like I said I just got lucky.

After 18 years in the business I wouldn't attempt making a living at wholesaling. There's not much room for error and it's a major pain in the A$$. I know several guy's that do it and enjoy that part of the business but they're on the road 4 to 5 day's a week. It's not something I would advise someone just starting out to try.

Get your license and location squared away. Buy a few vehicles, service and clean them so you put out a good product. Treat people right and you will do just fine.

In my town in the last 5 1/2 years since I've had my own place there has been 3 people come in to town to set up a used car store. They sold a few vehicles etc which anyone can do BUT they put out a sub standard product which means they were cutting corners, not fixing problems before the sale and then not taking care of the customer afterwards. They are all gone now. Unfortunately that type of practice in the car business is all to common. That's why this industry has such a bad reputation. On the flip side it makes it easier for guy's like me (and yes there are some good dealers out there) to be successful. Just do things right and treat people fairly and words spreads quickly.

I keep things simple, follow my process of buying a vehicle to getting it sold every time so my customers get what they pay for, If there is a problem I take care of it within a reasonable amount of time after the sale. I sell around 140 to 160 vehicles a year and I do it primarily by myself. I hire help to detail once in a while when I get behind and I have a retired gentlemen watch the store when I need to be away. It's simple and effective but you have to be willing to put the time and effort in. There's no short cuts that work just consistent hard work.
 
Congrats on your thriving business and that kind of man cave is my dream!

Appreciate your wise words and I will surely heed them! :)
 
Which brands of cars do you usually steer clear of....due to higher reconditioning costs?
 
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Just give me a call anytime you want my opinion on a vehicle. I'd be more than happy to help you out.
I have done this very thing and Brett steered me in the right direction.
Brett, I have another car that im gonna talk to you about (Mustang) after we get that paperwork done with the other car...lol
 
I'll get your information coming tomorrow in the mail. BTW I hope to have my car running by the end of April. I'll make a trip over and check out the 55.
 
Sounds good. Cant wait to see that beast run. Maybe we can do a test n tune sometime in May? We can focus on just your car and get it dialed in on low boost like mine.
 
Be VERY, VERY careful when considering entering into a business venture with a family member, especially when that family member wants you to provide the start up capital.

What will you say when you are asked for more money to "keep it going though this rough spot" when it isn't working?

What is your exposure and can you afford to lose everything you invest?

Are you prepared to lose every cent of your investment? Can you afford it if it happens?

Who will you turn to if it all goes bad and now you are in the position of asking for help?

There can be so many repercussions and unfortunately, too many times, most of the repercussions are bad ones.


Sorry to be a
images
 
Be VERY, VERY careful when considering entering into a business venture with a family member, especially when that family member wants you to provide the start up capital.

What will you say when you are asked for more money to "keep it going though this rough spot" when it isn't working?

What is your exposure and can you afford to lose everything you invest?

Are you prepared to lose every cent of your investment? Can you afford it if it happens?

Who will you turn to if it all goes bad and now you are in the position of asking for help?

There can be so many repercussions and unfortunately, too many times, most of the repercussions are bad ones.


Sorry to be a
images

This is good information to think about, seriously!!!

If you do enter in to a partnership (corporation) with a friend or family put everything in writing. There MUST be a buy/sell agreement and it must reciprocate. Simply put all parties involved need a way out if things go bad or they choose to leave. You need to have it in writing or you can end up in legal battle that no one wins in the end. If you incorporate and you should that makes the corporation a third party partner if there are 2 individuals. Without a buy/sell agreement you can't just leave with what you came with if the other partner won't or can't let you out. It's a criminal offense.

Capital is another huge issue. Borrowing money or floor planning inventory is a no no. Remember 2008 when new and used car dealers were dropping like flies? That's because the market fell and they became out of trust with their lenders. When this happens you either write a check to get back in trust or they send car haulers. You know how many businesses that are undercapitalized fail? ALL of them.
 
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