What does it take to be a car dealer????

So what does it really take to be a car dealer? Well that depends on where you live. I live in Arizona so I've found some answers for here.

1. You need a place to do business, in my town it requires C2 zoning and has to be approved by both the city and the Dealer Licensing Unit (more on them later). The place of business has to have 2 parking spaces dedicated. The office has to be dedicated to car sales. You have to have a sign permanently attached (no vinyl signs or paint on the windows) that is legible from 300 ft away. That's not so bad until you start trying to find a place on the cheep. The best I could find was a guy advertising on craigslist for a 400 sqf shack for $500 a month. It meets the minimum standards.
2. You need a $100,000 Dealer Bond. I hear that these cost anywhere from $1000-$5000 depending on your credit, assets, and experience. This is due in one payment upfront every year. The quote I received is in that range.
3. You need some kind of legal business entity. I'm leaning toward an LLC as it provides some liability protection (even though I'm still signing that I'm personally liable on everything this may be useful in the future.)
4. Finally once you have all this stuff all lined up and PAID for then you complete your application for your license with the MVD (DMV). This is where things get a little tricky... to process you application takes upwards of 4 months... So you're sitting on a leas, a bond good for 12 months and a whole lot of expenditures and you have no clue if you will be approved, if you site will be approved or anything. For someone starting out small this is a huge issue. It's like $10000 just to make it through those first couple of months.
5. Once you have your license then you have to start getting yourself into auctions and working your way into the tight "brotherhood" of car sales people. This will cost money too.
6. Then you go to an auction and start buying cars (even though half you cash was spent on rent and you bond which you didn't get a return on for 4 MONTHS!!). Here is another tricky spot. If you're like me you've been to Barrett Jacksons or seen it on TV but you've never been to a "dealer only auction". So while you're waiting for your license to be approved you start asking any dealer you can find for some friendly advice and maybe letting you tag along to an auction or two. Be careful here as this is the response I got form one guy I asked.... By the way just to clarify I stated "I'd be happy to take you out to lunch after the auction or compensate as appropriate."

first off let me tell you I have been in the business for many years & for you to ask someone to let you come to the auction with you 1st off is costly (some charge a visitor fee $250) if you are not a listed buyer & there are auctions that you can go to as a visitor but that clearly puts you in the ring with much more competion where everyone is trying to do the same thing buy em cheap n flip em for money & I have to say it has afforded me a very comfortable lifestyle & allowed me to move my family from an apt. to a home very quickly however - for you to ask someone to basically train you teach you the ropes bring you in & help you network would definitly constitute a VERY COSTLY LUNCH like a $500 one - it is insulting for you to expect someone to utlize their time for you to make money & you compensate with lunch? there are many auctions for dealer's some sell crap some sell good stuff but better be ready to pay BIGTIME cuz with that cheap ass attitude they will have you paying double in no time - here's some free "help" ask yourself what a 1/2 of day's pay would be to you? LUNCH? I don't think so - watch how you are to people it will come back to bite you in the ass - sometimes it's called KHARMA aka revenge!

Can you believe this Guy? I just copied and pasted typo's, bad grammar and all. This is definitely someone I want to hire as a paid mentor. I especially like his reference to Karma and the way you treat others will come back to bite you.....hmmmm I think that he may have a point there.

And used car sales people really have a hard time understanding why they have such a bad image?

Actually I've been getting a lot of this same attitude as I've asked around. I was at a Nissan dealership asking the sales manager for his opinion on what I wanted to do and he got mad and stormed out of the showroom yelling back "that peon used car guys are a dime a dozen and that I'll be there one day and gone the next."

So what is it with the Used Car Industry and the Dealer only auctions. There's a ton of secrecy and temper surrounding it all. I get the feeling that there is some big secret that no-one want's me to know about. Then I talk to other people "in the know" and they tell me that the pricing at the auction isn't that great and that they add on a buyers fee of $50-$200 to every car. That makes sense as the auctions here in AZ look pretty swanky form the outside.

These people are suggesting that I build wholesale relationships with some new/used dealers where as they get cars in through trades that they don't want to sell on their lot they can call me and I'll buy from them without the auction fees for either party. That sounds good but every dealer I've spoken with would prefer just to deal with the auction where you get your money right away and you don't have to deal with used car sales guys directly....

So that's how you get your dealer license here in Arizona. Sounds like fun. But atleast there's a barrier to entry for any weak competition. You just have to ask yourself if you're the strong or the weak competition type.

Phil