The business of selling used cars is not for the faint hearted. There are lots of ways in which newcomers can be cheated and find themselves seriously out of their depth.

Starting a Used Car Business

Depending on where you live in the world, you are likely to need a licence to be able to sell cars, old and new. Most people are suspicious of sole traders or one-man companies, so setting up in business as a limited company or partnership will help you to win trust from suppliers and customers alike as well as allowing you to get a licence.

Knowing how to deal with the financial aspect of running a business generally and a car sales business in particular is essential before you can dream of owning your own South Sea Island and mansion. Car dealerships take in great amounts of cash – depending on the size of your business you may have to pay for a specialist security company to pick up your cash on a daily basis.

Chasing up customers for money for spare parts and accessories is not a good idea either, so cash or credit card payments are the accepted way for smaller purchases. You will have to apply for merchant status before you can offer credit card facilities to your customers.

Location, Location, Location

While dealerships selling brand new cars are usually out of town in some industrial estate, smaller car sales companies offer their used cars closer to city centres. Finding suitable premises with a lease long and affordable enough will be your greatest headache. Used car dealers hardly ever leave a plot once established, sometimes passing the business on to their offspring when the owner retires.

Buying an established business may seem expensive but it is by far the better option, provided you employ due diligence principals and don’t rely on pencilled entries in a ledger. Insist on seeing all bank statements, annual and monthly management accounts and ask around for the company directors’ standing in the community as well as the overall company reputation. A business may appear to be in rude financial health, but underneath the façade bad customer service and shady business dealings may have damaged the business reputation beyond repair.

Being Liquid

Until you have established a cash flow with your business of selling used cars, you will have to cover the cost of monthly bills and staff wages out of your start up fund. With banks’ lending to small business enterprises virtually non-existent in the present financial climate, your savings are likely to be the source for the first six months.

The Customer is King

Whatever type business you start, remember that customer service is one of the most essential areas of your business. If you want to be taken seriously, don’t get a receptionist who chews gum, files her fingernails and dyes her hair green with blue stripes. Equally, make sure your staff all know how to operate the telephone correctly so that call aren’t lost and give them plenty of training, both in sales and telephone manner.