How to become a car dealer

There is a lot of profit to be made in the automobile industry and becoming a car dealer is one of the ways to tap that vast resource. The investment is huge but the returns are nothing to scoff at either. You need a large capital to become a car dealer but once you start making profits, you’ll recover your capital in no time.

A car dealer is someone who buys new or used cars and sells them at a profit. Car dealers may also sell spare parts and automotive services. Car dealers typically sign a dealership contract with a supplier which they buy from and then sell to individuals at the retail level.

Becoming a car dealer needs adequate preparation and research. Each country has specific guidelines and regulations. There are certain legal requirements you need to comply with to make it in such a competitive and high-risk field. Since you are going to invest a lot the losses are going to be significant so you need to be careful when going into this field. If you’re interested in going into the car dealership business, and you don’t know where to from, then you are in luck, as all you need to know will be compiled in this article. 

1. Conduct thorough research

Since a car dealership is a high-risk business you must gain adequate knowledge about the business before starting. The best way to learn is to meet with car dealers that are already successful in the business. Try to get work under them or get an apprenticeship if you can. This will help you learn both the legal and business aspects of the business. It can also help you form a strong connection in the field and when deciding on a supplier to sign a contract with. 

There is a lot to learn before starting a car dealership business. You will need to familiarize yourself with the automotive market, current trends, and the specific segment you wish to target (e.g., new cars, used cars, luxury vehicles, etc.). You will also need a thorough understanding of the market demands, competitors, and potential opportunities in your area. With this knowledge, you can better position yourself for success.

2. Create a business plan

Whether you are successful or not will all depend on your business plan. Having a thorough understanding of the business will help you craft a well-structured business plan and put you on the path to success.

Outline your business goals, target market, pricing strategy, marketing plan, and financial projections, and decide where you will operate, the kind of auto lot you will utilize, the technology and processes you will need to run your business effectively, whether or not you will need to hire staff. Having all these planned is extremely important to start running your business. 

Depending on your location and the size of your business, you may need to get certification to become a car dealer. Find out the legal processes to become a car dealer in your country or state and be willing to comply with them. If possible, contact the agency directly and ask relevant questions. Getting firsthand information will help you avoid any inaccuracies and help you prepare adequately. 

Apart from getting a car dealership license, you may also need to register your business with the relevant authorities. Depending on your location, you may not need to register your business, but being recognised by your local authority will give you credibility in the eyes of your customers. 

You may also need to get insurance and a bond to help you cover the cost of compensation for any complaints filed against you by your customers. Not every country will require car dealers to have insurance and bond, but consider it if you’re going into the business full-time.

Try to be ethical and transparent when dealing with your customers to avoid issues, but no matter how careful you are, you may still find yourself in a bind due to unforeseen circumstances. Having insurance will help you offset any costs due to legal issues with customers, and if something like that were to happen, it may be the only thing preventing you from bankruptcy. 

4. Source for Capital

Cars are expensive, so the capital to start the business will be quite high. You may also need space to sell your car, and this will increase your starting capital. Your business plan will determine the capital you need to start the business.

If you have enough money on your own to start the business, then excellent, you can go ahead and start. If not, you will need to source for ways to acquire the capital. You can take out loans, or look for investors and partnerships. Family and friends can also chip in to help you gather the funds. 

5. Get a reliable supply chain

This is the most important aspect of becoming a successful car dealer. If you do not know where to procure quality cars at affordable prices, you can’t make profits from your car dealership business. You need to trust your supplier to always provide you with the best quality cars. 

To get reliable suppliers, having a good connection in the industry is important which is why you should meet with those already in the business and learn from them. This way, you don’t end up signing a bad deal with suppliers, or worse get scammed. 

You may decide to buy from a local supplier or import from abroad. Your choice should depend on the preference of your target customers. 

6. Get documentation for your vehicles

Make sure to procure all your vehicles through legal means and get rightful documentation for each of them. This will help you build trust among your customers and avoid any issues with the law.  

7. Create an effective marketing strategy

You’ve gotten your license, registered your business and purchased your vehicle, so what’s next? The answer is obvious, you need to sell them and make money. But how do you go about doing this?

It doesn’t matter whether you have the best quality cars or you are selling at unbeatable prices, you won’t make sales if people don’t know about your business. There are various ways you can market your product; you could market them online on social media or online selling platforms, you could recruit the help of advertising companies, you can reach out directly to potential buyers to build a network around your business, or use a combination of all. 

Regardless of the means you use to market your business, it is important to come up with a well-devised plan. The first step is to do research. Know your target customers, their interests and buying habits. Choose the means of advertising that will best appeal to them. For instance, if you are selling the latest sports cars, you need to focus your advertising on social media since that is where you will easily find young people that will patronize you. 

You will also need to monitor your competition and see what they are doing. Come up with a unique marketing strategy that will beat what your competitors are already doing. 


Becoming a car dealer is a big deal and it involves meticulous planning and dedication. There are various ways you can perform your car dealership business. You could own a car lot and have many cars on site, or sell vehicles without a permanent location. You could hire employees to assist you or run your business on your own. Regardless of how you choose to run your business, there is a lot of profit to be made as long as you are willing to invest time, energy and money. 

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Habibat Musa

Habibat Musa

Habibat Musa is a content writer with She writes predominantly on topics related to education, career and business. She is an English language major with keen interest in career growth and development.

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