How much does it cost to start an automobile business? Not as much as you think.
How much does it cost to start an automobile business? Well, the answer is going to surprise you. The cost of opening a dealership can cost anywhere from $10,000.00 for a small home-based used car dealership to well over 10 million dollars for a branded new car dealership. It all comes down to what state you are opening your dealership in, and the type of dealership you will be opening.
Costs of opening a car dealership
One of the priciest businesses to launch is a car dealership. It is a high-risk venture that calls for a sizeable amount of upfront investment. However, if you are passionate about cars or making money, this is the perfect business for you to start. A new car dealership typically costs between $1 million and $10 million to launch. This price varies depending on the kind of car dealership, how big the dealership is (how many cars you plan to start with), where you are located, the cost of particular bonds, and the cost of insurance. This price includes the price of the car, as well as the cost of the business’s registration, property, and inventory. How much does it cost to start an automobile business?
Related articles How To Start A Used Car Dealership From Home and is a used car business profitable
WHAT KINDS OF DEALERSHIPS ARE THERE?
There are two different kinds of vehicle dealerships:
Used car dealership
How much does it cost to start an automobile business? Used car dealerships are the first category of the dealership: Setting this up and operating it on a smaller scale, even from your house, is pretty reasonable. You can purchase pre-owned vehicles at a discount and resell them for a profit later on. Additionally, your auto dealership needs to be situated in a place that is convenient for your target market. There are several different car brands represented by this kind of dealership.
How much does it cost to start an automobile business? A new vehicle dealership franchise is the second kind of auto dealer: Setting up this kind of dealership, which must be run on a massive scale, is expensive. Before a dealer can sell a specific brand of car, the car’s manufacturer must extend a franchise opportunity to the prospective dealer. Toyota, Ford, Tesla, and other manufacturers of vehicles are a few examples. Because some manufacturers’ rules and policies prohibit a car dealer from selling their brands, this type of auto dealership may be restricted.
The startup cost of an automobile dealership
You must carefully budget for your startup costs before starting any dealerships. These prices will change depending on the area and the country. How much does it cost to start an automobile business? Among the beginning costs are:
1. Business Registration
The cost of business registration can vary from state to state and even city to city within that same state. The type of registration is also going to make a difference depending on how much paperwork you need to file.
2. DMV license
Every state requires a dealership to be licensed within the state and city where they are going to operate.
3. Auto Dealer bond
You will need an auto dealer surety bond that will be set by the state based on the size of your business. There are a lot of factors that come into play with how much it will cost like, your credit score, and the bond amount.
Insurance requirements vary from state to state and you will need to shop around to get the best deal. You may find that you can get separate policies and combine them all together to get the same coverage for less money than finding one policy that covers all the different aspects that you will need.
This very well could be your biggest expense depending on what your requirements are. If you are a new car dealer that needs a big lot plus a showroom and service garage you can be looking at millions of dollars if you are just going to have a small used car lot you are not going to have quite as much invested in your location.
Your inventory can be either your biggest expense or your second biggest. It all depends on your line of credit and what you can get financed. If you have a really good credit score or a car manufacturer is willing to sponsor your business, you can get by with not very much at all. If your credit score is terrible and no manufacturer wants to partner with you. It is going to be much harder to get some inventory.
Every business needs to advertise to get customers in the door. You will need to start advertising before you have even sold your first car and made any money.
Start-up business expenses
It is unlikely you will sell enough vehicles to cover your first payroll. You need to have a line of credit to cover this or enough in the bank.
These are all costs how much does it cost to start an automobile business?
It is better to have plenty of money than not enough. It will be very stressful if you need to make a sale just to cover expenses for that month. How much does it cost to start an automobile business?