how to start used car dealership business

Used car dealership business is one of the most profitable business opportunities in the world. This business need very low amount of working capital and it is very easy to establish also. You can start this business either by establishing a show room or by setting it in your home.

How to start used car dealership business

Investment for used car dealership business start

How to purchase used car for dealership business

Sell used car for dealership

How about profit from used car dealership business

You can decide it on the basis of your financial capacity. In this article, we have explained all the details to establish and run a used car dealership business . Especially how we can purchase a used car at minimum price and what are the issues which we have to take care when we are purchasing a used car.

It also explained all the details related to sales of cars and procedures of licenses and paper clearances in detail. In the side of a customer, there are many benefits by purchasing a used car rather than a new car.

used car dealership business
used car dealership business

The most important benefit is that he can save a huge amount of money by purchasing a used one. Besides this, when we purchasing a new car, we may have to spent some more amount of money to purchase additional accessories for the car.

But in the case of used car, all the necessary accessories will be already embedded with the vehicle. The margin of profit from used car business is mainly depends on the value of car like its price, model of the car, its category and demand of that type of car in the market.

The start up procedure for used car dealership business

The start up procedure for used car dealership business are given below. Now we can consider the main issues which we have to take care when we are starting a used car dealership business. Firstly, if we are planning to start it with a showroom, we need a building with adequate facilities.

If we are constructing the building is a usual type with traditional model, it needs only very less amount of investment. Basically it needs a shed for protecting the vehicles from sun and rain. And we should keep the cars in neat and clean.

look solution

For that we should have the necessary arrangements and machineries to wash the vehicles. There should be a clean office place within the shed to deal with customers.

Another issue which we have take care in initial stage is the licenses and other papers to establish this business. Mainly it needs licenses from any local self government body.

When we are running it in a business form, we need to pay sale tax and income tax to the government. These kinds of taxes are compulsory only to big shops which has adequate amount of sales revenue.

How about the investment for used car dealership

How about the investment for used car dealership has given below. Now we can make a calculation of approximate total investment expenditures to establish a used car dealership showroom. The most important head of investment is expenditure for the construction of building.

Building investment

Total amount for this expenditure depends on the total area of building. If we are constructing it as a usual type shed with GI sheet, approximately, it will have the cost of RS 200 for one square feet. We need around 1000 square feet shed for this activity. So, about 2 lakh rupees are required to construct this type of a shed.

Office expenses

In addition to this, we need an office and toilet facility within this shed. For this purpose, it needs around 1 lakh rupees. Therefore, in total, we have to spend around 3 lakh rupees for the construction of building.

Paper clearance expenses

The main heads of other investment expenditures are expenditures for license procedure and electrical work. For a used car dealership business, around 50,000 rupees are required to collect all kinds of licenses and to prepare a partnership deed, if it is a partnership business.

Electricals expenses

No need a heavy electrical work for this business. Even though, we should have adequate number of lights and fans in our office and shed. The total amount for electrical work including connection cost and raw materials is about 50,000 rupees. For a used car dealership business, we need about 4 lakh rupees as fixed investment.

Working capital

Now we can list out main heads of working capital expenditures. The most important among them is expenditure to purchase vehicles. The amount of working capital is depends the number of vehicles which you are planning to stock in your business.

Important expenditure for used car dealership business

Important expenditure for used car dealership business are expenses for working. There will be an additional expenditure for repairing and polishing the purchased vehicles. It will vary based on the condition of your vehicles. When you are starting a used car dealership business, it is necessary to have one or two staffs for the maintenance of the vehicles.

Obviously, their wage is another main item of working capital expenditure. Besides these, rend and monthly expenditures for legal procedures are also added to this category of expenditure.

Dealers are essential for used car business. So, you have to pay the brokerage fee to dealers in the dealings of each vehicle. This brokerage fee also is one of the expenditures. Lastly, maintenance expenditures for shed and vehicles, if it need, are also added to the working expenditures.

How to purchase used car for dealership business

How to purchase used car for dealership business very important mater in show room business. It is essential to have a clear idea about how the used vehicles are purchasing for your dealership business.

Find out good vehicle

First of all we have to find out the vehicles which the users are ready to sell. In this modern era, there are many sources which help us to find vehicles. The traditional way among them is seeking vehicles through brokers.

For this purpose we have to build a wide network of brokers in our contact. The contact with all brokers within and outside of our surrounding area is very important in this regard. It is very easy to find and buy vehicles through those brokers.

In this current scenario, modern technologies are widely using in all kinds of businesses. So, here also we can use Facebook, WhatsApp groups and other different Applications to find used vehicles. The most popular among them is OLX. By using OLX also we can find and buy vehicles.

Selection of category

When you are buying vehicles through this ways, you should be very care about the category of vehicles. If you are preferring luxury vehicles, choose and buy only the category of luxury vehicles.

By this strategy, you can enjoy the monopoly power in the sales of luxury category f vehicles in the respective field.

Otherwise if you prefer low class vehicles, concentrate only on that category of vehicles. By this, you can be a dominant dealer in the sales of low class vehicles. So, it is better to establish a category wise used car dealership business.

Majority of dealers prefer medium range vehicles to start a dealership business. Because, comparing to other categories, medium range vehicles have highest demand in the market.

Among this, we have goods carriage vehicles and passenger vehicles. You can choose any of single categories of item to start your business. Your skill to find most desirable vehicles and the ability to find out its mechanical and other defects will be the most crucial in the success of your business.

Take care about the used car purchases

Take care about the used car purchases for car dealership business. In this section we are discussing about what are the main issues which you have to consider when you are purchasing a vehicle.

Check book and paper

First of all, you must ensure that all the papers of the vehicle from the side of government are perfectly clear. If all the papers are clear, you should check how many times the RC owners ships have transferred from person to person.

When the number of RC owners is increasing, there might be some troubles, for example, it has already 4 RC owners for a vehicle, and then it is not possible to get loan for that vehicle.

Check damages and replacement

After checking all these issues, then you should check the damages or defects of the vehicle. In this section we have explained all the means to check the damages of a vehicle.

Check service history

For this purpose, firstly, you can check the service history of that vehicle. By this you can understand about the replacement of any accessories of that vehicle. If it did not go through timely services, you cannot identify these issues from service book.

In this case, we can use traditional ways to check damages. For example, by examining the past of vehicle or date of glasses, we can understand the issue of replacement of accessories.

The vehicle which has no considerable damages and replacement by clearing all papers has big value and huge demand in market. The dealer can earn maximum profit when purchasing those vehicles directly from RC owners.

How to sale in used care

How to sale in used care dealership business have so many answer given below.

using Application for selling

In this modern period, mainly the vehicles are selling by finding customers through different applications. For that we can make paid promotions through the applications like OLX.

Vehicles selling through brokers

Brokerage services is the another main way to find customers. When you are selling vehicles through brokers, we have to give a brokerage fee to brokers.

Create network from customers

It is very important that you must ensure and sustain the quality of vehicles which you have sold to a customer. If you ensured this strictly, you will get other customers through that customer. That we can termed as ‘care off’ business.

For a successful ‘care off’ business, two things are very important; firstly, you must ensure the quality of your vehicles. Secondly, the neat and clear customer dealings are also very important. Our behavior, cash dealings and inter personal relationship before and after the transaction are crucial in this regard.

By expanding ‘care off’ business, you can develop your business to a higher level within two or three years. Then, you can create a wide network of customers in longer period.

How about the profit from used car dealership business

In this section, we are examining How about the profit from used car dealership business . In this business, mainly the profits are generated by the differences in the purchased amount of vehicle and its sold price.

You can increase this profit margin by practicing the following tips. Any type of vehicle has a common model rate in market. Even though, in many cases the actual rate may slightly vary from this modal rate because of different strategies practiced by dealers.

One of those strategies is providing polished vehicles with good condition and without replacement of accessories. Those vehicles will have high value in market. In the case highly demanded cars, the customers will not measure the actual value of those cars even though it is old model car.

It may be possible to purchase those cars at a very lower price. From those cars you can earn huge amount of profit.

make your own category for profit

In the case of luxury vehicles also it is possible. The purchase price of used luxury car from a new RC owner may be less and it can be selling with a high profit even though if it is in its market price.

From this we can understand that the market value of vehicles is subjected to change based on its neat and quality. By considering all theses a business man can increase his profit.

Another important matter in this regard is related to the number of monthly sales volume of vehicles. In accordance with increasing the number of sales volume, you can increase the profit.

It is also very important that you should try to reduce the working and fixed expenditure as possible. For that you have to care even before making the investment. One of the main heads of expenditures is rent of the plot. So, it is essential to select an area which has maximum lower amount of rent.


This article has explained all the relevant information to establish a used car dealership business and its marketing strategies in detail. All theses information is purely related to our detailed market study in this area.

So, if you have any arguments against these information, please understand that all these are completely based on our experience in the market.

And we and this website are not responsible for your failure and loss from used care dealership business which you have established based on the information given in this article.

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