Archive for July, 2010

27
Jul
10

Start a Used Car Dealership

Car enthusiasts often dream about opening a car dealership.  Wanting to buy and sell vehicles is a passion that they have that they would like to make a living off of.  For these types of people opening up a used car dealership might provide the best opportunity to make their dreams a reality.  Many people wonder what it takes to open a used auto dealership.  Throughout this article we will go over the steps that one will need to take to make the dream of owning a car dealership a reality. 

In the beginning most of the work in opening a used auto dealership will involve the city, landlords and DMV.  These will be the first set of obstacles when you’re setting up your business. Then you will need to learn the basics of the auto business, such as, managing inventory, getting financing, marketing, and customer service. 

If you run your business right, there is a lot of potential to make a lot of money in the auto industry.  Owning a used car dealership you have the ability to become a millionaire or if you do exceptionally well a billionaire!  The most successfully run auto business is on the Forbes 500 which means that there is potential to make a lot of money in this industry.

Used Car Dealership- Business Model

In the used car industry there are 3 different ways of generating money. Below are the three methods and the amount of money you would generate from the sale of a vehicle.

  1. Selling Used Cars Retail: $500-$2,000
  2. Selling Used Cars Wholesale: $300-$700
  3. Broker New or Used Cars: $250-$500

Selling Used Car Retail

The retail sale of a car happens at a car dealership or on a car lot.  A normal transaction for a retail used car dealership happens when a customer visits the dealership, talks with a salesperson, views the inventory to find a car they like and then purchase it. 

Besides the typical retail auto dealership there are other ways that allow a person to sell used cars in a retail setting. For example, you can sell used cars at a small office if you pass the legal criteria like a body shop selling cars they fix. 

When you sell a used car in a retail environment the average you can make is $1,000 per used car. That should be the amount that a used car dealer should aim for.  There are many reasons that the profit of a used car can fluctuate from the average $1,000.  Below are some of their reasons why the profit margin would fluctuate higher or lower than the average $1,000.

Factors for Higher Profit Margins

  • The car maybe in high demand
  • The car may have been purchased below the wholesale price
  • The car may have needed only a small amount of repairs
  • The customer may not hassle too much with the retail price
  • The car may be a luxury car that allows you to charge a premium
  • The dealership may have great service allowing it to charge a premium
  • The dealership may have subprime financing allowing you to charge a premium
  • The economy maybe booming so people are able to spend more

Factors for Lower Profit Margins

  • The car maybe in low demand
  • The car may have been bought above wholesale price
  • The dealership may have to do a lot of repairs on the vehicle
  • The customer maybe very good at negotiating
  • The dealership may need to compete with other dealerships on pricing
  • The customer may not be able to secure financing
  • The economy maybe in recession causing people not to want to spend too much

The factors in the list above and this simple formula below will help in determining the profit margin of each vehicle sale.

Retail Sale Price of Car – Purchase Price of Vehicle – Costs to Fix the Car = Profit Margin

By increasing the sales price or decreasing the purchase price or reducing the costs of repairs you are able to have a greater profit margin.  It is not unheard of for a dealership to make $2,000 to $2,500 off a used car.

Selling Used Car Wholesale

When you sell a car wholesale you basically buy the car at an auto auction or through a customer and sell it back to a dealer or an auction.  When you sell a car wholesale the average profit margin is $500.  In this field there is a lot less work and hassle so there is definitely an upside in being a used car wholesale dealer.

Broker New or Used Car

One way to make money in the auto industry is to broker either new or used cars. There are a lot of people that do not want to deal with taking the time to purchase a vehicle so they hire a broker.  The dealer will work with other dealers to purchase a vehicle for the customer and get a broker fee.  The broker fee can be taken from the customer or the dealer and the average broker fee is between $300 through $500. 

Be prepared

When starting up a used car business it is very important that you are prepared.  Most used car dealers have dealer management software or online used car software.  This helps the dealer with inventory management, working deals, credit reports, customized business reporting, financing, Buy Here Pay Here, web marketing and fraud solutions.

To read the full article on HubPages, please click here.

23
Jul
10

Fun Friday- Flood Win

21
Jul
10

5 Reasons to Buy a Used Car

Buying a used car can save a car buyer a lot of money for various reasons.  Phillip Reed, Edmunds.com’s consumer advice editor states that, he is a big fan of buying a used car because it is an important way for a family on a budget to save money. 

Jack Nerad the executive market analyst at Kelly Blue Book says, “Used cars are a great value.  Cars today are really good and really last a long time.  They have longer useful lives than in the ‘50’s and ‘60’s when I was growing up.”

Not all used cars carry the same value.  A used car shopper really needs to do some research to feel confident about the shape of a potential vehicle he or she is thinking about purchasing.

5 Reasons to Buy a Used Car

  1. Minimizing depreciation– Reed says that a new car typically depreciates about 20 percent once it is driven off of the lot and most vehicles will lose about 10 percent in value during the first year of ownership.  All together that is about a 30 percent loss within the first year of ownership.  You can avoid this loss by buying a one year old used vehicle.  This is why a car that is one years old is a lot harder to find than a vehicle that is two to three years old.  Nerad feels that the best value for your money is to buy a car that is two years old and drive it until you can’t drive it anymore.
  2. Reducing insurance costs- Insurance cost is associated with the value of the vehicle and since used cars are less valuable than that vehicle new it is no wonder that the insurance cost is lower.  Reed says that the insurance cost is lower because you can eliminate some elements of the car insurance such as collision and theft.
  3. Reducing registration fees- Reed says that the charge to register a vehicle is usually based off of the car’s transaction price.  In addition states are increasing the registration fees in an effort to generate more revenue and if you buy a used vehicle it helps reduce those fees.
  4. Getting more bang for your buck- When you buy a used vehicle you are able to buy better vehicle than if you were to buy it new.  For example, you may not be able to purchase a new luxury vehicle that you have always wanted, but two or three years old luxury vehicle could be in your budget.  Reed states that, “We used to think that a 100,000 mile car was done.  Now they are running to 200,000 miles.  That’s like a second life.”  Nerad feels that because carmakers aren’t redesigning their models every year like they use to so buying a used car really doesn’t carry the same stigma. 
  5. Keeping your peace of mind- Back in the day buying a used car was considered to be “buying someone else’s problems.” But rest assured that now we have information to be able to distinguish if it truly is “someone else’s problem.”Companies like AutoCheck make vehicle history reports giving potential customers valuable information on the state of the used car. If you are worried about the possible risk in buying a “lemon” you can buy a certified pre-owned car. Certified pre-owned vehicles have established manufacturer’s standards and have some sort of guarantee against defects.

To read the full article on Bankrate.com, please click here.

16
Jul
10

Fun Friday- Star Wars

09
Jul
10

10 Cars that are Worth the Purchase

It seems that reckless financing deals on vehicles are now a thing of the past.  For example, those types of deals took down the US Mitsubishi and were a factor in the fall of GM and Chrysler.  Due to the financing problem these companies are no longer over producing their vehicles like they use to. 

Consumer research and trend analysts suggests that carmakers should be ready for very slow sales around 11.5 to 12 million new vehicles sales due to the current home values and 401k accounts which will keep people in their cars for about seven to eight years maybe even more. 

For people who want to get rid of their old car and trade it in for a different car there is still good news.  Automakers are making longer ownership more possible with better engineering and quality. JD Power’s Vehicle Dependability study surveyed car owners who have owned their vehicle for about three years.  The study found that Detroit automakers are fast approaching the quality of the Asian automakers. For the first time in this study a Detroit model, the 2006 Buick LaCrosse, has the lowest incidence of problems.  For those of you looking for a different set of wheels below is the list of  vehicles to buy now.

10 Cars to Buy and Drive for A Decade

  1. Buick LaCrosse
  2. Toyota Prius
  3. Honda CR-V
  4. Lincoln MKZ
  5. Honda Ridgeline
  6. BMW 3-Series
  7. BMW Z4
  8. Mercedes-Benz SL-Class
  9. Hyundai Elantra Touring
  10. Volkswagen Jetta TDI

Do you agree with this list?  Let me know by leaving a comment.

To read the full article on AOL Autos, please click here.

09
Jul
10

Fun Friday- Serenading Unicorn

02
Jul
10

Fun Friday- Lion Reunion




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