How to Start a Second-Hand Car Showroom?

Business Plan to Start a Used-Car showroom

The Indian used car market is growing fast attributing all this growth to the surging costs of new cars as well as banks charging higher interest rates on car loans. People prefer to buy a used car than buying a new one. Moreover, in a developing country like India, the majority of people who wish to buy a car can't meet the expense of an ex-showroom price, making the second-hand car market evolve bigger and better.

If you too are planning to capitalise on the opportunity and start a second-hand car showroom, you have perhaps come to the right place. In this article, we are going to discuss the last detail of starting a second-hand car showroom right from market research to how to run it successfully. So, let's begin the journey.

Market Research: How big is the Indian Used Car Market?

Do you know the Indian used car market was valued at USD 24.24 billion in 2019, and it is expected to register a CAGR of 15.12% during the forecast period (2020-2025)?. In fact, the second-hand car market had crossed the mark of 4 million units in FY 2018 itself depicting the used car market worth 1.3 times the new car market. Market experts also attribute the reduction in the GST rate on used cars from 28% to 12-18% to be the key driver of this growth. Moreover, the Indian auto industry has stepped into the BS-VI era in April 2020, making the value proposition of second-hand cars to go high as new cars will become more expensive due to the additional technology cost.

Business Planning: Factors to Consider While Creating a Blueprint

To run any business successfully, the most initial step you need to perform is to create a practical & actionable business plan or a blueprint. Pre-defining the business plan helps you reduce the chances of trial & error instances during the real-time business scenario.

The first thing you do while creating a business strategy is deciding the business objective and your primary objective while starting a second-hand car showroom should be to achieve 100% customer satisfaction. It will get you as many repeat customers and referrals as possible. Your second objective should be to attain and exceed the overall profit margins that too within the first two years of opening the showroom itself. Consider the location where you wish to start the second-hand car showroom and take the relevant industry facts, figures and indices into account while creating the business strategy.

Certainly, the customers will be delighted with an uncomplicated car buying experience, and each satisfied customer means more business. A good customer experience should be the basis of your business mission. Focus on fulfilling the needs of the car buyers for safe transportation by providing them with a vehicle that will meet or exceed the expectation they have for it. One more thing that you should always keep in mind while planning your business is to delight your employees as well by offering them incentives & bonuses for their efforts.

Now comes other factors such as the location that you chose for your showroom, the suppliers' network, as well as the team of professionals you will employ to assist you in the business. The location you opt for should be high traffic, your supplier network should help you in buying & selling second-hand cars of optimal quality at striking prices, and your employees should have good experience.

Costs Involved: How Much Capital You Need to Invest?

If you have an adequate amount of capital with you, you are good to go, or else you can get your second-hand car showroom financed through bank loans. In the beginning, the costs that are involved may include the following:

• The rent for office or plot
• Legal charges for establishing the business such as no sell and ownership agreement
• Equipment such as telephone, computers, fax/ copier, desks and furniture
• Marketing and advertising costs for online and offline both
• Consultation charges by the Accountant
• Stationery and office supplies

Legal Formalities: How to Register the Business?

The legal entity you would be choosing for your second-hand car showroom depends upon the business goal you have settled on. For instance, let's say you are planning to invest a moderate sum of money; you can take the sole proprietorship for your entity.  However, if you have big plans and want to launch more outlets in the future, you should opt for a partnership business or a limited company.

Following is a list of legal documents you would need to open and run a second-hand car showroom:

• Used Car Dealership Business License
• Franchise or Trademark License
• Certificate of Incorporation
• Facility permit/license
• Non – disclosure Agreement
• Business and liability insurance
• Tax Payer's ID
• Employee's Handbook (optional)
• Fire certificate
• Insurance Policy
• Business Plan

Location Analysis: Factors to Consider before Choosing a Location

There are certain factors that you must take into account before deciding a location for your second-hand car showroom. Some of these factors are local laws of the region or state, accessibility, demographics, existing used car showroom in the location, safety, security & parking space as well as how capable people are of buying a used car in that area.

Licensing: Why take a Dealer's License?

Like any other business, a second-hand car showroom requires licensing to run the business. As far as getting a dealer's license is concerned, the process & requirements vary from state to state. At times, you also require to undergo a few courses and clear a licensing exam to get the license. Once you have obtained the dealer's license, you are legally permitted to operate the trade of buying & selling second–hand cars. Though you can find a few dealers who are working without getting the license, people usually don't want to do business with them as it involves a very high-risk factor. A licensed dealer is considered reliable for buying & selling a car.

Marketing & Advertising: How to Promote Your Second-hand Car Showroom?

The first and foremost step in marketing is to create brand awareness about your business among your target audience as then only you would be able to endorse your business. Go online! Get a website for your business and promote it through various means like optimising it for search engines, getting active on social media, and so on. In this digital world, if you don't exist online, you don't exist at all and have to struggle hard to get the eyeballs on your business. It was about marketing your business organically online. If you are willing to spend some capital, you can also run paid advertising online & offline both. Getting and promoting customer reviews is a great way to build trust with your prospective customers.

As far as offline marketing or advertising is concerned, you can do the following:

• Advertise your business in newspapers or magazines as well as on radio or Television.
• Get your business noticed by putting hoardings in tactical locations
• Introduce your business to people residing in your location by distributing pamphlets

Wrap Up

In the market research section itself, we talked about a few stats that prove how money-spinning a second-hand car showroom business can be. Even those who are the owners of immense fortune don't shun used cars anymore. The fact that second-hand vehicles have a low value of depreciation and are budget-friendly is making the used car industry boom high. Moreover, you don't require a significant investment to open a second-hand car showroom, all you need is a sound business sense, a winning business plan, and the right marketing strategy along with some money. Just follow the guidelines we have discussed in this article and reap maximum ROI.

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