Being a Chicago Car Dealer - The Truth
Being a Chicago Car Dealer - The Truth
Being a Chicago Car Dealer - The Truth
What You Need to Know About Being a Chicago Car Dealer
Chicago is said to be the third most populous city in the U.S. and the 26th most populous metropolitan area in the world. It is a major transportation hub with nine interstate highways. With its population and approximately 4.25 million workers, the second largest labor pool in the US, it presents a remarkable market challenge to car dealers.
The Basics of Car Dealership
A car dealership is basically a business that is allowed to sell used or new cars in retail, based on a dealership contract with a vehicle manufacturer or a sales subsidiary. In North America, a car dealership involves a franchise that offers new or used cars and usually provides options for pre-ownership of vehicles and for car financing. The U.S. government prevents direct vehicle manufacturer sales and new cars can only be sold by car dealers.
New Versus Used Car Dealership
In general, used car dealers are able to sell cars from various manufacturers. This provides more flexibility since various markets can be targeted. On the other hand, new car dealers have franchises which are associated with 1 to 2 manufacturers. This is somehow a limitation since people who do not like a particular brand would not go to that brand's car dealer.
The Essentials of Selling Cars
Car dealers should be able to display the cars available for sale in a showroom. If this is not possible, a car lot may be used. In Chicago and other U.S. states, the federal law requires the placement of a tag or sticker featuring the new car's features and price. The retail price is usually negotiable. Hired and trained salespersons, who earn commission with each sale, can negotiate with the car buyer to determine the final purchase price. In a car dealer's vocabulary, the negotiations may be called "desking a deal".
Investment Needed for a Car Dealership
In general, the profit margins in this field are low. With "flooring" or "floorplanning", a new car dealer can borrow the starting inventory from the vehicle manufacture then pay this with a predetermined interest. Afterwards, the dealer can then increase the car price by not more than 2% of the original price set by the manufacturer. When the manufacturer pays around 1-2% of the car's wholesale price to the dealer, the practice is called "hold-back". This is done to stabilize the fiscal outlook of the dealer. By having hold-back, the interest cost to the new dealer is minimized.
The Role of Trading in Dealership
Usually, consumers want to trade in their cars for immediate cash which can be used to cover part of the expense of buying a new car. A car dealer has to be able to determine a good trade-in value in order to avoid losses. This could be done by hiring a manager who is able to appraise each traded vehicle.
What Cars to Sell in Chicago
When one wants to sell new cars, the most popular cars among consumers include Hyundai Elantra SE, Hyundai Azera, Honda Accord, Mazda 3, Acura TSX, Subaru Forester SUV, Kia Rondo and Kia Optima. If one wants to target the used car market, Honda Accord, Honda Civic, Ford Mustang, Ford F-series, Toyota Camry, Jeep Grand Cherokee, Nissan Altima, Jeep Wrangler, Chevrolet Tahoe, and Toyota Corolla are the most frequently bought cars by the residents of Chicago.
Car Dealership License
Like other states, Chicago has its own Department of Motor Vehicles (DMV). One can contact the Chicago DMV to obtain information on license testing and documentation. A person who wants to be a dealer will be asked to fill out a Dealer Application Form. A certificate of deposit filled with the dealership name and the name of the secretary of state will serve as a proof that the required fee for the dealership license has been given to the state.
Fingerprints will have to be submitted to a Federal Bureau of Investigation-certified vendor as a form of background check. The business will have to be registered at the local business registry in order to gain a business registry number. A certificate of insurance will have to be obtained for the dealership establishment. A franchise agreement with the vehicle manufacturer is required if the dealer wants to sell new cars. If the dealership will involve a repair shop, the Environmental Protection Energy of the state will have to be contacted for certification. DMV also has a list of dealer education providers from which a person can get a dealer education certificate. All of these documents will have to be submitted together with the Dealer Application Form.
Being a Chicago car dealer can be a lucrative business provided that one satisfies these requirements. By being sensitive to the needs of the market, the profits from this business can be maximized.
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