New Guy Starting My Own Dealership

[mryan55]

Next Gear Capital is a good flooring source while you get the wheels turning. I am not a paid spokesperson or anything, but they have a local office near our dealership, so we have sold cars to many employees of the company over the years... so through that we have learned a bit about the program.

[79LilRedExpress]

Another consideration, although a little risky, would be to buy a couple of cars at an auction when they have a "float sale".
Basically it's a 30 day same as cash sale.
Downside... yes.
It makes 30 days pass faster than you can imagine.

[Vallman]

Originally Posted by 79LilRedExpress

Another consideration, although a little risky, would be to buy a couple of cars at an auction when they have a "float sale".
Basically it's a 30 day same as cash sale.
Downside... yes.
It makes 30 days pass faster than you can imagine.

Can you please expand on this a bit? I have never heard of a float sale.

Also, can anyone here tell me how long it takes the dmv in your states to process and approve a dealers license? I was told by the dmv it wouldn't take more than a couple weeks. But today someone said they can take 6 months. Is this even possible?

[mryan55]

All of my experience is in two states, but I can say that Michigan is very slow and will always send someone out to verify the property is fit for business, whereas Indiana is very speedy, requires only one picture of the property and proof of proper zoning.

If you're going for a wholesale license (aka a 'transfer' license here in Indiana) you can probably have your set of dealer tags and business license within a week or two of the completed application. Indiana has a bit of a reputation for being a pushover for wholesale licenses... if you want one and can pony up the cash, you can have one... not many other requirements.

[Vallman]

Originally Posted by mryan55

All of my experience is in two states, but I can say that Michigan is very slow and will always send someone out to verify the property is fit for business, whereas Indiana is very speedy, requires only one picture of the property and proof of proper zoning.

If you're going for a wholesale license (aka a 'transfer' license here in Indiana) you can probably have your set of dealer tags and business license within a week or two of the completed application. Indiana has a bit of a reputation for being a pushover for wholesale licenses... if you want one and can pony up the cash, you can have one... not many other requirements.

What is the longest it has taken you to get one? Michigan sounds similar to Nevada. They as well come out and inspect the dealership before they issue a dealers license.

[mryan55]

Michigan is several months from application to license for A (New/Used) or B (Used) stores... they do license wholesale, dismantlers, and others fairly quickly though.

[Vallman]

Originally Posted by mryan55

Michigan is several months from application to license for A (New/Used) or B (Used) stores... they do license wholesale, dismantlers, and others fairly quickly though.

Thanks! I couple months I can handle, when I heard 6 months I couldnt believe it!

The lady at the DMV said that it can be as quick as 2 weeks as long as I can ensure I file everything perfect and all together.

Still looking for a property and it appears that I was able to secure a larger investment from my angel investor. I have also decided to try and get a larger flooring plan.

My other question for you guys, at the new car dealerships that have worked for he had about 60 used cars on the lot. The goal was to turn 100% of that each month. I have been told however by a few co-workers who have just used car lot experience that people in this area are turning their inventory 2-3 times in a single month. They said that if I have a 15 car lot I should at least be able to sell 30 cars a month.

Does that sound reasonable? If so I think it is a great goal for me to hit but since I am use to only flipping inventory once a month if lucky it seems like it might be a bit unrealistic.

Also, for any of the pure used car lot guys, what kind of fees are you charging? Doc fee prices? VTR fee prices? Do you do any dealer add-ons with used cars?

[XDCX]

Originally Posted by Vallman

My other question for you guys, at the new car dealerships that have worked for he had about 60 used cars on the lot. The goal was to turn 100% of that each month. I have been told however by a few co-workers who have just used car lot experience that people in this area are turning their inventory 2-3 times in a single month. They said that if I have a 15 car lot I should at least be able to sell 30 cars a month.

Does that sound reasonable? If so I think it is a great goal for me to hit but since I am use to only flipping inventory once a month if lucky it seems like it might be a bit unrealistic.

It's been awhile since I've seen the statistics but as I recall in the past the NADA reported the average dealer turned 50% of their used car inventory each month. (e.g. If you have 100 used cars in inventory you should generate an average of 50 used car sales per month.)

I've known some new car stores that were able to get their used car turns up to 100% but it took a major focus by the dealership's used car manager. (Even when you're able to flip some cars in a week or less, you'll always have some 60 and 90 day units that pull down your average.)

As before, I don't have any direct experience with smaller used car operations but I doubt there are many that are able to turn their inventory faster than 100% per month.

[XDCX]

As a quick benchmark I thought I'd look to see how CARMAX performs as it relates to used vehicle inventory turns.

According to this source, click here, CARMAX carries 57 days of used car inventory, which mean it would take 57 days for CARMAX to sell all of the vehicles they have in inventory. Given an average 30 day calendar, that means CARMAX averages a 52% monthly turn on their inventory.

CARMAX has proven to be a pretty heads-up organization with some firm rules relating to inventory management and efficient processes as it relates to vehicle reconditioning and logistics. While I'm sure an individual operation could improve on CARMAX's results, I continue to doubt there are many used car operations that can turn their inventory two to three times per month.

[steve_biegler]

If I remember my 20 group days, CARMAX's selling gross sales are equal to the total of inventory? If that is correct they may have an individual car over 57 days. I'm sure they have some sort of days on lot limit.

[Vallman]

Thank you very much XDCX!

My goal is to gross 20-30k a month with this lot. So I am trying to figure out the scale I need. Right now I think I need to have 20-30 cars and maintain an average of 1200 per copy in order to hit my number if I can only flip 50% of my inventory.

Just have to find a place that has the room that's in my price range and hope that I can find the inventory to keep it stocked all the time.

[XDCX]

Originally Posted by steve_biegler

If I remember my 20 group days, CARMAX's selling gross sales are equal to the total of inventory? If that is correct they may have an individual car over 57 days. I'm sure they have some sort of days on lot limit.

It looks like CARMAX's inventory turn performance has been dropping over the past several years. According to this website, click here, CARMAX was turning their inventory 8.39 turns per year in 2008 but that's dropped to 6.88 turns to year in 2014.

In my opinion too much attention on inventory turn can make a dealer/used car manager make some poor decisions. Do you really want to wholesale a convertible in March because you've been holding it for 90 days?

[XDCX]

Originally Posted by Vallman

Thank you very much XDCX!

My goal is to gross 20-30k a month with this lot. So I am trying to figure out the scale I need. Right now I think I need to have 20-30 cars and maintain an average of 1200 per copy in order to hit my number if I can only flip 50% of my inventory.

Just have to find a place that has the room that's in my price range and hope that I can find the inventory to keep it stocked all the time.

One other website you might want to check out is: BizBuySell.com

Here's a link that shows some auto related businesses that are for sale in Nevada - click here

[Vallman]

Just a little update to revive the thread to hopefully continue gaining some new insight and information.

I am still on the path to opening my own used car lot. Been trying to find the time in between being a manager at a large new car franchise store.

Yesterday I found what I think may be the PERFECT location for what I have in mind. Cheap, on a main road and in a lower-income part of town. The owner of the property is open to a 10-15 car lot for now with the potential to grow it out.

I am pretty excited to see how it pans out. With how low my over-head is looking now I can just sell 10 cars a month there and be in a good place just with my doc and recon fees. Everything else looks like it can just be pure profit for me (assuming I run 90% of the entire business).

So hopefully I can be another step closer very soon to making this happen!

[57years]

Good luck. Reinvest every dollar back into business by paying off debt. I guarantee you will keep track of your business better if you watch CASH!