cause I would do it in the south what's going on guys welcome to rabbit's used cars this is a question I get asked probably 10 times a month um and I know we got a lot of a lot of new guys a lot of flippers and stuff in the in the crowd and a little food for thought Rob what's it cost to become a car dealer what's it you know what what does it take and I'll keep in mind every State's a little different but they're all pretty much the same stuff um give or take and literally as I renewed my dealer's Insurance the other week that made me think you know what you know no one told me how to do this and I started adding it up and this is just a little food for thought you know it it's kind of interesting on the back side of this you know everybody sees the cars but that's really a small part of the puzzle you know so you know what you got out got a few flips under your belt gonna be a car dealer Wheeler Dealer I want to be that guy and that's cool and I love it there's nothing more I love than seeing someone take that step into being self-employed to owning your own business I love it but you don't need to go into it blind so we're going to kind of break it down for you so first and foremost almost any state you're going to get a dealer's license in in the United States you've got to take a dealer training course that's 300 bucks so all right we got 300 invested you're going to get a little certificate saying you sat in your chair for eight hours and listen and talk to you and they're going to tell you the ins and outs and things like that you're thinking okay I can do that well now you have to find somewhere to sell cars because you know in some areas you can have a dealership and sell cars out of your front yard in some states some states you can't some counties municipalities you can some you can't um so you gotta have a piece of property to meet these guidelines but usually the rules go you'd have 100 square feet of Office Space inside that office space you have to have a filing cabinet a key lock box a computer and all your necessary forms that's what you got to have inside that 100 at least 100 square feet of office sales space well now you have to have a display space state of South Carolina you have to have at least 2 500 square feet luckily we have 2500 square feet inside and way more than that outside so that works out well here but you got to think about that as well you also have to have a sign that's visible to the public that they know that your primary business is selling cars at this location so when they see rabbits used cars there has to be in at least six inch letters invisible from the closest Road okay well still not getting you know crazy money or anything like that we gotta think well this location is going to cost you some money and I don't know if you've looked at Commercial Real Estate pretty pricey you know you got to realize so I own this building but like the other building like police in it you know and which is a great way to start out you know you don't need to go out and go into debt like that right off the bat um but even Leasing I mean the biggest hole in the wall in the world a couple Grand a month at least and and I mean that's nothing fancy as a rule and in some areas you know a little better than others to for as far as leasing goes but the other thing you got to think about is the area that you put your car lot in now granted the internet has opened this up a little bit for us and this is not as important but you don't want to be putting 500 saddles on 50 horses if you catch my drift so if you've got let's use Greenville for example I was in Greenville for years and I just know the numbers off top of my head the median income in Greenville is about sixty thousand a year which is decent it's Middle Road um and we sold 30 40 50 60 70 100 000 cars but as a rule most of our cars average 40 to 50 Grand give or take so that works for our Market locally and we did so a lot of cars locally um but the thing you got to think about you may not be selling classic cars you may be selling retail cars so retail Car Wise you obviously don't want to be selling Lamborghinis in a town with a thirty thousand dollar a year median income so you got to think about that um and this is the other side of that well you got to have insurance on this establishment well you gotta have dealers insurance and dealers insurance is kind of a double-edged sword because not only does it cover the cars but you also have to have a liability policy over the whole thing um and then this property that you just leased or rented you need a rental policy that's going to cover everything else that's inside your little hundred square foot office or Warehouse or whatever which way you want to do it so now that's got to be insured so you have these expenses for this and it won't fit in on a little secret between my surety bond which I'll get into that here in just a second dealer's insurance insurance insurance on the building and the garage liability that goes with it you're knocking 10K in the head and I'll be honest with you that number is pretty standard across the board you may be a little cheaper in a certain area you may be a little higher in certain areas but around 10 000 a year just for your insurance keep in mind we haven't sold a car yet we got a building that's costing us two thousand a month and we just spent ten thousand dollars for insurance so now month one we're 12 in the hole we haven't sold anything and we don't even own a car yet now not counting office furniture computers you know they don't give you that stuff you got to buy that so let's just go ahead and throw go on the low side 3 500 for everything Gotta Have A Nice printer and you got to buy your dealer forms which we'll throw that in with a 3500. so now we're what fifteen thousand and we didn't sell the car yet and you know I mean I didn't include the price of the sign or anything and I'm just keeping the numbers round so now we're sitting about 15 grand in this and we haven't sold one car yet and keep in mind next month's coming that's another two grand that you're going to pay and not counting your utilities and that's the thing you know people like oh you know rabbit you're breaking down too far but no you add that up yeah a power bill that's 175 dollars a month over 12 months that's 175 bucks adds up quick and you know gotta have heat you know like I said power internet these are all add up trash disposal these all add up these are all eating out of your bottom line and that's the thing that that I explain to people a lot is you don't realize it but just to get started and haven't sold one car or bought one car and you're gonna drop 50 Grand and that's on the cheap end just to sell now moving on to your cars and I get this one a lot too and whenever you go to your little dealer's class they're going to tell you all about it because they're gonna have people from companies they're trying to sell you on this it's called a floor plan I am not a big fan of floor plans they work for some people I see a lot of pitfalls in these things um you got to be very very very careful while floor planning um virtually 90 new car dealerships are floor planned and a lot of your larger used car dealerships are usually floor planned um and that works for them you know I'm not I'm not real big on this this concept you're like well what do you mean by floor planning floor planning basically is you're financing the cars you're selling um but it's a very short-term note and usually you know you can buy a 30-day flow to 60 day flow to 90 day float but you need to sell that car no matter what so if you buy this car for 10 you're gonna pay a little bit of interest and if you roll it you know in 60 days or 30 days or whatever but like the clock is ticking on these things um and you know floor plan in three or four cars for a car lot ain't that big of a deal you can keep up with that but when you start floor planning all your cars that's where you get into trouble because that's a pretty slippery slope and you got a floor plan payment you know what I'm saying they want their money um and you got to think about it if you're making payments on cars that you aren't selling on top of all your other overhead unless you're just independently wealthy going into this you're going to be in the hole quick um I always always stress this to people starting out in this business that you need to start small oh man you know I mean I could floor plan I got good credit you know everybody wants that car lot with 30 cars 40 cars out front and be the man you know what I have so many friends that have little dirt floor car lots that have five cars sitting out front that make a great living just because you got a bunch of cars out front doesn't mean you're making money I'll be honest with you it's actually the polar opposite of that because even if they're not floor plan you're sitting on Capital so having a bunch of cars is not necessarily a good thing um yeah it looks impressive but if they're not selling you know that sucks um another thing that I stress to people is starting small is to really do your research on what you're going to sell you got to understand you need to do all this way before we got to any of these steps but you really need to research what's selling you have people ask me all the time you know if you were going to start all over again what would you start at and one of my favorite fields that I think personally and I still to this day even in this economic climate when things are Sky High when things are you know Rock Bottom in a recession there's one thing I've always noticed sold is commercial vehicles you understand business keeps going it may slow down but it always keeps going people are going to need goods and services and goods and services have to have vehicles to either transport or to provide this service and I stress to people all the time and they see There's 7 000 car dealers in the state of South of South Carolina there's probably less than 50 that are commercial dealers and when I say commercial dealers they sell work trucks work vans things of that nature that to me is the best sales you can make in this business and for several reasons one is cost usually you know work vehicles or base Vehicles so they're going to be fairly inexpensive um another thing is buying them you know yeah you can go to an auction and buy work vehicles too I mean they run work trucks through you know lease lines and things like that at the car sale but another thing is you can actually go to auctions for like big companies like you know big telephone companies and power companies and utility companies that sell off fleets of vehicles I'm talking about hundreds at a time I mean I used to go and buy them all the time just like that from from a big Power Company up in North Carolina that's the thing that's the way to buy those things because they're all sold as is right then no calls no nothing so so so and as a rule Fleet maintained that's a double-edged sword some are better than others you'll get someone's the best truck you'll ever own you get some a little worse for wear but that's where you get to where you're looking at what you're buying too but that's the other thing about fleet vehicles is they have less options you know they're usually you know everything's got power windows now and things like that but they're not loaded out with all these crazy options so there's less stuff to get problems they don't have fancy stereos in them they don't have any of this you know Blind Spot crap or any of that they're simple they're made to work but that's something to remember so that's the reason I always tell people to go into commercial stuff so back to one thing I did miss was talking about a surety bond listen Rob what's a surety bomb surety bond is basically guarantees the deal to be whole and when I say A Deal to be whole is you know people joke all the time I'd never buy a car from a sleazy car dealer no I'd rather buy one from some dim witness front yard that how about it's a stolen car which literally happened just yesterday the same buddy that I was talking to you know the other night last night went to go buy a car and the damn thing was stolen they arrested the guy on the spot when he was there to buy it now how about if he'd been 30 minutes earlier that's what a bond does for a licensed car dealer if I flake something the deal falls through there's money in place in that bond to make that deal whole that's what you got to remember with that and that's something else about being a dealer you know we get a bad rap but at the end of the day you know cars are no cheaper if you buy them from an individual you're buying from a dealer there's a lot of fees and things like that that you got to watch out for but all in all all that stuff's put into place to protect you the buyer but anyway that's just my two cents I answered everybody's questions and I'll tell you what if you've got any other questions about dealer's license throw them down in the comments we'd love to check them out we'll answer as many as we can guys we'll catch you next time at ravage used cars foreign [Music]