How to open a car dealership: everything an entrepreneur needs to know

Business Features

The creation of such a trade organization requires significant capital investment. In order for investments to return faster, experts advise accompanying the sale of cars with the sale of spare parts and the provision of additional services. So, if the budget allows, it would be effective to open a car dealership together with a service station.

When choosing a location for a point of sale, you should:

• pay attention to those regions where competition in this sector is minimized;
• consider the possibility of selling used cars, since today there is quite a high demand in this niche.

It is also important that when selling a used car, the financial investments will be significantly smaller, and the monthly net profit, depending on the turnover, will be approximately 100,000–150,000 rubles. This will allow you to return the invested funds within just a few months of operation.

The lack of profit during the first 3-4 months should not be scary even if covering expenses will cause significant difficulties. Once your business has built up its client base, it will begin to develop rapidly and begin to generate the expected income.

Advantages and disadvantages

An adequate assessment of the advantages and disadvantages of a business, carried out before opening a car dealership from scratch, will help you make the right choice and determine your real capabilities.

The advantages of doing business at a car dealership include the following factors:

1. The constant growth in demand ensures that there is a sufficient potential customer base for both new and used cars.
2. The opportunity to increase income through the development of related business areas, such as the sale of spare parts or the provision of repair services.
3. Before opening your own car dealership from scratch, you do not need to obtain a higher education or any specialized education.
4. Opportunity to receive high income.
5. To develop a client base, it is enough to develop and implement the right marketing strategy.

The main thing is that car trading is a predictable type of business with a high level of stability.

There are only two disadvantages to car trading:

1. The need for large initial investments.
2. Long payback period, lasting several months.

Since the disadvantages are very relative, opening a car dealership can be called a business with great advantages. But subject to the availability of sufficient initial capital.

Profitability calculation

To understand the profitability of this type of business, it is necessary to take into account a fairly large number of factors that directly affect the cost of a car dealership from scratch. Among them:

• costs of purchasing cars for sale – 90–92%;
• salary to company employees – 0.6%;
• purchase of spare parts and accessories – 2%;
• tax deductions – 2%;
• marketing expenses – 0.4%;
• technical equipment of a car dealership – 1%.

So, the first profit of a car dealership will be approximately 2–3%. This figure will be increased by sales of used cars through a commission system, which does not involve expenses for the purchase of the goods offered for sale.

Initial Investment

In the case of organizing the work of a dealer car showroom, the initial investment is reduced to a minimum. If you plan to purchase used cars at auctions for subsequent sale, then the start-up costs will be more significant. Namely:

• Sales from open sites and purchase of cars - in the range of $150,000–200,000.
• Renting a suitable room for displaying high-value cars costs about $100,000–$200,000.

If you have the desire and opportunity, instead of renting someone else’s premises, you can start a business by building your own premises. But then, in order to calculate how much it costs to open a car dealership, you need to take into account the amount of capital investment, which usually reaches at least $1,000,000. Funds will be needed for the purchase of land and the construction of the trading platform itself, preferably together with a car repair shop. Quite a costly method, but with the shortest payback period.

If it is not possible to invest 100% of your own capital, before opening a car dealership, you can, based on a well-drafted business plan, obtain credit support from the bank. Cooperation with the bank is also necessary in order to sell cars on credit, which will significantly increase the number of potential buyers. In addition, this is also an opportunity to put expensive cars up for sale.

Difficulties

Despite the attractiveness of the idea, it has serious drawbacks:

1. High competition, especially in large cities. And this means more expenses for promotion, it is more difficult to gain a foothold in the market and other related difficulties. It will be difficult for a beginner.
2. Large starting capital. It will not be possible to launch such a business with a million in your pocket (not to mention smaller amounts). A serious enterprise needs to rent a large premises in a fairly accessible (and therefore expensive) location, at least 5 million for the initial purchase of cars for the hall alone, and a substantial advertising budget. 10 million is the minimum for such a business.
3. It is difficult to purchase cars. Without any problems, you will be able to purchase only junk cars, the pre-sale preparation of which will have to be invested. You will have to learn the ability to “fish out” a good car for an inexpensive price and organize the work of an entire department for selecting a car. By the way, be prepared that car owners putting their car up for sale will not be happy about your calls, because they are sure that they will sell the car themselves.

If all this doesn't bother you, go ahead! Further - more interesting.

Defining a Niche

To choose the right location for a point of sale, it is necessary to conduct professional monitoring for:

• demand studies;
• presence of competition.

In the first case, it is important to assess the purchasing power of potential customers in a certain region. In the second - to study market conditions, identify “dangerous” competitors and study their marketing and economic strategies. In addition, you need to choose “your” niche in this business. This could be the sale of used cars or new cars, an independent business, a dealership or a franchise.

How to lead and promote

The principle of business development is generally standard, except for extreme competition, including with dealerships that also offer the purchase of used cars through the trade-in system and their sale. Not to mention private resellers and ordinary car owners.

The main channel of promotion is the Internet and placing the business in the right place. All other methods are ineffective in the mid-2010s. The site must be of high quality and modern - focus on contextual advertising and other methods of modern Internet marketing (usability, working with behavioral factors, SMM). Classic SEO for promoting this business will not be as effective.

Among offline means, it is worth giving preference to advertising on radio and billboards in the city. This is quite effective for all areas of business related to cars. You can offer an express assessment service (without checking at a car service center). This is more convenient for the car owner, and it’s easier to attract him. But keep in mind that you need a trained eye, and there is a higher chance of buying a car with hidden flaws, which you will have to eliminate at your own expense. It is worth offering such a service if you have successful experience of making money by repurchasing cars.

Sale of used cars

Selling used vehicles is a great way to open a car dealership with minimal costs. This type of activity can be associated with the sale of new cars or be an independent enterprise. In any case, you can spend relatively little money on purchasing used cars by purchasing them at auctions, or you can spend absolutely nothing, simply providing vehicle owners with a platform for sale.

To sell used cars, it will be necessary to organize the process of assessing them in one of the following ways:

• on our own with the involvement of a specialist and the purchase of high-cost equipment;
• via ]STO[/anchor].

To do this, it is enough to conclude an agreement with the client and determine the price of the car that will suit both parties. The car dealership will handle sales independently on its site. After sale, the agreed amount will have to be returned to the former owner. The profit of the car dealership will be a percentage of sales.

For example, as payment for its services, a car dealership can offer the client a return of 20% of the cost of the car after its sale. If a used car cannot find its buyer for a long time, the owner will be asked to reduce its price.

Main taxes paid

Official dealership or franchise

Working on this principle involves concluding an agreement with one or more car manufacturers before opening your own car dealership from scratch. When opening a dealership, the business owner does not have to pay for the product, but he will not be able to influence the setting of its price, which will be set by the manufacturer himself. The range will also be regulated by partnerships. It will not be possible to sell only cheap models; expensive ones will also have to be on the site. At the same time, not in every locality an official car dealer will be able to sell such an expensive car, such as, for example, a BMW, Mercedes or Hyundai.

A car dealer's profit is usually 10% of sales. Expenses will be required for advertising, organizing the activities of the car dealership and equipping it. As bonuses from the manufacturer, the car dealership can receive various types of discounts, as well as significant discounts on purchasing a car for a test drive.

However, dealership does not reduce any risks. It’s rare that companies explain to their representatives how to open a dealership and launch cars for sale. The car dealer has to resolve all issues himself, which is much riskier than franchising. By purchasing a franchise, along with acquiring the rights to use the brand, you have the opportunity to apply a ready-made business model, receive assistance in developing a business plan, choosing premises and training staff.

Estimated income

Let us now consider the approximate earnings that usually occur in most such companies. As a rule, the owner of a car dealership receives from seven to twenty percent of each sale. The dealer may also assign additional profit if the sales plan is fulfilled - this is a kind of incentive, which can also be expressed in the provision of discounts and installment plans. In addition, models that are not in demand may be offered for sale. You can also earn money by selling various accessories, such as car mats, wheels and tires.

Let's assume that the average cost of one car in the showroom is one and a half million rubles. If a partner gets seven percent of the sale, then in this case he receives one hundred thousand rubles per car. Moreover, in just a year the showroom manages to sell one hundred cars. It turns out that the estimated profit of the salon can be about ten million rubles per year or one million rubles per month of total income. If you subtract from this money the costs of rent, advertising and salaries to sellers, then the minimum salon owner can receive is about five hundred thousand rubles a month - for such a business, although not the highest, it is still quite a decent figure.

The given data are only conditional, so it is almost impossible to talk about any specific figure here. Moreover, a car dealership is a very large-scale business, and therefore the spread of income here can be very wide. In one salon, the profit can be several times less than in another, and much depends on external factors. So when calculating earnings, you need to literally take into account the cost of each car and the likely demand for a particular model. Here you need to carry out a very subtle and detailed analysis, which will allow you to calculate your potential earnings. It is important to take into account the demand for a car in other regions and in Russia as a whole - this will allow the generation of accurate statistical data in general. Naturally, over time, customer requests may change, hence the natural drop in profits for one or another model.

Work with providers

With proper organization of work with suppliers, you can significantly increase your profits and reduce potential business risks. To do this, it is important to choose wisely and enter into agreements with manufacturers.

How to choose

The fewer intermediaries, the more profitable. Therefore, it is better to work directly with a foreign or domestic manufacturer.

Foreign

In this case, you will need to take care of delivering the vehicle intended for sale to the dealership. This process involves the use of carrier services, as well as possible costs when transporting such goods through customs. If the relationship between the parties has a formal contractual basis, the procedure for processing documents at the border may take no more than 2 days, after which the car can be prepared for sale.

The cost of a carrier company's services is usually about $2,000 for the delivery of one vehicle. You can reduce this cost item if you do the work yourself. To do this, it is necessary to formalize this type of activity, obtain the appropriate license and the necessary certificates. It is important to remember that the manufacturer most often requires immediate payment of the full cost of the purchased car.

Domestic

In the case of concluding a partnership agreement with a domestic manufacturer, the procedure is somewhat simplified. The costs of transporting the car remain, but now you do not need to worry about completing a large number of documents and worrying about the quality of delivery, since this will be handled by the supplier himself.

It is important to pay attention to the possibility of purchasing a car under a trade loan agreement. Thus, the car dealership is provided with a vehicle completely free of charge for a period of 1 month. After this period, if the car is not sold, a penalty will begin to accrue on the cost.

Working with foreign suppliers most often involves the need to buy the car after 3 months. Such an agreement provides for the mandatory sale by the car dealership of approximately 1,000 vehicles in the low-cost segment or 460 in the expensive segment within a month.

How to conclude an agreement

You can become a dealer without even leaving your own office. It is enough just to send a corresponding letter to the manufacturer. Information about what data will be required from the owner of a car dealership is most often published on official websites. Here they may also offer to fill out special forms that include the following information:

• location of the car sales place;
• description of the company's strategy;
• estimated sales volumes;
• market potential in the selected region;
• business plan for a car dealership.

The purpose of such an appeal to the manufacturer should be to convince the latter that such cooperation is beneficial to both parties. Sometimes it doesn’t hurt to organize a personal meeting with a representative of the dealer network.

Typically, the supplier himself sets the standard for the implementation plan, and the car dealership must follow it. But it is better to order 2-3 times more. This is necessary to ensure that the show grounds are not empty for a long time after the car has been purchased. Delivery of a new car to a car dealership usually takes a long time, and not every buyer is willing to spend that time waiting.

Financial plan

One of the most important parts of a business plan for opening a car dealership is a financial plan with detailed calculations of funds. This part of the project indicates the initial and ongoing investments, expected income and expected return on investment.

Investments in the project

If we take into account that it is planned to open a salon for the sale of domestic and foreign cars, as well as a service for their repair, then the main investments during the opening will go to the following needs:

• registration and contracts with suppliers;
• rent of land and premises;
• development of a design project;
• repair;
• conducting communications;
• equipment purchase;
• advertising.

Taking into account other smaller expenses, the minimum amount to pay for all items will be from 20 to 25 million rubles.

Current expenses

You should also take into account monthly expenses, which include:

• purchase of cars;
• purchasing consumables for service and spare parts for the store;
• payment of taxes;
• salaries;
• payment of utilities;
• Unexpected expenses.

On average, the amount of current expenses per year can reach 96 million rubles or more.

Income from car sales

If we take the average statistical data on car sales, and also take into account income from the service and spare parts store, then the average annual income of the enterprise will be 104 million rubles. In the future, with the expansion of the range, even greater values ​​are planned.

Profit

The net profit of an enterprise is calculated by deducting monthly expenses. In this particular case, the total amount of net profit on average in the first year will be 8 million rubles.

Registration process

The recommended form for this type of activity is LLC. Before opening a car dealership, you need to contact the tax service, Rosstat, Pension Fund and Social Insurance Fund and provide:

1. Form 11001 application.
2. Charter of a certain form for a legal entity.
3. If the business is registered in the name of one person, a “Decision on Establishment” must be obtained. If there are several persons, a “protocol on the creation of a legal entity” will be required.
4. Receipt for payment of state duty (4000 rubles).
5. Notarized copies of the founders’ passports.

The regulations specify a period of 3 days for the consideration of such an application by the tax service. After this period, the applicant will be provided with:

1. certificate of state registration of LLC;
2. tax registration certificate;
3. extract from the Unified State Register of Legal Entities;
4. registered articles of association;
5. document defining the code from Rosstat;
6. certificate of registration with the Pension Fund;
7. certificate of registration data in the TFOMS.

In addition, to open a business, you need to open a bank account and make a stamp. Then the owner will have to obtain all the necessary permits from the GPN and Rospotrebnadzor.

To organize the sales process, you will need a cash register, which is purchased from the tax office. In the consumer market department, you also need to obtain a certificate of inclusion in the unified trade register of the enterprise. Opening a car repair shop will also involve obtaining permit certificates from Rostest to perform this type of work.

According to OKVED, this type of activity will be described by the following codes:

• 50.3 – trade in spare parts for cars, accessories and components.
• 50.10 – sale of vehicles.
• 50.20 – car repair and maintenance.
• 65.23.2 – dealer activities.

Accounting in such organizations is carried out according to the Single Tax on Imputed Income.

Position of the enterprise in the industry

In order to avoid claims from supervisory authorities, to correctly position the company in the market, newly created companies need to reflect in their plans the issues of choosing an organizational and legal form (LLC or individual entrepreneur), suitable OKVED codes (main and additional), as well as the taxation system (OSNO, USN , PSN).

Attention! Entrepreneurs who have already organized their own business should check existing OKVEDs for compliance with new types of services and consider switching to a different taxation system if this will increase the profitability of the business.

Organization of a trading platform

If a well-known brand is chosen as a supplier, you need to be prepared for the fact that the car dealership will have to meet some of the supplier’s requirements. Often, an agent from the manufacturing company visits the site for control purposes. When conducting independent activities, the business owner decides all these issues himself.

Selecting a room

When choosing a room, it is advisable to focus on the following requirements and recommendations:

1. A suitable plot of land, a former car park or a car park with a ready-made premises can be selected as a trading platform for a car dealership, or it will be necessary to build it yourself.
2. Recommended area – 3000 sq. m. If you plan to provide the business with related services (washing, service station, etc.), this parameter should be increased accordingly.
3. The size of the exhibition area depends on the number of cars that are planned to be displayed on it at the same time. On average, for one vehicle you need to assume 30–35 sq.m. This area will allow you to freely display the car to a potential buyer.
4. Manufacturers recommend using glass display cases for showroom equipment. The room must be clearly visible from the street. To avoid glare that interferes with the assessment of the assortment, it is better to place glass surfaces at an angle.
5. Considering the high cost of such a product, you need to understand that making a purchasing decision can often be a lengthy process. It’s good if, at the moment of reflection, the buyer is in a recreation area specially equipped for this.
6. It is necessary to provide for the availability of all necessary utility rooms, for example, a warehouse, as well as areas for the location of a car service center, a car wash and a spare parts and accessories store.

A location that is clearly visible from the road is considered successful for a car dealership. It doesn't have to be the city center. A similar business is quite successfully conducted on the outskirts.

Car showroom equipment

Presentation plays an important role here, so it is important to include equipment in the following areas in the cost of a car dealership from scratch:

• showroom;
• administrative premises;
• client area - for relaxing and waiting;
• territory for vehicles sold;
• bathroom

It is also necessary to take care of the availability of parking so that potential clients do not have problems visiting this car dealership.

Technical equipment of a car dealership

To open an auto center, premises with a total area of ​​700 square meters are rented. m. It will house:

• Exhibition hall (300 sq. m).
• Office center (100 sq. m).
• Auto parts store (100 sq. m).
• Service and consultation center (200 sq. m).

All areas of the car dealership are equipped with modern ventilation and communication systems.

To ensure the normal functioning of the auto center, the following equipment is purchased:

• Light and music technology.
• Monoblock.
• Furniture for visitors.
• Reception desk
• Platform trolley.
• Cabinets and racks for storing spare parts, tires and car accessories.
• Cash machine.
• Computer equipment.
• Office equipment (printer, scanner, fax, telephones, etc.).
• Alarm equipment.

The technical equipment of the created auto center must fully correspond to the status of the facility and the represented automobile brand. The equipment is selected from certified products that meet the safety requirements of the long-term development strategy for a commercial facility in terms of their parameters and performance characteristics.

Recruitment

The professional team should consist of the following employees:

1. Director of the enterprise.
2. Marketer. It is important to choose an experienced advertiser, since he will not only be responsible for drawing up a marketing strategy, but also monitoring the market for demand and studying competitors’ offers. And this important information will form the basis for developing a sales plan.
3. Sales manager or salesperson. When hiring, it is important to evaluate not only the candidate’s experience in this field of activity, but also communication skills, diplomacy, persuasion and eloquence. All this can either increase sales or decrease them, since it directly affects the buyer’s overall impression of this organization.
4. Accounting specialist.

This list may be supplemented by car wash and service station workers, and sellers of related goods stores, if such structures exist.