Selling a used car is a highly competitive and complex market, but with a competent marketing system, you can count on a margin of 8-15% of the car’s value. Let’s talk about the intricacies of this case.
The idea of opening a car dealership that would sell used cars is not new in itself – however, this does not at all lose its relevance. At the end of 2019, the realities of the modern automotive market are such that prices for new foreign cars in the showrooms of official dealers are growing by leaps and bounds. In the upcoming “twentieth” we are waiting for another jump in price lists – just the other day in Russia, a law was adopted to increase the recycling fee for foreign cars.
Against this background, both private resellers and larger sites for the sale of used cars feel good. Why are there private traders – already almost all official dealers of well-known brands have, in parallel with showrooms, departments dealing with “secondary”.
How not to burn out in this highly competitive market, find your niche in a series of other auto sellers and secure a stable income for yourself – in our today’s material. We hope he will answer the main question – how to open a modern salon for the sale of used cars.
The essence of business, advantages and disadvantages
It would seem that the essence of the business of selling cars with mileage is as simple as possible – you find a car in decent condition on the secondary market, bargain well with the owner, after which you “wind up” your percentage and sell it through the salon at a higher price. Bingo! However, of course, not everything is so simple …
If you want to make money on the resale of cars, be prepared to combine the speed of Michael Schumacher (good cars “leave” almost instantly), the meticulousness of Sherlock Holmes (the market is full of beaten, mortgaged and simply “batty” cars) and the ability to sell at the level of heroes from The Wolf of Wall Straight”.
In addition to the qualities mentioned above (or the ability and ability to find employees with such), it is necessary to remember about the rather high threshold for entering this business – if you are not content with the level of a reseller, you will have to invest a round sum in the business.
However, with a well-built marketing and sales system, you can safely count on a margin of 8-15% of the cost of the car. Taking into account the fact that the average period for the sale of a liquid car is about 1 month, you can get a good spin.
First steps
- Registration. The optimal legal form for opening a car dealership is a limited liability company. The OKVED classifier is as follows: 45. Wholesale and retail trade in motor vehicles and motorcycles and their repair.
- Location. Next, you need to decide on the location of the future car dealership. Of course, you can make a significant investment at the initial stage and purchase a building plot, but we recommend renting a site in a good location. It can be a car market, some large shopping center, or just a territory adjacent to a busy highway.
- Rent and office. The average cost of renting a site for 50 cars in a “brisk” trading place of a million-plus city is from 300 to 500 thousand rubles. In the immediate vicinity of the site there should be an office building where the sales department and other support staff will be based.
- Equipment. In the current case, we will not go into detail about the need to purchase furniture, office equipment (PCs, laptops, etc.) – this is already obvious. But it’s worth mentioning the presence of more or less necessary technical gadgets – these are thickness gauges, scanners for popular car models, start-chargers for batteries, etc. All this will definitely come in handy for the successful work of technicians and experts in the selection of cars. However, it is worth dwelling on the issue of staff selection in more detail.
A good team – and where without it in the auto business?
- Supervisor. So let’s start with the leader. The experience of both a manager and a line employee is desirable (some salons prefer to take established ROPs from the salons of official dealers, while others, on the contrary, try to take management from other areas and teach them the intricacies of business on their own). The average “fix” in a city with a million population is about 60-70 thousand, plus a percentage of sales (or a KPI system tied to indicators such as revenue, marginality, machine turnover period, etc.).
- Salespeople (3-4 people minimum for a site of 50 cars) are the main driving force in any business, and this is especially true for the niche we are considering. The main qualities are the ability to understand cars, knowledge of the main pros and cons of the model range of any manufacturer, and driving experience of several years (after all, it is the sales manager who conducts a test drive of the car that the client likes). The main income is a percentage of cars sold personally by the manager, although a small salary is usually present. The average income is 50,000 rubles.
- Technicians (2 people) are employees responsible for the technical condition of the fleet being sold, responsible for moving cars from car carriers and around the site, as well as maintenance, service, and pre-sale preparation. The salary of a technician depends on the company – on average, employers in the market are willing to pay from 25 to 45 thousand rubles.
- A loan officer (1-2 people) is a full-time employee of the salon who has access to apply for car loans to banks. Yes, yes, immediately make sure that you have such a service as lending. Many key players in the used car business focus on sales on credit – these are Fresh Auto, Automama, Klyuchavto Select and other large companies. Most banks (such as RusFinance, VTB, etc.), as a rule, welcome cooperation with new salons and sites that sell their lending products. However, for this it is necessary to send a financial consultant for training, where he will get a more detailed understanding of the nuances of car loans. FOT 30-40 thousand rubles.
- Buyers (they are also experts in buying a car) – as a rule, this is a pair of specialists savvy in the purchase of cars in the secondary market. It is these employees who will be engaged in the search, culling and purchase of cars. Many of the buyers come in search of stability to the salon from their private business, where they were previously engaged in resale and distillation (in a simple way – resellers. However, some managers prefer to “grow” buyers from among successful sales managers, bypassing people with experience ” buy and sell.” The salary is piecework and depends on the number of cars purchased.
- Security manager. To provide control over cars and employees, as well as to check documents, it would be useful to introduce the position of security manager. As a rule, these are former employees of law enforcement agencies with relevant experience in the police, army or other law enforcement agencies.
Buying cars for resale
There are two main channels for the supply of used cars to the salon – the purchase of cars from private traders (owners) and the purchase of wholesale lots from corporate clients. Let’s take a closer look at both options.
Buying cars from private owners
So, the main part of the work of purchasing managers is the search for good and at the same time affordable cars on the “secondary”. First of all, this is the monitoring of bulletin boards (“Avto.ru”, “Avito” and others like them), as well as working with incoming phone calls. In the first stage, the expert inspects the car body for an accident, checks the technical condition (engine, gearbox, suspension), and names an approximate price (somewhere minus 10-15 from the market average).
If the seller is satisfied with such a price tag, the next stage is taken – the car is driven away for a total check in a partner service, where the master already thoroughly checks electronic systems and other details that cannot be assessed in the field.
Next comes a check with a forensic specialist for the legal purity of the car, and some salons also check the car according to taxi databases (for example, Automama does not retail such cars, and Fresh Auto negotiates a good discount for such options). If everything is OK and the client is satisfied with the final price, you can buy out his iron horse.
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Purchase of cars from corporate clients
A separate song is an interaction with corporate clients. These can be companies selling their fleet due to its renewal, representatives of the car outsourcing business, courier services, etc. As a rule, negotiations with large key car suppliers are carried out either by you yourself as a business owner or by a hired manager. Purchasing managers in such projects are engaged only in the technical component of the ransom – they check the condition of each copy.
Who are “corporations”? First of all, these are large international and Russian companies that have a large fleet of vehicles and periodically hold tenders for their implementation. As an example, we can cite such suppliers as Pepsico, Baltika, Metro Cash and Carry, Procter & Gamble and others. The advantages of such suppliers are low prices (according to the final book value, a five-year-old car generally costs a penny) and a good fleet condition (large companies do not save on maintenance and do all the work at official dealers). Cons – it is not so easy to contact CarFleet-managers of corporations and enter the list of trusted buyers.
However, an official dealer selling new cars can also act as a corporate supplier of cars. When a client sells an old “swallow” through the trade-in system, stocks are formed, which are sold in batches of 10-20 cars to those salons that are engaged in “secondary” (that is, this is an excellent supply channel for the business we are considering).
Pre-sale preparation
What is the next step in the car resale cycle? An ignorant layman will think that it is directly putting up for sale, and they will be mistaken … However, if you, as an entrepreneur opening a car business, you probably know that few cars without pre-sale preparation are put on the site. First of all, the purchased device goes to dry cleaning the interior and (if necessary) polishing the body. The author of the article knows that some large salons (we will not name them) even keep full-time employees who alter steering wheels and gearshift knobs in dozens of months to give them a “fresh” unworn look. But we will be guided by an honest approach to the client – and therefore no twisted runs and “outsider” tricks.
If necessary, maintenance is carried out – it is easier to fix some minor malfunction, like a leaky rack or a crispy ball yourself, than to give us a disadvantageous discount to a future buyer. Moreover, partner service stations and spare parts suppliers will give you a good discount as regular customers.
Sale stage
So, the car is put in order, polished, shiny, and reclaimed – and is heading to our site.
How much is the markup? As a rule, we are talking about 15-20% of the purchase with a further decrease until the “winning” sale. When setting a price tag, it is necessary to focus on the average figures for the market for a specific model and its parameters (condition, mileage, number of owners).
If in the first reporting period (usually a month) the car was not sold, the price for it is gradually lowered. Quite “unsellable” options are often set to zero – so as not to freeze working capital. However, this is rather an exception to the rule if a hidden flaw of the machine is discovered. Salons, as a rule, try not to set the “cheat” below 7-8%, because do not forget that you have to pay salaries to employees and considerable rental costs.
Business promotion
The main channels that generate a flow of customers are bulletin boards – “Avto.Ru”, “Avito”, “Yula” … It’s better to make a paid account right away, which will go under your brand and be associated with a reliable service. The site is also important, and it would be useful to place their information that cannot be indicated on any bulletin board – for example, defects in the bodywork, nuances about the technical condition of the car, the cost of a monthly payment if it was bought on credit. An excellent solution is also the placement of a photo report with customers who have already bought cars in your showroom.
Don’t discount social media. Each new car that comes to you must be photographed from all angles and posted with it. If you are located in a market or a shopping center, be sure to launch sound advertising and make yourself known through banner rental.
Financial indicators
As we have already mentioned, the main costs for business development are working capital for the purchase of cars for further sale. In our business plan, we will take an average price of about 500,000 rubles – this is how much a mass car of a budget class Hyundai Solaris or VW Polo 5 years old costs. However, of course, you can replenish the site with both more expensive options for about 1 million rubles per car (an average popular crossover like Hyundai Creta, Kia Sportage, and others), and more budget ones (yes, on Accents and Priors according to 200,000 rubles can also be earned!).
Starting costs for opening a car dealership
| NAME | AMOUNT, RUB. | |
|---|---|---|
| Real estate | ||
| one | Venue rental | 300 000 |
| 2 | Office rent | 30,000 |
| Equipment | ||
| 3 | Furniture | 50,000 |
| four | PC and office equipment | 200 000 |
| 5 | Equipment for technicians | 30,000 |
| 6 | Equipment for buyers | 50,000 |
| Intangible assets | ||
| 7 | Purchase of 1C base and CRM system | 50,000 |
| working capital | ||
| eight | Purchase of a car (50 units) | 25,000,000 |
Total: | 25 710 000 |
The main staff of the salon for the sale of used cars can be formed from 10-12 people, we described their functionality in more detail above, and now we will give the figures for the wage fund.
payroll fund
| JOB TITLE | QUANTITY, PERS. | FOT, RUB. | |
|---|---|---|---|
| Administrative | |||
| one | Car dealership manager | one | 100,000 |
| 2 | Head of Sales and Purchasing | one | 70 000 |
| 3 | security officer | one | 50,000 |
| Industrial | |||
| four | Auto loan specialist | one | 40 000 |
| 5 | Auto Buying Expert | 2 | 60 000 |
| Trade | |||
| 6 | Sales Manager | four | 50,000 |
| Auxiliary | |||
| 7 | Technician | 2 | 0 |
| Total: | 370 000 | ||
| Social Security contributions: | 111 000 | ||
| Total with deductions: | 481 000 |
So, we are starting from a fleet of 50 cars – about the number of options available for sale at start-up sites. However, do not forget that many large representatives of this business sell 300 or even 500 cars per month.
Key business indicators
| Investments in working capital | 25,000,000 |
| Revenue, rub. | 16 500 000 |
| Variable costs, rub. | 50,000 |
| Fixed costs, rub. | 300 000 |
| Payroll (with deductions), rub. | 481 000 |
| Annuity loan payment, rub. | 0 |
| USN tax 6% | 990 000 |
| Net profit | 14 679 000 |
In total, selling about 30 cars per month at an average price of 500,000 rubles, and with an average markup of 10%, the owner of a car dealership can count on a profit of about 15 million rubles. However, do not flatter yourself that already in the first months of sales you will be able to reach these indicators – initially sold cars will account for a quarter, a third of the total fleet, and only with further development can we talk about the sale of more than 50 percent of the available stock. In the presence of successful growth dynamics, we can also talk about increasing the car fleet – large representatives of the industry are doing just that.
Brief Summary
The used car market is currently undergoing significant changes. First of all, it is becoming more civilized – we are talking about the quality of the service provided, and about transparency when buying cars. The services of the Autoteka format that have recently appeared, by which you can track the history of service, accidents, and so on, also contribute to this.
Against this background, it is extremely important not only to offer customers a quality service but also to focus on the reputation of the company – for example, provide guarantees of legal purity, documentary responsibility for the information provided in the car card on broken car elements and the absence of twisted mileage.
In a word, the business of selling used cars is very interesting and quite profitable, although it requires significant investments at the start. In any case, we hope that we have shed some light on the functioning of this business, its pitfalls, and its features for our readers.