Are you thinking about selling cars in Alabama? Then the question of how to start a car dealership business is probably on your mind. Naturally, creating a new company can be a daunting task, even though the auto sales industry is currently in good shape. Its recovery from the recession is strong and steady and things are definitely looking up. So while it takes a lot of hard work and personal investment to succeed, the experience will also certainly be financially rewarding.
To get started, you not only need to meet all the state licensing requirements, but you also need to get established as a business and develop a customer base. The process is certainly not an easy one, but with a bit of preparation you will be on your way to success.
With these seven clear steps, opening your auto dealership in Alabama will certainly be easier and smoother. Let’s dig into the details.
#1 Start with educating yourself
If you are completely new to the auto dealership business, there is no better way to start your journey than by getting to know the ins and outs of selling cars. One option is to read and learn by yourself, but you can also attend trainings to give you a professional understanding of the business. In any case, like in any field, knowing the tricks of the trade is crucial for your company’s success. Once you feel confident, you can start dealing a few cars and hone your skills as you practice them.
#2 Choose your field of operation
If you are dealing with more than five vehicles over the period of one year, you are officially a motor vehicle dealer according to the Alabama Code Section 40-12-51 and you need to get licensed. You can choose between six different categories for your dealership’s operation: used car dealer, new car dealer, wholesaler, rebuilder, reconditioner and dismantler. Whichever one you go for, make sure to prepare a proper business model, so that you know which parts of your work will be lucrative and which parts will require you to focus your energy.
#3 Get a license bond and insurance
Among the many state requirements for opening a car dealership, getting a surety bond and insurance are some of the most important ones. If you deal used cars, the Alabama auto dealer license bond amount is $10,000. If you choose to deal new cars, it’s $25,000. Surety bonds serve as protection for your customers, guaranteeing that you will meet your contractual obligations and will abide by state regulations. To get bonded, you need to pay only a premium of the bond amount. As for insurance, you need a blanket liability auto insurance.
#4 Choose a top location for your dealership
Having a permanent business location is one of the licensing requirements in Alabama. It’s also a very important factor for the success of your dealership, as proximity to and accessibility for your customers is key. Of course, top locations will be quite costly, so the choice usually boils down to some kind of compromise. You can select a more rural area, where the prices will be lower and you can get a bigger space. Or, you can go for a more central and known place, which in turn will be tighter and will limit your inventory and office space.
#5 Get your licenses
To operate legally in Alabama, you will need two kinds of licenses. You need a regulatory license from the Alabama Department of Revenue. You can find the application online, and it will cost you $10 per category (new car dealer, used car dealer, etc.). After you get this license, you will also need a business, or privilege, license from your local county probate office. In order to obtain it, you have to show your bonding and insurance documents, as well as an office location and a sales tax number. The business license is valid for one year, from September 30 to October 1 of the next year, so you will need to renew it annually. The price will vary depending on the size of the city in which you operate.
#6 Hire honest and friendly employees
Hiring and educating the right kind of people for your dealership is another crucial factor for its success. While ultimately the aim of your business is to make money, it’s also about serving the community. Having your staff understand this goal is going to be very beneficial for your sales. If they apply sales tricks, you are likely to get only one-time sales, as customers won’t return next time. However, if your sales approach aims at creating brand ambassadors of your customers, honesty and genuine desire to help out people should be a priority. Make the simple calculation and you will see it’s better to have loyal, returning customers, which means a steady customer base.
#7 Don’t forget the marketing strategy
While word of mouth and direct recommendations are truly important for your dealership, you should not underestimate the power of marketing your business online. Especially with more Millennials buying cars, you simply need to have a good face online, as they are always checking their buying options there. Of course, it’s not only about them – most people these days do thorough research on the internet to see prices, explore car models, and read reviews. This means that having a well-functioning and user-friendly website as part of a proper content marketing strategy is a must.
Ready to get started?
Once you’ve gone through all the steps outlined above, you’ll be well-equipped to dive right into the car dealership business. To ease the bonding process specifically, you can apply online for an auto dealer license bond in Alabama.
Do you have any other useful tips to add? Share them in the comments below.