What does it take to start a dealership?
12-01-2007, 11:12 PM
#1
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What does it take to start a dealership?
Anyone out there dabble in the car dealership business? I was curious what it takes to start up a franchise - say a Porsche dealership for example. What criteria is required from the franchisee, start-up funds, financing, what market research the franchisor can help with, etc.
Anyone done this kinda thing before or currently in the business?
Anyone done this kinda thing before or currently in the business?
12-02-2007, 12:39 AM
#4
Fahrvergnügen'd
Originally Posted by INSPIRE 32V
^ lol yeah but what after that and how much is alot of money
I'd say at least $5M for a Porsche dealer. Probably more considering they aren't going to let you put a dealership in a strip-mall looking building
12-02-2007, 01:10 AM
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Originally Posted by vector7777
Anyone out there dabble in the car dealership business? ...
For that kind of money nobody "dabbles".
12-02-2007, 07:30 AM
#6
Fahrvergnügen'd
If I were you I'd start small. Get a dealer license and go to the nearest mega-auction where program cars and rentals come through. Buy a good deal and then turn and sell it.
Start there and then move up.
Since you're probably going to have to get a line of credit through the manufacturer I cannot see how anyone in their right mind would let someone who wasn't either incredibly rich (aka a pro athlete like Jordan or Elway) or extremely experienced (owns other dealerships) start a new Porsche dealer somewhere.
Start there and then move up.
Since you're probably going to have to get a line of credit through the manufacturer I cannot see how anyone in their right mind would let someone who wasn't either incredibly rich (aka a pro athlete like Jordan or Elway) or extremely experienced (owns other dealerships) start a new Porsche dealer somewhere.
12-02-2007, 08:24 AM
#7
Senior Moderator
State of the art dealerships go for about 3-5M nowadays (and that's just the building)... Tasca Ford over in RI built their new dealership right around the corner from where I work. He was a drag racer who started with a small used car lot back in the 50's in Bristol RI. Bob Sr. was the guy who got John Force away from GM. http://findarticles.com/p/articles/m...08/ai_n9278231
The easiest way to get into the game is to buy an existing "mom and pop" dealership. I've seen alot of these bought out and moved to new facilities in my area.
http://www.projo.com/ri/johnston/con...9.1868367.html
I've always wanted to own a used car lot / dealership, but figured the money and logistics (legal and otherwise) would be a huge undertaking for one person. Starting small (with and independant used car lot) would be one way to minimize the undertaking. Buying an existing (used or otherwise) lot would also make the transition easier especially if you could retail the sell as a consultant for awhile...
The easiest way to get into the game is to buy an existing "mom and pop" dealership. I've seen alot of these bought out and moved to new facilities in my area.
Michael Jr. said manufacturers want to end the era of numerous Mom-and-Pop dealerships in neighborhoods and are pushing for big dealerships, or auto malls, that are on major thoroughfares and carry a full range of a company’s marques as well as services.
“(Chrysler) wants everything in one showroom,” Michael Jr. said, noting that with land on major commercial thoroughfares running at $1 million an acre, the money involved is daunting for small businesses.
He said Joe LaPolla had told him that Chrysler “wants us to move and build brand new facilities.”
“He did not want to do that and so we sat down and put the peanuts together,” he said of the deal.
He added while the addition of the Dodge dealership to the Chrysler and Jeep franchises was a “new point” rather than an existing franchise, and therefore would not cost him any money, he did not expect to make anything from it initially as “it takes a couple of years to get everything up and running.”
“(Chrysler) wants everything in one showroom,” Michael Jr. said, noting that with land on major commercial thoroughfares running at $1 million an acre, the money involved is daunting for small businesses.
He said Joe LaPolla had told him that Chrysler “wants us to move and build brand new facilities.”
“He did not want to do that and so we sat down and put the peanuts together,” he said of the deal.
He added while the addition of the Dodge dealership to the Chrysler and Jeep franchises was a “new point” rather than an existing franchise, and therefore would not cost him any money, he did not expect to make anything from it initially as “it takes a couple of years to get everything up and running.”
I've always wanted to own a used car lot / dealership, but figured the money and logistics (legal and otherwise) would be a huge undertaking for one person. Starting small (with and independant used car lot) would be one way to minimize the undertaking. Buying an existing (used or otherwise) lot would also make the transition easier especially if you could retail the sell as a consultant for awhile...
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12-02-2007, 08:29 AM
#9
Senior Moderator
Originally Posted by LotusTracker
why would you want to get into the car business now when they are predicting a 15 yr low industrywide?
Here's the article Phil's referring to:
https://acurazine.com/forums/automotive-news-6/15-year-low-forecast-auto-sales-378734/
12-02-2007, 09:51 AM
#10
Suzuka Master
Like what Greenie posted, the mom and pop dealership is dead. Unless you have money coming out the wazoo, you won't even be able to afford to build the building that the manufacturer would require of you and high end manufacturers have strict requirements about what they want in terms of showrooms and service centers.
I work for a small dealer and we are 4 separate dealers. Almost all dealers now are auto groups and if they aren't they are being bought by auto groups.
I work for a small dealer and we are 4 separate dealers. Almost all dealers now are auto groups and if they aren't they are being bought by auto groups.
12-02-2007, 12:04 PM
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Originally Posted by LotusTracker
why would you want to get into the car business now when they are predicting a 15 yr low industrywide?
People are still going to have to buy cars.
12-02-2007, 12:30 PM
#12
Team Owner
One way to sell fancy cars is to open a used car lot that specializes in luxury brands. You can sell used Mercedes, Lexus, BMW, whatever. The nice thing is that you are still selling very nice cars but can run it out of some crap building and don't need a service department.
12-02-2007, 07:17 PM
#13
One of our Partners looked into starting a Porsche dealership and his major hang-up was that premier dealerships such as Porsche (and perhaps all dealerships, not sure) have a geographic limit. Due to the fact that Indianapolis already had an existing Porsche dealership, they would not entertain any ideas of opening another dealership in the city.
12-02-2007, 07:55 PM
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You need:
1) Cash
2) A convincing argument as to WHY the manufacturer needs a dealership to be in the location you've chosen and also why YOU personally are someone they are interested in doing business with.
3) A solid business plan doesnt hurt either. So you'll either need to be smart enough to know market factors for the region OR have someone in mind with the experience/knowledge to run your dealership for you.
1) Cash
2) A convincing argument as to WHY the manufacturer needs a dealership to be in the location you've chosen and also why YOU personally are someone they are interested in doing business with.
3) A solid business plan doesnt hurt either. So you'll either need to be smart enough to know market factors for the region OR have someone in mind with the experience/knowledge to run your dealership for you.
12-02-2007, 08:02 PM
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Originally Posted by doopstr
One way to sell fancy cars is to open a used car lot that specializes in luxury brands. You can sell used Mercedes, Lexus, BMW, whatever. The nice thing is that you are still selling very nice cars but can run it out of some crap building and don't need a service department.
Good point!
12-02-2007, 08:33 PM
#16
Three Wheelin'
I have a friend who was in the car business straight out of college for a while. He had a small lot that he got with someone else. He let the other guy have the lot and he worked from home on the side. He only carried nicer cars and only would buy cars he would like for himself in case he got stuck with one for a while. He also did street bikes as well. He would go to the big auctions in florida and buy 3 or 4 cars at a time. Mosly he would buy cars that had non-stock rims or cars that needed minor cosmtic work. He would get them shipped home and get the proper rims etc. He always had different nice car to drive. We would always go to his house before we went out. "what do ya'll want to take tonight, the BMW , Benz or the Lexus?" He would switch the dealer plate to whatever one and out we would go. pretty fun when you're like 23 always having pimp cars to drive.
12-02-2007, 08:34 PM
#17
Suzuka Master
Originally Posted by Tripp11
One of our Partners looked into starting a Porsche dealership and his major hang-up was that premier dealerships such as Porsche (and perhaps all dealerships, not sure) have a geographic limit. Due to the fact that Indianapolis already had an existing Porsche dealership, they would not entertain any ideas of opening another dealership in the city.
Forgot about this. This is true for most high end marques if not all manafacturers. Pretty much anywhere where you think there is a decent market is has a dealer already.
12-02-2007, 09:04 PM
#19
dɐɹɔ ǝɥʇ ʇɐɥʍ
All manufacturers have territories, a local Chevy dealer wanted to buy a lot I had for sale and was willing to pay a lot for it, but GM killed the deal because we were 3 miles too close to a dealer they didn't want to upset 
12-03-2007, 10:23 AM
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Originally Posted by LotusTracker
Good point!
Be a Vette dealer....a Mustang dealer.....a BMW dealer.
Pic one and find really nice ones and build your rep on getting the nicest of that one brand!
^
12-03-2007, 02:56 PM
#23
All you really need is a dealer license, somewhere to put the cars, $ to buy cars & Ebay.
That's if you want to get in.
To actually become a major dealer like Ford or Mazda etc, you need start up capital. You can always get a loans to cover the costs & be in the red for the 1st few years until you can turn a profit.
That's if you want to get in.
To actually become a major dealer like Ford or Mazda etc, you need start up capital. You can always get a loans to cover the costs & be in the red for the 1st few years until you can turn a profit.
12-04-2007, 08:25 AM
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Originally Posted by fuzzy02CLS
All you really need is a dealer license, somewhere to put the cars, $ to buy cars & Ebay.
That's if you want to get in.
To actually become a major dealer like Ford or Mazda etc, you need start up capital. You can always get a loans to cover the costs & be in the red for the 1st few years until you can turn a profit.
That's if you want to get in.
To actually become a major dealer like Ford or Mazda etc, you need start up capital. You can always get a loans to cover the costs & be in the red for the 1st few years until you can turn a profit.
I wonder how much dough (or liquidity / assets) you'd have to show to get a major car-maker (Porsche, Acura, etc.) to finance your dealership initially. Lots of businesses operate in the red for the first few years...
12-04-2007, 09:11 AM
#26
dɐɹɔ ǝɥʇ ʇɐɥʍ
As a business owner and a venture banker any business that operates in the red for the first few years that isn't going to explode with growth is a horrible project to get involved with.
The only way I would recommend it is if you have little to nothing to invest, and borrowing the money from a bank would be the only way for you to get involved with a project like that, then maybe. But if your planning on dumping any sum of your personal money into a losing deal it makes no sense, buy a mutual fund and make 10% and see who's further ahead in 10 years.
The only way I would recommend it is if you have little to nothing to invest, and borrowing the money from a bank would be the only way for you to get involved with a project like that, then maybe. But if your planning on dumping any sum of your personal money into a losing deal it makes no sense, buy a mutual fund and make 10% and see who's further ahead in 10 years.
12-04-2007, 10:58 AM
#27
Originally Posted by vector7777
I wonder how much dough (or liquidity / assets) you'd have to show to get a major car-maker (Porsche, Acura, etc.) to finance your dealership initially. Lots of businesses operate in the red for the first few years...
Also, figure this... we own a few franchises. As an example, our franchise typically has start-up costs of around $250k. In order to qualify for a franchise, the applicant's net worth needs to be around triple that. So if you're thinking of opening a dealership that will cost $3 - $5 million, you need to be worth at least double that.
Lastly, my dad works at a dealership part-time (he's retired, so he just does it for a few extra bucks). The dealership was just sold... at a huge loss to another dealership for about $3 million. This purchase price was basically for the building (which is only about a year old) and very little inventory (the seller sold out pretty much everything they had before the transaction was finalized so he could make back as much as possible). So, $3 million for basically a finished building and some inventory. The catch........ that was for a Lincoln/Mercury dealership.
So I think you'd be lucky to get into a Porsche, Lexus, Acura, etc. dealership for less then $5 - $6 million. So you better at least be worth at least twice that and have at least $1 million liquid available to put down.
I'd say... get your dealer's license and stick to buying/selling on eBay...
12-04-2007, 11:18 AM
#28
Trolling Canuckistan
Originally Posted by GreenMonster
State of the art dealerships go for about 3-5M nowadays (and that's just the building)...
12-04-2007, 12:15 PM
#29
dɐɹɔ ǝɥʇ ʇɐɥʍ
Originally Posted by juniorbean
Typically on any business you need about 20% down payment to even be considered. So if you figure a major car dealership will run you about $3-5 million you're going to need $600k - $1 million just to put down.
Also, figure this... we own a few franchises. As an example, our franchise typically has start-up costs of around $250k. In order to qualify for a franchise, the applicant's net worth needs to be around triple that. So if you're thinking of opening a dealership that will cost $3 - $5 million, you need to be worth at least double that.
Lastly, my dad works at a dealership part-time (he's retired, so he just does it for a few extra bucks). The dealership was just sold... at a huge loss to another dealership for about $3 million. This purchase price was basically for the building (which is only about a year old) and very little inventory (the seller sold out pretty much everything they had before the transaction was finalized so he could make back as much as possible). So, $3 million for basically a finished building and some inventory. The catch........ that was for a Lincoln/Mercury dealership.
So I think you'd be lucky to get into a Porsche, Lexus, Acura, etc. dealership for less then $5 - $6 million. So you better at least be worth at least twice that and have at least $1 million liquid available to put down.
I'd say... get your dealer's license and stick to buying/selling on eBay...
Also, figure this... we own a few franchises. As an example, our franchise typically has start-up costs of around $250k. In order to qualify for a franchise, the applicant's net worth needs to be around triple that. So if you're thinking of opening a dealership that will cost $3 - $5 million, you need to be worth at least double that.
Lastly, my dad works at a dealership part-time (he's retired, so he just does it for a few extra bucks). The dealership was just sold... at a huge loss to another dealership for about $3 million. This purchase price was basically for the building (which is only about a year old) and very little inventory (the seller sold out pretty much everything they had before the transaction was finalized so he could make back as much as possible). So, $3 million for basically a finished building and some inventory. The catch........ that was for a Lincoln/Mercury dealership.
So I think you'd be lucky to get into a Porsche, Lexus, Acura, etc. dealership for less then $5 - $6 million. So you better at least be worth at least twice that and have at least $1 million liquid available to put down.
I'd say... get your dealer's license and stick to buying/selling on eBay...
sounds about right, financially it makes little to no sense, its an emotional move.
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