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Eric
Eric, Automotive Repair Shop Manager
Category: Car
Satisfied Customers: 29968
Experience:  Automotive Repair Shop Manager, Technician/JA Mentor
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Becoming a Car Dealer.... I was thinking of becoming a car

Customer Question

Becoming a Car Dealer....
Hi...I was thinking of becoming a car dealer on a small scale....i.e. buy/sell some late model, reliable cars from auctions and re-sell.
What does it take to become a dealer? What does it cost yearly etc?
Why would it be a good idea or bad idea if I just wanted to sell 2 cars/month let's say to start out? I live in California, Los Angeles..thank you.
Submitted: 12 days ago.
Category: Car
Expert:  Eric replied 12 days ago.

HI,

Ok, if you plan to sell less than 25 vehicles per year, it is a $10,000 surety bond you must put up, $125 for the required class to get your license, $1250 for the license, then you would have insurance, which can run from $600 per month to $2000 per month depending who you go thru as well as your credit rating. Then you would have to rent a shopfront for this, unless your residence is zoned commercial.

If you plan to sell more than 25 cars per year, it is a $50,000 surety bond, plus the other.

Then you will have around $250 in fees per vehicle you purchase to get it thru emissions, tag and title fees.

Without knowing really detailed financial records, I cannot tell you if this is a worthwhile endeavor or not. If you have the spare money and willingness to eat the upfront costs for a year or so until you are established, then it is worth it. If you are like a lot of the public and living from paycheck to paycheck, I would not advise it.

It is a cutthroat business and unless you are selling exotic cars, you are competing with every other car lot and private seller and the margins on used cars are thin. Especially if you purchase from auctions and you have to put money into the vehicle to be able to sell it and if you are not a mechanic to at least save some on the labor. Most used car lots make around 2-4% profit on a vehicle. So you have to watch that margin on what you purchase it for and what you put into it and are able to sell it for.

And then you have the consumer that purchases it AS IS and comes back in a couple of days because something fails on it and you have that headache of making them happy without losing your shirt or losing your reputation.

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Customer: replied 12 days ago.

Hmmm...good information. I'd sell late model cars like Camrys...still under warranty for the major stuff. I thought about buying and selling g through the same dealer who brought me to the auction...then I don't have to pay sales tax. My loft is in downtown LA...commercial /residential

Expert:  Eric replied 11 days ago.

HI,

That would be a good way to go and save on taxes as well as storefront rental if that dealer will let you place the cars on his lot.

Expert:  Eric replied 10 days ago.

I noticed we have not yet resolved your concern you asked about. I would sure appreciate it if you would reply so I can offer my skills and knowledge and repair guide access to help as best I can.
~Do you still need more help?
~Confused by my info request or answer?
~Need more time?
~Confused on how the site works?
~Need more detail or a different explanation?
If the answer is YES to any of these just press reply and lets work on this concern some more.
If you have new questions now or in the future please do not hesitate to ask them. If you would like me to assist you. Just bookmark this page so you can access my profile easy and post a new question from the question box on my profile page.

Please remember to rate service using the rating page so that I may receive credit. Thanks

Please note that if you have a subscription service, you still are required to rate service, however you are not charged again. This is just so that your expert is credited for their time and services. Thank you.

Customer: replied 7 days ago.
Sorry i sent a reply out but should have just addressed it to you....I don't really understand what a surety bond is.
If I just want to sell through a dealer and use his/her license, give them a few $, can that be done? I'm trying to avoid having to pay sales tax and dealers are immune from that right? Thanks for your follow up!
Expert:  Eric replied 7 days ago.

HI,

A surety bond basically ensures that you deliver on your contract with a buyer and in the event you dont, that bond money is used to make good on it, which would mean penalities and fines incurred by you.

Legally, you are not supposed to do what you are proposing, but that would be between you and the dealer if the dealer is willing to not say anything and if you and the dealer have some type of written agreement that you would be accepting full responsiblity for the vehicles he sells for you

Expert:  Eric replied 6 days ago.

I noticed we have not yet resolved your concern you asked about. I would sure appreciate it if you would reply so I can offer my skills and knowledge and repair guide access to help as best I can.
~Do you still need more help?
~Confused by my info request or answer?
~Need more time?
~Confused on how the site works?
~Need more detail or a different explanation?
If the answer is YES to any of these just press reply and lets work on this concern some more.
If you have new questions now or in the future please do not hesitate to ask them. If you would like me to assist you. Just bookmark this page so you can access my profile easy and post a new question from the question box on my profile page.

Please remember to rate service using the rating page so that I may receive credit. Thanks

Please note that if you have a subscription service, you still are required to rate service, however you are not charged again. This is just so that your expert is credited for their time and services. Thank you.