The used car dealership launch plan
Every step from deciding to opening, in the order it happens, shaped to your situation, with your own numbers beside it. About 51 steps in 8 phases, 22 of them specific to an used car dealership. Free to read; ticking steps off and putting in your own numbers come with membership.
The plan51 steps
- 01Not started0/6Fold
Decide with the numbersa week or two
Before a dollar is spent. Most expensive mistakes happen here, and this phase costs nothing.
A used-car lot makes money on inventory turn and the F&I office, not on the thin gross of any single car.
Typical for one unit is $800,000 to $8,000,000 a year; the owner keeps 5 to 15% of it before paying themselves. If that band does not cover what you need, that is the signal to pause and look again.
~50% survive 5 years. Roughly half of new US businesses are still open after five years.
Twelve questions about your money, time, experience and temperament, scored. Then the 3 questions this business asks of its owner, about the hours and the work. Answer both before you spend a dollar.
Rule of thumb: buy for an existing license, location, floor-plan line, and cash flow; build when you have the capital and the buying discipline to set the inventory and the F&I process right from... Answer it in your situation above and the plan reshapes.
Customers, prices, rent, staff pay, what it costs to open. We filled in typical numbers; change what you know and everything on this page follows.
- 02Not started0/5Open
Plan the moneya week
What it costs to open, where the money comes from, and the cushion that keeps you alive until the business pays for itself.
Opening a used car lot means getting licensed and bonded, setting up a leased lot and office, and stocking it: some cars bought with your own cash and the rest on a floor-plan line.
The itemized cost to open8 lines
- Opening inventory bought with cash (about 10 to 25 cars): $50,000 to $250,000A floor-plan line carries the rest of the lot; more cash cars mean less floor-plan interest each month
- Lot repairs, lighting, striping and paving: $5,000 to $86,000Paving a gravel display area is the big swing at the high end
- Office furniture, computers, phones and cameras: $3,200 to $19,700
- Scan tool, recon tools, supplies and staff shirts: $1,700 to $17,500
- Lot signs and flags: $1,500 to $10,000
- Dealer license, plates and bond: $400 to $3,500
- Insurance, lease deposit, legal and launch marketing: $4,300 to $37,700
- Initial working capital: $50,000 to $150,000Payroll, rent, floor-plan interest and curtailments while sales ramp; your plan works out the figure for your numbers
Costs start on day one; customers take months. Map the first twelve months of cash so the business does not run out of money while it is getting going.
The business has to earn your pay like any other bill. Set it in your numbers and watch the month it move.
How deals in this business are financed4 lines
- Floor-plan line (About 27¢ per $1,000 a day (about 9.9% a year) · about $85 a car per 60-day term)A revolving line from a specialty lender or bank that pays the auction for each car and is repaid when the car sells.
- SBA 7(a) loan (Up to $5M · up to 10 yr (25 with real estate) · 75-85% SBA guarantee)The usual loan for buying a dealership or setting up a lot: it covers lot improvements, equipment, working capital and the purchase price.
- SBA 504 loan (10% down on standard property · up to 25 yr)For buying the lot and building at a long fixed rate instead of leasing.
- Seller financing (Often 5-20% of price · 3-7 yr)Common when buying a going lot.
Most new shops pair an with 10 to 20% of your own cash. Know the monthly payment before you look at a single space.
Before you shop. A lender tells you what they would fund, what they need from you (credit, your cash in, a plan with numbers), and a pre-qualification letter makes a landlord or a seller take you seriously.
- 03Not started0/4Open
Set up the companya day or two
A day of paperwork, and it has to come before the space: a lease, a loan application and every permit are in the company’s name.
Your state’s business name search, the trademark register, and the domain, before the name is on a sign, a van, or a lease.
A , an , and the S-corporation election each change what you keep and what you are exposed to. Compare them with the numbers, confirm with a CPA and an attorney, then file with your state.
After:The is free from the IRS in minutes once the company exists. The bank account needs both. Keep business money separate from day one.
After:Pick the accounting software and connect the bank account now, so every cost of opening is captured and the numbers you later are real.
- 04Not started0/5Open
Find and secure the spaceone to three months
Used-car demand is local and impulse-driven.
What decides it for this business: traffic count, visibility & frontage, ingress / egress & lot size, auto corridor cluster, competition.
One call to the planning desk with the address: is this use allowed there, and what will it take (, permits, fire sign-off)? A space that needs a change of use can add months.
Rent, free months for the , who pays for what, the and the renewals, subject to financing and permits. The lender needs this letter or a draft lease to take your application.
After: ,, renewal options, increase caps, what the landlord adds on top of rent, and what happens if you have to leave. For a location business the lease is part of the purchase price.
After:at minimum; property, workers’ compensation and the rest as the business needs. The landlord asks for a certificate at signing and the lender at closing.
- 05Not started0/2Open
Get the loanfour to eight weeks
Four to eight weeks with an SBA lender, longer if the file is incomplete. Everything else waits on this, so send a complete file.
Your plan with numbers (download it as a PDF from this page), the company’s papers, the or draft lease, the and equipment quotes, your personal financial statement, and proof of the cash you put in.
After:The lender approves against the ; you sign the lease once approved; the loan closes against the signed lease and the insurance certificate. Ask for the to match the or longer.
After:
- 06Not started0/15Open
Permits and the build-outone to three months
Selling cars to the public is a licensed trade in every state, and titles, advertising and financing all carry federal and state rules.
Bind the policies you had quoted before a contractor, a vehicle or a customer is in play. Keep the certificates; the landlord, the lender and the city will ask.
After:Your contractors pull the building, plumbing, electrical and mechanical permits and close them out by inspection. Hold the free rent months for this.
After:Most cities approve exterior signs separately; signs take weeks to make. Order early.
City or county registration, and a DBA filing if you trade under a name other than the company’s.
Register to collect tax and process titles and registrations within your state’s deadline after each sale.
Confirm in writing that car are allowed at the lot, and get the ; many cities limit lots on some corridors.
Every state licenses used car dealers; Texas, for example, charges $700 for a general distinguishing number, and many states require fingerprints and a background check.
States set rules for the lot: an office, a permanent sign and a display area (Texas asks for a hard-surface area that holds at least five cars and cannot be a driveway).
Many states require a course before the first license; Texas asks for a six-hour online course that costs about $149.
States require a bond of $10,000 to $100,000 ($50,000 in California and Texas); premiums run about 1 to 3% a year with good credit.
Plates for test drives and moving inventory, ordered with the license (Texas charges $90 a plate).
Every used car offered for sale must carry the FTC Buyers Guide, and each sale needs an odometer disclosure.
If you arrange or offer financing, the Truth in Lending rules and the FTC Safeguards Rule for customer data apply, and many states require a finance or installment lender...
Fire-marshal review of exits, extinguishers and load, after the build and before the .
After:The city’s sign-off that the space is approved for this use. You cannot open the doors without it.
After:
- 07Not started0/9Open
Set up to runduring the build
During the build, so the business runs from day one: the systems, the prices, the people and the routine.
Tracks every unit by days-to-turn, recon stage and cost, and structures the deal at the desk; the operating core that tells you which cars are aging and which...
Most shoppers start on the marketplaces, where price transparency squeezes the front gross; sharp photos, complete listings, and market-based pricing are what...
Routes deals to banks and credit unions and attaches warranty and GAP; the F&I office is where an independent earns the gross the thin front end never gives.
See the price the the business needs implies, then check it against what the market pays.
State employer, withholding and unemployment accounts, and workers’ compensation, before the first payday.
After:Wages are the start: , insurance, training time and the hours you stop billing. Owners usually post the jobs a month out and hire two to four weeks before opening so training happens before the doors open.
Daily: Work leads and walk-ins, sell and negotiate, structure each deal... Weekly: Source at auction lanes and on trade-ins, push cars through the... Monthly: Review days-to-turn and front gross and F&I gross per unit, identify...
Opening, closing, the sale, the complaint, the cash. One page each. This is the manual a franchise would have sold you.
Free, and it is how most people will find you. Address, hours, photos and the menu or price list, live before opening day; then the sign, the soft opening and the first regulars.
- 08Not started0/5Open
Open and measurethe first ninety days
You own it. Now run it on the numbers.
Friends, neighbors and a short menu or list. Find the problems while the room is forgiving.
Enter the real numbers and see every cost line against the for this business.
Vehicle acquisition cost; Floor-plan interest, curtailments & aging; Reconditioning & customer acquisition.
Growth consumes cash before it produces it. Find the rate your own cash funds before you push.
An independent lot can be sold, and buyers include other dealers and first-time owners with SBA loans.