Pros and Cons of Starting a Used Car Dealership

Starting a used car dealership may not have been the dream you had growing up, but it is a steady business that makes healthy margins. Sometimes, the average profit on a used car is more than what a dealership gets from selling a brand new car. This is because of the dealership getting favorable acquisition price points.

I've built a template for used car dealership financial forecasting and a template for tracking car salesperson performance.


  • High Demand: The demand for used cars is always high as it's a more affordable option for buyers.
  • Low Initial Investment: Starting a used car business requires less capital than starting a new car dealership. You can start with a few cars and expand as you grow.
  • Profit Margin: Used cars have a higher profit margin than new cars, which means you can make more money per sale.
  • Variety of Cars: With a used car business, you have the opportunity to offer a wider variety of cars at different price points to meet the needs of different customers.
  • Lower Depreciation: Used cars have already depreciated in value, which means you won't suffer the same loss in value as new cars.
  • Compliance: You don't have to deal with the big brands initiatives and requirements.


  • Competition: The used car industry is highly competitive, which means you will have to work hard to differentiate yourself from other dealerships. Location is very important.
  • Inventory Management: You will need to manage your inventory carefully to ensure you have a variety of cars that are in demand and not sitting on your lot for too long.
  • Quality Control: It's important to make sure the cars you sell are in good condition and meet safety standards. This may require investing in a mechanic or other staff to inspect and repair vehicles.
  • Legal Requirements: Starting a used car business requires complying with various state and federal regulations, including obtaining the necessary licenses and permits.
  • Reputation: As with any business, your reputation is key. It's important to maintain good customer relationships and ensure you're selling quality cars to avoid negative reviews or legal issues.
Some General Industry Tips
  • Focus on Customer Service: Providing excellent customer service is critical to your success. Treat your customers with respect, listen to their needs, and be responsive to their questions and concerns.
  • Build a Strong Online Presence: Most customers start their search for a used car online, so it's important to have a strong online presence. Build a user-friendly website with high-quality photos and detailed descriptions of your cars.
  • Offer Financing Options: Many customers need financing to purchase a car, so offering financing options can help increase sales. Work with banks and other lenders to offer financing options to your customers.
  • Build Trust: Many customers are hesitant to buy a used car due to concerns about its condition and reliability. Build trust by providing detailed vehicle histories, offering warranties, and allowing customers to take cars for a test drive.
  • Price Your Cars Competitively: The used car market is competitive, so it's important to price your cars competitively. Do your research to understand market pricing and adjust your prices accordingly.
  • Invest in Marketing: Marketing is key to attracting new customers. Consider investing in targeted online advertising, social media marketing, and other marketing efforts to reach your target audience.
  • Build a Strong Team: Building a strong team is critical to your success. Hire experienced salespeople who understand the industry and are good at building relationships with customers. Also, consider hiring a mechanic to help with vehicle inspections and repairs.
  • Continuously Improve: Continuously improving your business is important to stay ahead of the competition. Monitor customer feedback, stay up-to-date on industry trends, and make adjustments as needed to improve your business.