How to set up a used car dealership

Updated April 17, 2017

When it comes time to purchase a car, there are many individuals who seek out a deal by looking for a used car. Used car dealerships are one aspect of the automobile market that is unlikely to disappear anytime soon. If you set up a used car dealership, you could be looking at substantial profits. To become successful, you need to be prepared to promote and finance your dealership. Starting a used car dealership could be an investment where you can quickly recoup your money.

Find a location for your used car dealership. Secure a commercially zoned lot to house all the used cars you want to sell. Keep all documents so you can apply for a dealer's license.

Apply for a license from your local motor vehicles department before setting up your dealership. Most states require you to pass a test, submit an application and pay a fee to get your dealership license. You may be required to show your deed to your lot to a representative at the DMV. Some states only allow dealers with official documentation to acquire a license.

Obtain a bond to show that you are a legitimate car dealership. Surety bonds protect the public from shady dealers who sell used vehicles with mechanical problems. Your state may require you to renew your surety bond every few years.

Start building your used car inventory by attending car auctions. At auctions you can purchase used SUVs, cars, trucks and vans from various manufacturers. This gives you a great selection of vehicle brands to put on display at your dealership lot. Attend private auctions, estate sales and police auctions in your area to find used cars at a low discount.

Determine if you want to buy and trade from the public. Keep an organised inventory of all trades and buybacks. Look over each used vehicle closely to ensure it meets your standards for the dealership. Ideally, you want to sell your used cars for a percentage of the listed price brand-new. For a price guide, refer to Kelley Blue Book (see Resources).

Choose a bank to become your primary lender for your customers. Work with the same banker each time to help speed up the transaction time. Keep your loan and bank information on hand in the lobby of your dealership for the customers.

Hire a mechanic and sales team to work at your dealership. Have the mechanic check each used car that is brought onto your lot. Have the mechanic conduct regular tune-ups on used vehicles that have been sitting in your lot for a long time.

Promote your used car dealership. Place ads in the local newspaper, on the radio and on television. Make colourful stickers and signs to catch the attention of drivers passing by your dealership.


Hire an accountant to organise all your sale figures, tax information and expenses. Business laws can be complicated and tend to vary from state to state. Hire a lawyer to help you set up your dealership.

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About the Author

Lucy Bowles is an avid freelance writer from Indianapolis. She has written for various websites since 2009. As a certified paralegal Bowles has worked in the areas of business, intellectual property and entertainment law. She has a bachelor's degree in history and a minor in legal studies from Indiana University.