How to start a used car dealership

Written by jordan meyers
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How to start a used car dealership
A used-car dealership requires a monetary investment, but you may be able to recoup it fairly quickly. (car image by Warren Millar from

For every person who buys a new car, there's at least one other person who prefers to buy a used car. By starting a used-car dealership, you can get in on a market that's unlikely to shrink. While you will need to make a monetary investment, you may be able to recoup it fairly quickly.

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  1. 1

    Get a dealer's license. Requirements and fees vary, so contact your state's Department of Transportation or Department of Motor Vehicles (DMV). In some states, you'll have to meet credit-score requirements and pass a background check.

  2. 2

    Pay a surety bond. This is an expensive but usually mandatory part of becoming a used-car dealer. This bond is intended to ensure that consumers can recoup losses if you commit fraud or employ unethical business practices that cause them to lose money.

  3. 3

    Secure liability insurance as well as insurance for the cars you'll sell. This provides protection in case someone is hurt on your used-car lot or in the event of an accident in one of your cars before you are able to sell it.

  1. 1

    Find a lot on which to park and sell your used cars, making sure it has proper zoning for use as a used-car lot. Also, make sure you'll be able to meet any applicable signage regulations. This can be one of the most expensive parts of starting a used-car dealership.

  2. 2

    Buy used cars from other dealers, through online and in-person auctions and from private sellers you find through newspaper ads and for-sale signs. After making sure they're in acceptable condition, you may be able to sell them for a 50 per cent profit or more.

  3. 3

    Hire salespeople to assist you. Keep in mind that they may need licenses in some states.

Tips and warnings

  • Research your state's "lemon" laws as you work toward starting your used-car dealership. Doing so can help you stay on the right side of the law and establish good business practices.
  • Consult with an attorney and certified public accountant before starting your dealership to be certain that you are in compliance with all legal and financial requirements.
  • Don't piggyback on someone else's used-car dealership license or general business license. Doing so is illegal and could cost you money and your business. You might even find yourself subject to criminal prosecution.
  • Don't skip the process of applying for your dealer's license and setting your business up legally. In most places, buying and selling used cars without a license is a misdemeanour. While you can sell cars as a private seller, states put annual limits on how many you can sell in this manner.

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