Earn More MoneySeptember 6, 2020October 5, 2020

Do Private Car Dealerships Earn A Profit?

Throughout my years of looking for ways to earn money, I’ve come across many methods. However, there is one method that I always wanted to try. Although I was never able to try it, the possibility is still there. Much like the readers who frequent the website, you’re looking for information. Therefore, in this article, we will go through how you can earn money through owning and operating a dealership. A private car dealership. This would probably be a good method for anyone who is really passionate about cars. There are a few methods that car dealerships operate their business.

I’ve known people who have their own business, such as a mechanic shop, but double as a dealership as well. Others are body shops that frequently purchase cars and sell them on a later date. However, regardless of how you wish to conduct your business, we will see how much money you can potentially earn from selling cars. As always, before we get into the amount of money you can potentially earn, we need to go through a few things. First, what exactly is a car dealership and how do you go about acquiring/becoming one.

What Is A Private Car Dealership?

At this point, you may be asking what a private car dealership is. We’ve all seen the big-name car dealerships such as Honda and Toyota. However, chances are is that you passed a dealership that sells cars but is not branded through these large names. Instead, they have their own name, similar to a local restaurant. In these places, you’ll typically find cars that are older than the average Honda dealership car. For example, if you were to walk into a Honda dealership, you most likely won’t find a used car before 2015. If you do, they will be scarce. However, in these dealerships, you can find older cars, sometimes prior to the 2010s. In fact, I purchased my personal car from one of these dealerships.

There are many benefits to purchasing a car from these dealerships. First, you will typically find better deals. Since the cars are older, you won’t have to pay a large sum of cash. This is due to the fact that used cars depreciate immensely. Therefore, purchasing a used car can save you a great deal of money.

That brings me to the second benefit, lack of depreciation. Whenever you purchase a new car, the value declines greatly once that car is officially sold and driven off the lot. This depreciation can be calculated well into the thousands. This is why many people call a car a depreciating asset. While it can take you places and earn you money, over time the car loses its value.

Next, private car dealerships can have lower interest rates on their finance options. Of course, some dealerships don’t offer financing. However, many do. Looking at banks is also a great way to get a loan for a used car. However, this is only if the dealership does not offer financing options. Although, banks can have lower interest rates.

Many of the points I’ve stated are benefits from the customer’s standpoint. However, as a business/dealership owner, you must know why a customer would choose you over a competitor.

The last point is that private car dealership will have a wide variety of cars to choose from. Variety is essential and if you’re not adamant about the specific car you want, having a wide variety can help you choose.

How Do You Get A Private Car Dealership?

Owning and operating a car dealership can vary depending on where you live. For example, creating and operating a dealership within Canada may have different regulations, insurances and policies compared to the states. Therefore, we will try out best to stay within Canada due to the fact that most of the people who’ll view this article reside there.

As a person who buys and sells new/used cars, there are a few costs associated. First is the OMVIC registration fee. Furthermore, there are a few different classes of registration. It is important to note that if you can register as two classes.

Above is a list of the different types of classes that you can purchase. If you need to know the difference between each category, a quick google search should help.

If you take a look at the picture above, you’ll see that there are a few fees that you’ll have to play. First is an annual fee. This is something that you’ll have to pay once per year in order to keep your license up to date. After that is the processing fee and compensation fund. Both of these add up to $824. Whether this is before tax or not is unclear. However, after-tax this equates to $931.

The costs don’t start there. You’ll need a lot to house cars. Most private dealerships lease a building with a large lot. The inside is used to sign paperwork and wait while you can browse the car selections outside. The cost of this depends on how big the lot your purchasing is and location.

You will also need to complete the automotive certification test. The automotive certification test is done in-person or online. Furthermore, there is a cost associated with this test. For self-study, the cost is $275. For more information on completing the test, visit the link here.

Now, you’ll need to get the biggest component of your business (next to customers), the cars. You can have contracts with vehicle producers in order to sell different types of cars. The other method is purchasing cars privately or through auctions. However, if you’re going to purchase cars from an auction, you need to know that they tend to come with a lot of problems. If you have a mechanic/body shop owner who can consistently fix the cars, you should be able to turn a profit.

Do Private Car Dealerships Make A Profit?

Now its time to discuss whether or not the dealerships turn a profit or not. However, it is important to note that in any business, you need to learn how to mitigate expenses. Therefore, if you do purchase a car from an auction and it needs work done, make sure it does not cut into your profits too much.

The interesting part about dealerships is that they make most of their money from other methods. These are methods that don’t include the profit from selling a car. Of course, you can make a profit from selling a car. If you purchase a car for $1,000, spend $500 fixing it up, you can sell that car for $2,500. This is a $1,000 profit. However, the amount you make depends on the car you’re purchasing, how much money you spend on fixing it, and the type of car. Initially, this will be your first method of earning money. If you were to purchase, fix, and sell 1 car a week for a $1,000 profit, you could make $4,000 per month before taxes.

The other way to earn money through a car dealership is through add-ons. These add-ons can be warranties and financing. Chances are you won’t be able to offer such things when starting out small. However, if you have a financing option for your customers, you’ll begin to enter a new level of earning. This is because you’ll begin to collect the interest payments. There are many banks that can provide financing options for your customers. However, this will cut into your profits. Essentially becoming the bank is a good way to earn money. However, it is risky. There is always the chance that customers will skip/default on payments.

To conclude, you can definitely make money through a car dealership. However, there a few key factors. You need capital, a plan, start out small and save money wherever you can. As you expand your business, you’ll begin to earn more money through car sales and financing. Owning a car dealership can cost quite a bit of initial capital. Therefore, make sure you’ve saved enough money and have done an adequate amount of research.

Shameed Chris Khan

Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.