New Small Dealer Introduction and Questions

bshoeduke

Green Pea
Dec 22, 2020
7
2
Awards
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First Name
Bailey
Happy New Year Everyone! I wanted to introduce myself and ask a few questions.

I recently took half ownership of a small dealership that my father-in-law has been running more or less like a hobby for the past 2-3 years. The lot has been mostly empty with a car or 2 here and there over the past 6 months. He got kind of burnt out on doing it by himself and doesn't really have the financial motivation to get it going since he's retired. He has kept it up mostly for tax right off and the ability to go to auction and drive whatever he wants, switching cars every 6 months or so, haha. I bought into it about a month ago because I think this business has a lot of potential. We are in a small rural area in Louisiana halfway between Monroe and Shreveport, but we're the only dealership in our parish (county), our town is the parish seat, we're on the main hwy, and the lot and building are paid for free and clear. Essentially we're running with our electric bill and insurance as the only overhead. We both have our dealer/salesperson licenses and the used car commission came out to inspect, so everything is legal. His strategy so far has been essentially: pick up a cheap car or 2 at auction, sell for cash (significantly under blue book value). There's no advertising, no office hours (there's a "by appointment" sign and phone number on the building), no negotiating, no financing, etc. Sometimes his wife puts the cars in the local fb groups, but that's about it.

Right now he has 4 cars (2 of which are on the lot), and I have 6 (3 of which are on the lot). His other 2 are ready to go, but he's unmotivated. My other 3, one needs a radiator, one needs are catalytic convertor, and one has a weird electronic issue with the back hatch. All are actively being worked on by us as we go. He's handy and knowledgeable, and I don't mind learning a thing or 2 about engines. It seems like he enjoys the working on cars much more than the buying and selling, so I'd be more than happy for him to take this role in the long run. I want to work up towards more inventory, but we're operating on a cash only basis right now, and neither of us are interested in a floor plan. My husband's income pays the bills and my FIL is retired, so we should be able to roll most of our profits back into more cars and build pretty quick.

Because of our rural area, it's also a somewhat impoverished area. We've been trying to stick to things with a sale price under $5k, but I think financing needs to be high on our priority list. We need to find a financing partner that works with poor credit, low income, and older cars. Anyone here that can afford better, is more than likely going to go to one of the big car dealerships in the neighboring cities, so I'm not sure that prime options are even necessary for us right now, just sub-prime. I have a small list to look into that I've pulled from posts here:

lobel financial
united auto credit corp
westlake
western funding
Gold Acceptance
Nationwide Auto Finance

Are any of these lest strict about the type of vehicles we sell? Pretty much all our vehicles are 2000-2010, which is too old for a credit union or other prime financing. We want to keep our cars on the lower range of affordable because of the clientele we're supporting here. Mt father in law wants me to go around to all the title loan/cash advance places and ask them if they'll finance for us. Anyone have experience with this?

Second topic is advertising. I'm in the process of setting up a website for us, and I also have all the cars on facebook marketplace. Anything else that's affordable that would be good? Craigslist is paid ads only now. Are they worth it? Car Gurus? Auto trader? What's the best way to bring in customers starting out?

The last thing I need opinions on is a vin scanner app. Laser Appraiser, Autoniq, Vincue, Vin scanner... what do you use and why? We're spending WAY too much time going through the pricing on the consumer KBB website for each car we look at when at the auction.

I've read through a ton of posts and I really appreciate all the info I've gotten so far. Thanks for being so helpful, and I look forward to interacting with you all in the future!
 
Wow, you have a lot going on in this post!

First thing, you are probably in the wrong place for this type of a dealership. I will try to help you, but most members here are in a completely different space than you are talking about. You will learn a lot here, but may not be ready for so much of it. Don't get me wrong, I am not saying that you aren't welcome here because you are!

You have Facebook, search groups for Independent Auto Dealer groups. You will find groups that are comprised of dealers exactly like you are.

Those banks that you have mentioned there are not going to do you any favors on the type of inventory you are trying to sell. You may want to look into Credit Acceptance Corp. They have a Collection Only program in which they will keep 20% of all payments they collect and send you the 80%. It is sort of like being in the Buy Here Pay Here business without having to handle your own collections.

Craigslist seems to work for some dealers. I have heard selling price is the deciding factor here, but I really don't know. Get yourself a Facebook Business Page, and start listing your cars on Facebook Marketplace. That is free.

If you want to grow this business up into something that is outside of the hobby classification, you need inventory. Yes, you can accomplish this by reinvesting all of your earnings. You can also do this by getting a floor plan. You will hear lots of horror stories about how floor plans have ruined dealerships and that you will go straight to hell if you have one. Floor Plans do not ruin car dealerships. Poor management ruins car dealerships. If you are disciplined and use the floor plan as if it was your own money, you will be fine. Buy cars that are relatively close to retail ready, even if you spend a lot more money for them. The business model you have now will not scale to even 10 units per month.

Contact the Louisiana Independent Auto Dealers Association and become a member. You will learn a lot about your business and market from them. https://louisianaiada.com/

I hope I have given you some guidance here. Feel free to message me or respond here.

Good luck and welcome to Dealer Refresh!

Clint
 
Wow, you have a lot going on in this post!

First thing, you are probably in the wrong place for this type of a dealership. I will try to help you, but most members here are in a completely different space than you are talking about. You will learn a lot here, but may not be ready for so much of it. Don't get me wrong, I am not saying that you aren't welcome here because you are!

You have Facebook, search groups for Independent Auto Dealer groups. You will find groups that are comprised of dealers exactly like you are.

Those banks that you have mentioned there are not going to do you any favors on the type of inventory you are trying to sell. You may want to look into Credit Acceptance Corp. They have a Collection Only program in which they will keep 20% of all payments they collect and send you the 80%. It is sort of like being in the Buy Here Pay Here business without having to handle your own collections.

Craigslist seems to work for some dealers. I have heard selling price is the deciding factor here, but I really don't know. Get yourself a Facebook Business Page, and start listing your cars on Facebook Marketplace. That is free.

If you want to grow this business up into something that is outside of the hobby classification, you need inventory. Yes, you can accomplish this by reinvesting all of your earnings. You can also do this by getting a floor plan. You will hear lots of horror stories about how floor plans have ruined dealerships and that you will go straight to hell if you have one. Floor Plans do not ruin car dealerships. Poor management ruins car dealerships. If you are disciplined and use the floor plan as if it was your own money, you will be fine. Buy cars that are relatively close to retail ready, even if you spend a lot more money for them. The business model you have now will not scale to even 10 units per month.

Contact the Louisiana Independent Auto Dealers Association and become a member. You will learn a lot about your business and market from them. https://louisianaiada.com/

I hope I have given you some guidance here. Feel free to message me or respond here.

Good luck and welcome to Dealer Refresh!

Clint

Haha, yeah I guess I got carried away. Thanks for the detailed response!

I joined a few FB groups a couple weeks ago, but they seems to be mostly spam. I'll give it another try!

I'm trying really hard to avoid the BHPH thing at least until I have a couple years experience. I see it as a huge risk, and I really don't have the capital to keep buying inventory if I'm not getting paid upfront for each sale, but I'll look into Credit Acceptance Corp. Thanks for the suggestion.

Why do you think the model isn't scalable? I do want to eventually buy some more expensive cars and do more financing, but I really want to cash flow all of it until we build to that point. We currently have 10 units, so once we get those sold, I don't see why we can't have 12, then 15, etc.

LIADA is already on my list! Thanks for the reminder. :)
 
Haha, yeah I guess I got carried away. Thanks for the detailed response!

I joined a few FB groups a couple weeks ago, but they seems to be mostly spam. I'll give it another try!

I'm trying really hard to avoid the BHPH thing at least until I have a couple years experience. I see it as a huge risk, and I really don't have the capital to keep buying inventory if I'm not getting paid upfront for each sale, but I'll look into Credit Acceptance Corp. Thanks for the suggestion.

Why do you think the model isn't scalable? I do want to eventually buy some more expensive cars and do more financing, but I really want to cash flow all of it until we build to that point. We currently have 10 units, so once we get those sold, I don't see why we can't have 12, then 15, etc.

LIADA is already on my list! Thanks for the reminder. :)
You didn't get carried away, there was just a lot there!

What you have now won't scale because because you're buying fixer upper inventory without a mechanic. Your growth will move at the speed of your reconditioning process. That is the reason I suggest buying retail ready inventory, stuff the just needs cleaned.

It is very hard to get signed up with lenders (other than Westlake). Do you have a DMS?
 
You didn't get carried away, there was just a lot there!

What you have now won't scale because because you're buying fixer upper inventory without a mechanic. Your growth will move at the speed of your reconditioning process. That is the reason I suggest buying retail ready inventory, stuff the just needs cleaned.

It is very hard to get signed up with lenders (other than Westlake). Do you have a DMS?
We always TRY for cars that don't need work, but in the price range we're working with, There are more often than not some "surprises"

No, I didn't think a DMS was necessary considering how few cars we have.
 
Frazer DMS is about $50/month, and will send your inventory to your website. You can get a website for about $50/mo as well. For $100/mo you can have your website, inventory management, Facebook Marketplace, accounting, lender interface, access to Carfax/Autocheck, and the list goes on. I urge you to get a DMS now. Small dealerships can't afford not to have one.
 
Frazer DMS is about $50/month, and will send your inventory to your website. You can get a website for about $50/mo as well. For $100/mo you can have your website, inventory management, Facebook Marketplace, accounting, lender interface, access to Carfax/Autocheck, and the list goes on. I urge you to get a DMS now. Small dealerships can't afford not to have one.
Thanks, I'll look into it. I assumed it would be much more expensive.
 
Frazer DMS is about $50/month, and will send your inventory to your website. You can get a website for about $50/mo as well. For $100/mo you can have your website, inventory management, Facebook Marketplace, accounting, lender interface, access to Carfax/Autocheck, and the list goes on. I urge you to get a DMS now. Small dealerships can't afford not to have one.
I'll keep bugging you since you're the only one that responded, haha... any thoughts on the best vin scanner app?
 
Happy New Year Everyone! I wanted to introduce myself and ask a few questions.

I recently took half ownership of a small dealership that my father-in-law has been running more or less like a hobby for the past 2-3 years. The lot has been mostly empty with a car or 2 here and there over the past 6 months. He got kind of burnt out on doing it by himself and doesn't really have the financial motivation to get it going since he's retired. He has kept it up mostly for tax right off and the ability to go to auction and drive whatever he wants, switching cars every 6 months or so, haha. I bought into it about a month ago because I think this business has a lot of potential. We are in a small rural area in Louisiana halfway between Monroe and Shreveport, but we're the only dealership in our parish (county), our town is the parish seat, we're on the main hwy, and the lot and building are paid for free and clear. Essentially we're running with our electric bill and insurance as the only overhead. We both have our dealer/salesperson licenses and the used car commission came out to inspect, so everything is legal. His strategy so far has been essentially: pick up a cheap car or 2 at auction, sell for cash (significantly under blue book value). There's no advertising, no office hours (there's a "by appointment" sign and phone number on the building), no negotiating, no financing, etc. Sometimes his wife puts the cars in the local fb groups, but that's about it.

Right now he has 4 cars (2 of which are on the lot), and I have 6 (3 of which are on the lot). His other 2 are ready to go, but he's unmotivated. My other 3, one needs a radiator, one needs are catalytic convertor, and one has a weird electronic issue with the back hatch. All are actively being worked on by us as we go. He's handy and knowledgeable, and I don't mind learning a thing or 2 about engines. It seems like he enjoys the working on cars much more than the buying and selling, so I'd be more than happy for him to take this role in the long run. I want to work up towards more inventory, but we're operating on a cash only basis right now, and neither of us are interested in a floor plan. My husband's income pays the bills and my FIL is retired, so we should be able to roll most of our profits back into more cars and build pretty quick.

Because of our rural area, it's also a somewhat impoverished area. We've been trying to stick to things with a sale price under $5k, but I think financing needs to be high on our priority list. We need to find a financing partner that works with poor credit, low income, and older cars. Anyone here that can afford better, is more than likely going to go to one of the big car dealerships in the neighboring cities, so I'm not sure that prime options are even necessary for us right now, just sub-prime. I have a small list to look into that I've pulled from posts here:

lobel financial
united auto credit corp
westlake
western funding
Gold Acceptance
Nationwide Auto Finance

Are any of these lest strict about the type of vehicles we sell? Pretty much all our vehicles are 2000-2010, which is too old for a credit union or other prime financing. We want to keep our cars on the lower range of affordable because of the clientele we're supporting here. Mt father in law wants me to go around to all the title loan/cash advance places and ask them if they'll finance for us. Anyone have experience with this?

Second topic is advertising. I'm in the process of setting up a website for us, and I also have all the cars on facebook marketplace. Anything else that's affordable that would be good? Craigslist is paid ads only now. Are they worth it? Car Gurus? Auto trader? What's the best way to bring in customers starting out?

The last thing I need opinions on is a vin scanner app. Laser Appraiser, Autoniq, Vincue, Vin scanner... what do you use and why? We're spending WAY too much time going through the pricing on the consumer KBB website for each car we look at when at the auction.

I've read through a ton of posts and I really appreciate all the info I've gotten so far. Thanks for being so helpful, and I look forward to interacting with you all in the future!

@bshoeduke welcome to the community and congrats on becoming half owner of your own dealership. Sorry for the lack of responses. Most of us are still in Holiday/End of Month catch up mode.

Clint @Tallcool1 offers some solid advice on the cheap DMS front. Hard to believe a $50 DMS can do all of that, but I'll take his word for it.

Due to your inventory count and price point, I would steer clear of the $$ listing sites like ATC and Cargurus and focus on Marketplace for the time being. Otherwise you could quickly be spending more than what you're making.

Craigslist may still work for you if the costs isn't out of whack.

May want to look at Carsforsale.com as an alternative. They offer independent dealers quite a bit for the money. Mobile friendly website (a must), listings, inventory feeds, a light CRM, and your inventory gets listed on their Carsforsale national website.


Also - be sure to build/claim your Google Business page. Follow @georgenenni on LinkedIn for great advise on how to manage and optimize your GMB Page. If optimized correctly could be your best bang for the buck! George also has a book you can purchase on Amazon worth every penny.

Here is a RefreshFriday session with George - https://forum.dealerrefresh.com/threads/w-george-nenni-to-discuss-gmb-and-covid19.6940/
 
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