Dealership Decisions: Making your Mark in the Used Car Market

The oil. The sound of the engine. The smell of fresh rubber. The only thing you love more than cars is selling them. And, the used car business is one of the best ways to make money in the industry. Here’s how to set up shop and stay in business.

Used car agent

Get Your Licenses Out Of The Way

You will need both general business licensing in the state where you do business and a dealer’s license, which gives specific authority to sell vehicles. Individuals are allowed to sell a limited number of vehicles without a license, but you shouldn’t rely on this loophole to run your dealership. Without a dealer’s license, you’re going to be hamstrung by a law which was designed to allow private individuals, not acting as a business, to sell their own vehicle.

If you’re intending to sell vehicles for profit, you must obtain proper licensing so that you can comply with consumer rights and safety laws.

Usually, you can apply for a dealer’s license through your state’s department of motor vehicles office.

Decide On Your Business Model

Will you sell retail or wholesale? One of your first decisions in business will be whether you will sell to the public or to other dealers. If you’re selling to other dealers, your customer base will be concentrated, there are difference licensing and advertising as well as zoning laws that apply to wholesalers.

If you’re selling to the general public, realize that it’s easy to for consumers these days to discover the true dealer cost of a vehicle. So, be prepared to be competitive and price your vehicles in-line with other dealers in the area.

Get Bonded and Insured

Obtain the proper insurance for your dealer’s lot, liability, and comprehensive insurance. A surety bond is another form of insurance you will need. It’s expensive, but it guarantees that your inventory arrives, and that the customer has a good buying experience.

Choose a Location

Location is everything in the used car business. If you choose a suboptimal location for your dealership, you won’t get the foot traffic that’s often responsible for the early success of a business. At the same time, you need to keep costs low to stay in business long enough to turn a profit. Finding the right location, that is a combination of a low rent, and yet high visibility, is challenging. And, it’s the first test of your business acumen.

Fleet of used cars

Hire A Lawyer

You will need a lawyer for two things: education on consumer rights and safety laws and warranties. As a dealer, you will need to familiarize yourself with the Federal used Car Rule. This rule requires that you post disclosures on used vehicles – specifically about the condition of the vehicle at the time it is sold.

The law applies in every state except Maine and Wisconsin, which both have laws similar to the federal laws, The District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, and American Samoa.

Part of your responsibilities include giving consumers a Buyer’s Guide before you offer a vehicle for sale. The guide must include whether the vehicle being sold is “as is” or under warranty, what percentage of the repair costs you will pay under any warranty, any oral promises you make are difficult for the consumer to enforce, that all promises should be in writing, that the buyer’s guide should be kept after the sale as a reference, that major mechanical and electrical systems on the vehicle, and some other major maintenance items, should be considered before purchasing the vehicle, and that consumers should have the vehicle inspected by an independent mechanic before purchasing.

You should also familiarize yourself with the state’s lemon law, and cooling off periods for transactions. While you do not have to give consumers 3 days to return the vehicle, you may if you wish.

Another reason you should speak with a lawyer is to go over any warranties you want to offer with your vehicles. State laws hold dealers responsible if vehicles you sell fail to meet reasonable quality standards.

It is up to you to make sure the vehicles you purchase and sell are fixed up, and in good working order at the time of the sale.

A warranty of merchantability is a promise that the vehicle you sell will do what it’s supposed to do. A warranty of fitness applies when you advertise a vehicle for a particular purpose. For example, if you tell the consumer that a truck is capable of towing cargo, it must be able to perform that task reasonably within the guidelines set out by the manufacturer – it must be a suitable vehicle for that task.