Common mistakes that you can avoid when opening a new car dealership

Starting a business is an exciting, but daunting proposition, and opening a new car dealership is no exception. You may be full of enthusiasm and energy during the first few months while you’re establishing your business, but it won’t be long until you’re going to start coming up against some challenging issues that could take the wind right out of your sails.

The key to being able to meet and tackle these challenges is preparation. The first thing you should do is to perform market research to determine whether or not there’s a sufficient demand for the particular product that you plan to sell. What will be the dollar amount of your sales? How many customers will you be able to attract? What kind of advertising campaign will you launch to accomplish this? What business expenses will you entail in owning and operating your dealership?

The investment that you have to make in order to open a new dealership includes the cost of:

  • Inventory
  • Leasing or purchasing land
  • Facilities (a showroom, service center, or both)
  • Personnel hiring and training
  • Working capital (equal to at least two months of inventory)


In order to have a well-functioning and successful enterprise, you need to have a business plan in which you define your goals in a mission statement and in your vision statement how you’re going to meet those goals.

As part of your plan, you should make it a priority to research the competition in order to find a target audience that will complement your business. In addition, you need to consider the location for your dealership. It should be both visible and conveniently located to attract clients.

Just as important as having a business plan is having a sound financial plan. One mistake that many new dealers make is overextending themselves financially which can result in problems down the road.

Getting a handle on your budget, savings, and financing options is critical to the success of your operation. Most dealerships are financed through a bank with the inventory serving as collateral. Banks will want to see a detailed financial plan which will outline how you plan to generate profits through sales and other services in order to repay your loan.

Another mistake that can have severe repercussions is losing track of your credit history. If you don’t keep track of your finances, your business can end up in serious debt and could cause you to default on your loan. In addition, a good credit record is critical to getting and keeping your dealership license.


Owning and operating a dealership can require an investment of millions of dollars. If you’re thinking about starting a new auto dealership, you really need to take the time to become familiar with these and other common startup mistakes so you can avoid making them.

Consulting with an accountant about how to distribute your initial investment as well as helping you with your monthly sales figures and other financials is important to the success of your business.

GYL, an automotive dealership business consulting firm, can assist you in realizing your dealership’s full potential, minimizing tax liabilities, and maximizing cash flow. Call our offices to schedule your free consultation.