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How to Start Your Own Auto Dealership - Part 2

Updated on January 17, 2009

This Hub is a continuation from the original Hub,

How to Start your Own Auto Dealership

Click back to find the start of this Hub.

Step 2: Dealing with the DMV, City, and Landlord

As mentioned in my introduction, before you get started in the auto dealer business, you will need to work a lot with the DMV, the city officials where you plan to do business in, and your landlord. This Hub is based on my experience living and working in California. Each state and city will have different sets of regulation, and this Hub should provide you with a basic guideline on what you should expect when starting your auto dealer business.

Dealing with the DMV

First thing is first. Even as an auto dealer, you need to learn the basics. So the DMV will make you attend a class. In the class, they will teach you the rules and regulations of the auto dealer business. Since the DMV paperwork involved in selling and registering a car is semi complex, and strict, the dealer school will teach some of the fundamentals of this. They will also go over the laws of the auto dealer business in terms of advertising, lot maintenance, and selling practices to ensure that you won’t become another rip off dealer out for a quick buck. The list of schools approved by the DMV can be found on their website.

Dealer Schools

After you finish your class with the dealer school, now you are eligible to take the test to become a dealer. The test is pretty easy. I think it was 20 questions, and you need 75% to pass. The dealer school will go over this stuff with you, so don’t sweat it now. You should be able to pass if you study just a little bit.

Once you pass, you meet the first requirement to get licensed. But wait… there’s actually a lot more that you need to go through before the DMV will give you your dealer license.

Dealing with the Landlord

Dealing with the landlord maybe easy or difficult, depending where you intend to setup shop. Why? Because the landlord has to personally approve you that you will be selling cars at the office or lot that they are leasing to you. Now, this will likely be a pretty easy thing if you go out and buy out another dealership or find a location where there used to be another dealership. But if you’ve found a new piece of land or location where you want to setup shop, there’s probably going to be a lot of negotiations that you will need to go through.

The landlord will usually give you a hard time if you are setting up shop at a new location. Why you ask? Well, who really wants a lot filled with cars, where customers will come in, there will be repairs, and toxic chemicals readily available? If you are a landlord in the right mind with other tenants nearby, they will surely reject your proposal to start up a dealership at the new location that you’ve found.

The easiest thing to do is to go out and find a location where there already exists an auto dealer doing business one way or another. By going this route, you are somewhat relieved that the landlord will accept your proposal to sell cars on their property, and sign the form you need to become an auto dealer with the DMV.

But again wait, before you get too excited, check out the requirements you need with the city.

Dealing with the City

Dealing with the city means you need to deal with the Zoning and Planning division of the city. This is because the city will restrict you on where you can and cannot sell cars retail to your customers. As the city planner, they don’t want auto dealers popping up randomly around the city because there are all kinds of negative consequences that can bring to a given area. This can be in terms of environmental, traffic, neighborhood, crime, and aesthetic.

If you decided to go out and find a location that has never been an auto dealer in the area, be sure to go check with the city first to see if they will allow you to operate an auto dealer business in the given area. From my experiences, depending on the city, the people in the zoning department are extremely strict, so it’s best to keep a good relationship with them and ask them questions before you make any decisions on a location.

Once you do find a location where the zoning rules allow you to operate the auto dealer business, you will then need to pay a pretty hefty fee to get that business plan approved with the city. The fees for zoning will usually run between $2000-4000, and it may have even gone up more recently due to the California’s budget crisis. I paid close to $3,000 to get mine approved. Pretty expensive, but it is a necessary fee that you will need to include on your business plan.

So finally after you work things out with the city and the landlord, you can go back to the DMV to get you approved as a dealer. The DMV will also have some rules that you will need to follow to get officially licensed as an auto dealer. These rules should be covered in your dealer school.

Working with the city, DMV, and landlord can be a big headache if you don't have it planned ahead of time.  Be sure you don't sign your lease agreement with your landlord before you get approved by them, or it may end up costing you a lot of $$$.

Continued on to How to Start Your Own Auto Dealership - Part 3. 

We'll cover the auto auction in the next section.

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    • profile image

      50 8 years ago

      the best advice

    • profile image

      fidpa1 8 years ago

      I found the How to start a used car dealership info. very helpful and informative. I was not able to get to part 3 and beyond. I am in the process of buying a 3.5 acre property with a repair facility, a reconditioning area and a used car sales lot. I could sure use some tips on the car dealership side. I am actually going to lease out the wash bay and recon. area to another person and focus on repairing, inspecting and selling cars. Any tips would be greatly appreciated.

      Thanks,

      Fidpa1

    • profile image

      Mikey 8 years ago

      extremely informational, and helpful, im a college student majoring in interpersonal communication (sales), while working at a dealership. I would love to open my own shop locally, this really helped me out with some of the questions - zoning, permits, liscensing, etc.

    • profile image

      Shady 8 years ago

      THAT ADVICE IS GOOD AND ALL ESPECIALLY FOR THOSE WHO LIVE IN CA. BUT WHAT ABOT OTHER STATES AROUND OUR COUNTRY? DO YOU HAVE ONE FOR EACH STATE? I KNOW THE GENERAL RULES ARE ALL THE SAME THOUGH.

      THANK YOU

    • profile image

      huppster20032004 8 years ago

      i like to no moore please it wont let me go to next page

    • how2start profile image
      Author

      how2start 8 years ago from Orange County, CA

      Hello.

      Thanks for your comments!

      I've been lazy to write the next article. But I think I'm getting the writing bug again, so hopefully, I'll update #3 soon. It will be about the auto auctions.

    • profile image

      bigstive 7 years ago

      I enjoyed it all so far. Can't wait for section 3. I have been pondering dealing cars. I was ripped off recently bought a car as is ans spent a lot of money fixing it up. I ended up selling it, but made sure it was in perfect working order, even though i'm just a private owner, i'm not gonna sell a lemon. Now i'm thinking of going to school for mechanics, then doing the process to become a Used Car seller in Ohio. How can i get a job at a dealership?

    • profile image

      Chuck 7 years ago

      This is a great article. I'm running into a zoning issue with an office located in an industrial zone.

      Can you expand on what it takes to get the zoning approved and whether or not I would need an attorney to handle that?

      Thanks

      Chuck

    • profile image

      Dee from WI 7 years ago

      The site doesn't show me how to get to step 3.....

    • profile image

      Wayne 7 years ago

      I enjoyed reading what you have written so far and look forward to reading your upcoming completion of this series.

      Thanks in advance...

    • profile image

      George 7 years ago

      You have not written the 3rd part because you don't know it do you! having been in the business for 20 years the auction is one of the first things you must understand as that, other than the occassional trade in, is where you get your inventory.

    • profile image

      JC 7 years ago

      I just wanted to know, auto dealer get their lot inventory filled up, besides auto auctions. I've noticed full lots and some dealership don't seem to be all that rich to afford that much inventory. Thanks for all that information was very helpful and knowledgeable. I was contemplating opening up a dealership myself.

    • profile image

      tim 7 years ago

      JC... the ways some dealers get inventory is by having auction flooring. Usually they repay the auction after 21 days 45 days or even 90days after they buy the vechile. They charge a fee and some intrest. This can be very risk espcially during though ecomonic times as we are having now. Also they might buy cars at large new dealer franshisce... The best way to make a TON of money at a car dealership is to have your cars paid off in FULL,,, and have a lot of cash reseves so you can do INHOUSE fiaanicing that is where you can make a 20-24% return on your money, and if they dont pay you just repo the car and sell it alll over again!..

    • profile image

      Killa 6 years ago

      One of the very first things you have to do is check the local zoning for the location because if it's not zoned correctly you could have a huge and expensive problem. Property owners bordering your location may object to your business as well as local politicians even your zoning officials may not approve your zoning this could cost thousands and still might get turned down be very careful. Auctions are the most popular ways for dealers to get cars but in this economy you have to be careful because used car prices are on the rise too many dealers competing for the same cars driving prices up. I've been in the business for a while I run Used cars dealerships for a living any questions I'll be happy to answer

    • profile image

      graider 6 years ago

      killa and George, how do i contact you. i'm in the process of starting my dealer and I have lot of questions for you guys.

    • profile image

      Pierre Delcin 6 years ago

      I like the advice that I read on Part1 and part2 I will love to read part3

    • profile image

      bj 6 years ago

      This was real helpful now I want to read # 3

    • profile image

      klim_45 6 years ago

      where is part 3?

    • profile image

      sandy vanholt 6 years ago

      your information is so wonderful,i was at a lost as where to start but you have answered a lot of my questions so throughly. thank you so much

    • profile image

      richard urbanec 6 years ago

      this was very helpful in many different ways thanks for the advice and once im done doing everything i need to get going im going to need a partner so look me up guys who knows thanks everybody

    • profile image

      chuckie 6 years ago

      this is really fake he took my idea i made all this up i sold hit the idea for 10000000

    • profile image

      chuckie 6 years ago

      this is really fake he took my idea i made all this up i sold hit the idea for 10000000

    • profile image

      RHS 6 years ago

      No use if incomplete

    • profile image

      Lena 5 years ago

      I would like to read part#3. Any idea when it can be ready. Thank you for very helpful site

    • profile image

      Padri 5 years ago

      Very good stuff. It's exactly the kind of info I'm looking for. Straight forward, lowdown info for beginners like myself. I can't wait to read Part 3.

      Thank you very much!

    • profile image

      Rao 5 years ago

      Your posts are very helpful, good stuff.

      Waiting on your part#3.

      Thanks a lot.

    • profile image

      Shellden 5 years ago

      I am going to buy a used car lot, I have been selling cars,for over 10 years--never own a used car lot--I need all the help I can get,if you have a point or two PLEASE email me Thanks

    • profile image

      JJ 5 years ago

      Part 1 & 2 were packed with tons of info. But I doubt the author will write a part 3..it's been 2 years....

    • profile image

      Mxo 5 years ago

      Surely being an auto-dealer needs a lot of dertemination...it's been two years still waiting for part 3

    • profile image

      mimido 5 years ago

      Good stuff

    • profile image

      abe 5 years ago

      good stuff man

    • profile image

      leeroy 5 years ago

      III part cost money :)

    • profile image

      Mico 5 years ago

      Yes, it takes a lot of determination and patience to sell cars as an auto dealer. You can make a multilingual auto showcase on the web to reach more buyers, alongside having a physical location. This will help get more inquiries. http://www.micoequipment.com

    • profile image

      Jeremy Williams 5 years ago

      Thank you, great article. Very informative without being to technical. Cant wait to read more aeticles from you,'

      Thanks Again!!

    • profile image

      Roach 5 years ago

      Great info , but a real cliff hanger

    • profile image

      HAMID 5 years ago

      How to Start Your Own Auto Dealership

    • profile image

      dddd 5 years ago

      wtfwheres the rest

    • profile image

      Gene 5 years ago

      I thought 1 and 2 was very informative i would like to read pt3 thanks.

    • profile image

      swaleh 5 years ago

      for the first time you want to start selling car online what business model can i use?????

    • profile image

      bernadette 5 years ago

      can a dealership sell a car without having a mechanic looking at it?

    • profile image

      dave 5 years ago

      bad time right now to start a used car business no one is buying or spending any money!! poss a mini recession!!!

    • profile image

      Sam 4 years ago

      Where the heck is the button for part 3? I don't see it!

    • profile image

      Mike 2 years ago

      i am in South Africa and i want to start my own auto dealership but i don't know where to get the information about the Auto Dealer Lisence

    • profile image

      Isaac 2 years ago

      Your Information was so interesting and educative. i got to read just the part 1 and was very informative. would like to know you personally to get the Detail in order to get start my Autor Business soon.

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