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Benny · 02-06-2017, 11:14 AM

I've lurked on this forum for quite some time. Never joined because I'm an independent dealer and this place seems to be geared more towards new car dealers. Seen your thread and figured I'd join to throw in my 2 cents.

I'm only 27 so by no means would I call myself an expert, but hopefully something I share is useful to you. I started my dealership 5 years ago. I was very naive when I started. I was one of those people who thought it would be easy money selling cars. Not quite the case. You might think your overhead is low but you will quickly find out it isn't.

When I started I had to start in a warehouse because zoning around here did not favor car dealerships. I would not suggest doing this because relying solely on online advertising to get customers really raises your overhead and brings you all the price shoppers. My rent at this place was $1,500 per month, which is cheap rent for anything commercial. By the time you added in the other expenses I was a little over $3,000 per month.

The few actual car lots I found on a main road were about $3,000 per month for rent. After a year at the warehouse, I found a spot on a main road for $1,000 per month but it was dump and a bad location. After 5 years, I am just barely starting to take a paycheck for myself from the dealership. Before that I relied on my other business for income, if I didn't have that I wouldn't be in the car business any more.

I'm a firm believer if you want to start a dealership from scratch and do it the right way, it takes years to get established before you make money. I see big shots who start a dealership, sell junk cars and start making money off the financing etc and then neglect the customer when there are problems. Next thing you know they are out of business.

I was very lucky that after renting for 3 years that I was able to scrounge enough money together to buy a location for myself. I was even luckier when I was able to buy it for cash and not have to have a mortgage. I have to tell you that makes a huge difference on the monthly overhead. Currently my overhead is about $1,900 per month but at the end of this month I cancelled carfax and am trying to make a go without it. We'll see how that turns out but if I can make a go without it, my expenses will be $1,300 per month. I don't think anyone can really beat me there, the electric bill at most dealerships is probably more than that.

I think your biggest hurdle is going to be finding those cars you want to sell. Around here, those cars are very sparse to get. I'm in PA about an hour from Manhiem, PA which is where the flagship manheim auction is. We are very spoiled where I am in that we have so many auctions within an hour or two of here. I don't buy the cheap cars, I only sell off lease cars because that's what I chose to specialize in. I mainly compete against the franchise dealers. But the cheap cars I see go to auction get scooped up by the Buy Here Pay Here lots. They run the price up because they make the money on the financing. That's why I say it's going to be hard to buy cheap cars.

It's very difficult to try and buy dealer trades direct from the big dealers. Most of them only deal with established wholesalers and you have to be part of the "good ole boys club." And then we have the biggest wholesalers in the world around here who have most of the market locked up, but they don't usually touch the old junk.

I would stay away from floor plans at all costs. I have always owned my inventory outright. Floor plans can put you under quick. Nextgear and everyone else always stops by trying to sign my up and I won't do it. I also think you buy smarter when you use your own money.

You better start figuring out how you are going to offer financing for your cars. To you and I $3,000 might be nothing, but the customer probably won't have it. The few times I sold old junk, even for $1,000 the first questions were "Do you finance, and what kind of warranty does it have." That's why I usually send all my unwanted trades to auction. I'm hooked up with a large regional bank for financing but they won't finance anything older than 6 years or 90,000 miles. The terms of the subprime finance companies are laughable. They basically hold you accountable if the customer doesn't pay, even after you had to pay them a hefty fee to buy the deal. That's why I don't get involved with subprime but as time goes on there are fewer qualified people with prime credit that I can get financed.

I hope this helps. If you would like to know anything else just ask.

02-06-2017, 11:14 AM	#4
Benny New Member Join Date: Feb 2017 Posts: 4	I've lurked on this forum for quite some time. Never joined because I'm an independent dealer and this place seems to be geared more towards new car dealers. Seen your thread and figured I'd join to throw in my 2 cents. I'm only 27 so by no means would I call myself an expert, but hopefully something I share is useful to you. I started my dealership 5 years ago. I was very naive when I started. I was one of those people who thought it would be easy money selling cars. Not quite the case. You might think your overhead is low but you will quickly find out it isn't. When I started I had to start in a warehouse because zoning around here did not favor car dealerships. I would not suggest doing this because relying solely on online advertising to get customers really raises your overhead and brings you all the price shoppers. My rent at this place was $1,500 per month, which is cheap rent for anything commercial. By the time you added in the other expenses I was a little over $3,000 per month. The few actual car lots I found on a main road were about $3,000 per month for rent. After a year at the warehouse, I found a spot on a main road for $1,000 per month but it was dump and a bad location. After 5 years, I am just barely starting to take a paycheck for myself from the dealership. Before that I relied on my other business for income, if I didn't have that I wouldn't be in the car business any more. I'm a firm believer if you want to start a dealership from scratch and do it the right way, it takes years to get established before you make money. I see big shots who start a dealership, sell junk cars and start making money off the financing etc and then neglect the customer when there are problems. Next thing you know they are out of business. I was very lucky that after renting for 3 years that I was able to scrounge enough money together to buy a location for myself. I was even luckier when I was able to buy it for cash and not have to have a mortgage. I have to tell you that makes a huge difference on the monthly overhead. Currently my overhead is about $1,900 per month but at the end of this month I cancelled carfax and am trying to make a go without it. We'll see how that turns out but if I can make a go without it, my expenses will be $1,300 per month. I don't think anyone can really beat me there, the electric bill at most dealerships is probably more than that. I think your biggest hurdle is going to be finding those cars you want to sell. Around here, those cars are very sparse to get. I'm in PA about an hour from Manhiem, PA which is where the flagship manheim auction is. We are very spoiled where I am in that we have so many auctions within an hour or two of here. I don't buy the cheap cars, I only sell off lease cars because that's what I chose to specialize in. I mainly compete against the franchise dealers. But the cheap cars I see go to auction get scooped up by the Buy Here Pay Here lots. They run the price up because they make the money on the financing. That's why I say it's going to be hard to buy cheap cars. It's very difficult to try and buy dealer trades direct from the big dealers. Most of them only deal with established wholesalers and you have to be part of the "good ole boys club." And then we have the biggest wholesalers in the world around here who have most of the market locked up, but they don't usually touch the old junk. I would stay away from floor plans at all costs. I have always owned my inventory outright. Floor plans can put you under quick. Nextgear and everyone else always stops by trying to sign my up and I won't do it. I also think you buy smarter when you use your own money. You better start figuring out how you are going to offer financing for your cars. To you and I $3,000 might be nothing, but the customer probably won't have it. The few times I sold old junk, even for $1,000 the first questions were "Do you finance, and what kind of warranty does it have." That's why I usually send all my unwanted trades to auction. I'm hooked up with a large regional bank for financing but they won't finance anything older than 6 years or 90,000 miles. The terms of the subprime finance companies are laughable. They basically hold you accountable if the customer doesn't pay, even after you had to pay them a hefty fee to buy the deal. That's why I don't get involved with subprime but as time goes on there are fewer qualified people with prime credit that I can get financed. I hope this helps. If you would like to know anything else just ask.