How To Run a Successful Car Dealership

Learn the essential steps to successfully run a dealership, from effective inventory management to customer satisfaction. Master the art of automotive business.

Running a car dealership business can be a lucrative and fulfilling idea, but learning how to run a dealership isn’t always easy. You won’t be just selling vehicles. You also need to deal with many tedious, routine tasks and processes, including inventory, marketing, and customer service. You have to learn effective car dealership management. It’s only by running a tight ship that you can attain business success.

The good news is that you can learn from many profitable dealerships—no need to reinvent the wheel. Plus, Podium offers industry-specific solutions to help you run your dealership without a hitch. Speed to lead is critical in today’s fast-paced market, and Podium’s AI BDC offers an unparalleled advantage by ensuring dealerships engage with leads within a couple of minutes—guaranteed. This tool helps dealers transform potential interest into concrete actions, like booking test drives and scheduling service appointments.

Engage every lead with meaningful conversations to drive sales with Podium’s best-in-class conversational AI Employee. Watch a demo today.

Running a Car Dealership: The Importance of Setting Up a Strong Foundation

One of the first questions most people ask when opening a car dealership is, “How do I make my dealership successful?” The answer is to create a solid foundation.

Why do you want to start or run a car dealership business? What specifically do you want to achieve in business in the long run? What is your ideal team like? What are your business model, target market, and value proposition?

If you don’t know the answer to some of those questions, your business will likely struggle to get off the ground. You may end up wasting time and resources on things that don’t matter, which eventually inhibits the business’s growth and success.

Business Planning and Strategy

Learning how to run a dealership starts with a business plan. A solid business plan serves as a roadmap and helps businesses overcome and pivot quickly in the face of crisis. The plan should outline the business goals, purpose, and objectives. It should also include a blueprint for its daily operation and key functions, such as finance, marketing strategies, and expansion.

Legal and Regulatory Considerations

Every state, county, or city will have requirements for operating a car dealership. They set up most of these rules to protect consumers who spend large amounts of money to buy a car. Used car dealers must meet these requirements to avoid facing legal consequences and the risk of getting their businesses closed.

Location and Facilities

Your business location and facilities can considerably impact many aspects of your business, including your brand image, marketing strategies, and even employee satisfaction. It can also affect the business visibility and accessibility. That is why aspiring business owners should invest ample time in location planning when developing a business plan.

If you don’t have the budget for opening car lots, you may secure funds from financial institutions or lenders.

8 Expert Tips & Tricks on How to Run a Car Dealership

The world of car dealerships can be intimidating at first and quite tricky to navigate. But by equipping yourself with knowledge, you’re likely to succeed. After all, knowledge is power. Use the following tips and tricks to succeed in running a car dealership.

1. Solid Business Planning

A well-defined business plan is the foundation of any successful car dealership venture. Outline your dealership’s goals, business model, target market, and financial projections.

2. Customer-Centric Approach

Place your customers at the core of all your auto dealer business activities and decision-making process. Recognize that customers are integral partners in your business success.

3. Effective Inventory Management

Be very careful when choosing vehicles to buy and sell. Focus on your target customer’s needs and location instead of your preferences. Also, research and implement inventory management practices that can maximize your profit.

4. Strategic Pricing

Make your pricing model appealing enough for car buyers. After all, customers tend to go to dealers they think to give the best bang for their buck.

5. Embrace Technology

From CRM and inventory management software to marketing solutions and chatbots, there’s no shortage of technology you can use in your car dealership. These technologies can help improve your internal operations, enhance overall customer experience, and give you an edge over the competition.

Also, speed to lead wins and Podium’s AI Employee boosts lead conversion by 45%. Engage every lead with meaningful conversations to drive sales with Podium’s best-in-class conversational AI Employee.

6. Sales and Marketing Tactics

Establish a strong sales and marketing plan. This should include your marketing budget, a clear description of lead generation strategy, and techniques for closing auto sales as quickly and efficiently as possible.

7. Employee Training and Development­

Invest in your team. They are your business’s greatest asset. Consistent employee training and development will not only improve your team’s performance. It can also help lower turnover rate, as employees often stay when there’s career and personal growth.

8. Streamlined Operations

Running a dealership is a lot of work. Use car dealership software and other technology to streamline your operations so you can have more time for other valuable activities.

The Importance of Customer Service and Satisfaction in Car Dealerships

Since a vehicle is a big-ticket purchase, customer service and satisfaction remain crucial in car dealerships. Satisfied customers may not go back to your facility to buy another new car for a while, but they are likely to turn to you for servicing, repairs, and even future car purchases. They may even tell their family and friends about your business. Service customers are reliable sources of continued revenue.

Creating Exceptional Customer Experiences

Exceptional customer experience is what makes a car dealership successful. By giving customers the best possible buying experience, you can build loyalty among your clientele and stand out in a sea of competition.

There are many ways to create an exceptional customer experience. One is to empower car buyers with knowledge. Give them easily accessible content that answers most of their car dealership-related questions. Other ways include offering superior amenities and responding to their concerns quickly. Consider building a service department as well.

Handling Complaints and Feedback

Customer reviews, both good and bad, are invaluable. Good feedback will help attract more buyers, while any negative feedback can help your business become stronger and better. But customers don’t usually initiate leaving feedback, so consider reaching out and asking them for one. Doing so will also make your customer feel like you value their experience.

Podium’s AI BDC helps dealers transform potential interest into concrete actions like booking test drives and scheduling service appointments.

Retention Strategies and Loyalty Programs

Implementing retention strategies and building loyalty programs can improve customer satisfaction. When customers are satisfied, they will return and your business will likely maintain higher gross profit. Some ways to keep customers on the hook include offering incentives, providing referral bonuses, and including more free accessories or services with every car purchase.

Improving customer service and satisfaction doesn’t have to be tough. Podium offers state-of-the-art tools you can use to keep your customers happy. As an example, AI-powered text chat helps customers connect with you on their terms and get answers that might make them more likely to purchase from your dealer. It has nearly everything you need to grow your dealership business.

How Can Inventory Management Make or Break a Car Dealership

Inventory management is another crucial aspect of running a car dealership. Your inventory management practices can help your business grow or bring it down. Manage your inventory effectively and you’re likely to make more sales and money. Neglect this process and your business will likely miss opportunities for bigger profits. You may even risk losing loyal customers in the process.

Sourcing and Acquiring Inventory

Sourcing refers to identifying, evaluating, and establishing relationships with manufacturers. By contrast, inventory acquisition refers to obtaining the vehicles you’ll sell in your business. Rely on data when making inventory decisions. Perform market research to determine what type of car to acquire and when.

Inventory Turnover and Optimization

Any car dealership wants to sell more and earn as much money as possible from each vehicle. Sending unwanted cars to auction used to be a common practice. However, the sustained interest in pre-owned cars has changed the game.

As a result, dealers these days often keep and recondition older models instead of trying the auction route, to maximize profitability. Unfortunately, only those who can easily anticipate which trades have the best retail potential can benefit the most.

Pricing Strategies

While generating more profit is crucial, you also have to think about how you can attract potential customers. Your pricing strategies will likely impact your appeal to customers. Research the commonly used pricing models, and implement the one that will make car buyers think they got the best deal.

How To Run a Used Car Dealership

Want to know how to run a successful used car dealership? Start by learning the basics.

What is a Used Car Dealership

A used car dealership is a business centered around buying and selling used cars. Its main difference from new car dealerships is the condition and price of cars for sale. Acquiring used cars to sell is also often more challenging than getting new vehicles because you can only often get your inventory from dealer-only auction companies and sometimes online auction sites.

How to Start a Used Car Dealership

Successful used car dealerships are run by entrepreneurs interested in vehicles with a basic understanding of how cars work. Unlike selling new cars, you may have to fix some problems with the vehicle and ensure it is road-ready and can pass an inspection.

You’ll also need to organize your budget. Although buying and selling used cars doesn’t cost as much as new cars, you’ll still need capital. Your small business must pay for many things, including surety bonds, marketing and branding, office supplies, etc. These startup costs can easily add up to thousands or even tens of thousands.

Fundamentals of Running a Car Dealership

When you’re ready to start a used car dealership, keep the following things in mind:

• Develop an entrepreneurial mindset and necessary skills.
• Don’t forget to set a budget for maintenance or low-level restoration work associated with your inventory.
• Research your target market.
• Be creative with your ads.
• Choose an affordable and visible location.
• Think about your target market and location when choosing your inventory.
• Set financial goals.
• Prioritize customer service.

Legal Aspects of a Used Car Dealership

Unlike selling and buying new cars, used car dealerships are not bound by the terms and conditions of a franchise agreement. You can do whatever you want as long as it’s legal. But you must register your business first. Complete your business registration at the state and federal levels.

Next, get an auto dealer bond; you will need it to have a dealer license. Find out licensing requirements in the state where you will be doing your business.

Once you start selling used vehicles, you will be required to comply with various federal and state laws. Consider investing in a business attorney to avoid getting on the wrong side of the law.

Staying Updated with Market Trends: Monitoring Automotive Market Shifts

Customer preferences and demands change. If you want to sell and earn more, staying abreast of existing market trends is vital. Right now, personalization, data analytics, and bridging the gap between physical and digital showrooms are the trends shaping car dealership operations. But these trends may become obsolete sooner or later, so it’s important to keep yourself updated on the automotive market.

Flexibility and Innovation in Dealership Operations: Adapting to Industry Evolution

The automotive industry is evolving, and flexibility and innovation will be the key to navigating the changes. Encourage your team to embrace change and implement innovative solutions. Adopt newer technologies and reimagine traditional processes to meet the target market’s demand. Learn from competitors and embrace dealership best practices.

Bring speed and efficiency to every customer experience and automotive sale with Podium’s AI BDC. Watch a demo now.