The Costs to Consider Before Opening an Auto Dealership

Car Agent and Customer in Car Showroom

Auto dealerships, when managed properly, turn out as good investments that reap satisfying revenue. Starting one, however, requires funds that aspiring entrepreneurs should prepare for. Below are the most important:

Retail Space

A retail space is highly necessary when putting up an auto dealership. It is also one of the biggest investments you should prepare for. Other than being a showroom, your location can be a service center that provides vehicle repair and maintenance. The size and type of property will determine your monthly rental costs, but on the average, expect to dish out $8,000 to $20,000 per month.

Business Registration

Business registrations differ by cost and type with classifications, such as sole proprietorship, general partnership, limited partnership, limited liability company, and corporation. In some states, the first two options do not require a registration but only a trademark for your brand name. The cost varies by state, as well. The highest fee for a limited liability company is $630 while the registration for a limited partnership can be as high as $750.

Inventory and Equipment

Inventory and equipment costs eat up a huge part of your investment. Without both, your business cannot function properly. The scale of your inventory depends on the type and number of vehicles you want to carry. Equipment depends on this as well. Most auto dealerships invest in high-quality equipment like a Titan 1500xlt Motorcycle Lift or a Hunter Brake Lathe. To help you with finances, consider getting a short-term loan from a financing company.

Liability Insurance

Many dealers overlook the need for a liability insurance. However, if you’re thinking long-term, this kind of insurance is a must for your business. Consider getting a proper insurance that can aid you during unexpected circumstances. Premium coverage is about $25,000 while personal injury insurance ranges from $10,000 to $15,000. You’ll most likely have to make a 20% to 40% down payment when getting one.

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Every start-up business is a risk which is why smart planning is important. Save up, create a feasible business plan, and open the auto dealership you have always wanted.