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Old 10th February 2011, 10:52   #16
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Default Re: Feasibility of a *pre owned* Car Dealership

Just to add a little bit of trivia, Bernie Accleston started of as a used car dealer.
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Old 10th February 2011, 10:58   #17
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by 2500cc View Post
Hi Raghav,

many people atleast whom i know of are scared to go to car dealerships in bangalore is because of the astronomical prices they quote (Eg: 2007 Alto Lx 2.7L, another 60k will fetch you a brand new one, isn't it), not being transparent and lack for basic customer handling skills.

There's no point is you doing all the oil changes, many people would still do it after they buy the car, no one trusts anyone you see . Goodies are always good, but the unfortunately the deals aren't made based on goodies being offered, right ?

If you could think anything better on these lines, i think this is quite a good venture in today's market conditions.

Cheers,
Rajesh
True Value dealerships in Mangalore charge figures that are beyond imagination. The price quoted for a 2002 Martui 800, done 79000km was rs. 135,000/- and that for a heavily battered (with the paint scraped) 2004 Model Alto was for rs. 185,000/-. How much can a person negotiate on this price level? My friend offered me a 2004 Maruit 800, 30000 km run with the tyres just renewed for Rs. 80,000/-.

I guess with the production of 800 stopped, the True Value delaership may even fetch over Rs. 200,000/- for this vehicle in the lext two years.

The fact is, with the entry of these manufacturing companies in the Pre-Owned sector, customers are being taken for a ride. They give absoultely no explanation for these astronomical prices, calling it True Value certified.

Bring in more clarity in the business as to the prices and the vehicle condition in general. When i sold my 2001 accent, the first thing i pointed out to the prospective buyers was the problems with the car and then went to with the condition and service history. In this Pre-Owned segment the returns will be good provided you are able to convince the owner that you are selling him a car that is worth his money and do not let him feel cheated.
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Old 10th February 2011, 11:47   #18
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Default Re: Feasibility of a *pre owned* Car Dealership

First of all, let me start with a big thank you for putting my thread up onto the portal!
second of all, thank you so much for your overwhelming replies, provides alot of support/confidence in an endeavorer if at all i plan to take it up, it's definitely encouraging with the response out here.I would like to let you guys know that i don't plan to offend anybody with my replies, It's just my point of view that you guys may or may not agree with. I've taken all your replies with a positive learning spirit and hope to make the best use out of them.Please find my replies in bold to each of your comments
Quote:
Originally Posted by RS_DEL View Post
The issue of valuations is something I have not seen addressed atleast in the used car price check thread.

My question is very basic. How does one evaluate a used vehicle objectively before factoring in the variables such as interiors/tyres/general upkeep/body/paint conditions? Is using the value derived from the actuarial models of the insurance guys a logical starting point - prior to factoring in the subjective pluses and minuses ?

This is somewhat of a mystery to me atleast and I sure would like to hear the views of those clued in to the workings of this business.
]Here you've asked a question and answered it yourself my friend, I am pretty sure there is some procedure as to which used cars are evaluated, the 118 points that these companies claim to check, I'm sure has some significance.Last I heard, for close to 300-500rupees, companies like Hyundai provide all the history and evalute a car from bumper to bumper. But like you said, more details on this can only be found out when someone is actually in the business[/b]
Quote:
Originally Posted by blackbeast View Post
Hi Raghav,

Good to hear that you would like to have a business on something which you are passionate about - cars. I would suggest buy and sell to start off your business rather than pre-owned/refurbished dealership. There are big guys who are into it since a long time. Toyota, mahindra, hyundai and maruti. However, your immediate competitor would be someone like classic automobiles.

Instead of putting in a high capital on real estate, labour etc.. you could buy cars, do body work and then push it off. I am sure you will have enough buyers.However the key is consumer database and other dealer networks, both could you built over a period of time if you get your pricing right and not something like this

http://www.team-bhp.com/forum/what-c...ngalore-3.html (Does it make sense to buy a used car in Bangalore ?)
I apoligise for the confusion, I am not looking at a pre owned business, I was actually looking at starting my venture and am currently studying the feasability of the same, the venture was to deal with pre owned cars. I am now looking at the feasability of taking a franchisee of something like a mahindra first choice, That would give me the reliable name that I'm looking for,and the reason of mahindra is because they are a multibrand dealership vis a vis a maruti truevalue or honda terrace which restricts it to only the respective company cars,
And as far as buying cars, body work is concerned, I need capital for that, I can't ask my father to finance this whole project without a proper business plan, and neither can i approach a bank,Also, I would need a place to sell the cars that i refurbish,I like the idea, I just can't do it, Let me give you an example, My friend has a 2004 forester,little less than 50k done, that he's looking to sell, mechanically perfect, it needs new tyres, power windows, and new upholstery, I can't convince him to make that investment into the car before selling it, and he's not expecting much for it either, but I can buy it from him for about 4lakhs, do the required refurbishment for about 40k,and sell it at about 4 75-5lakhs? even if i did work on it worth 40k,and sold it for 4.50? i would still make 10k off it, but the question is, from where do i finance this, and whom do i sell it to? whereas, if i had a place, the whole process is a whole lot easier, I completely respect your views sir, I'm just letting you know why i can't do it[/b]

Quote:
Originally Posted by saurabhkanchan View Post
True Value dealerships in Mangalore charge figures that are beyond imagination. The price quoted for a 2002 Martui 800, done 79000km was rs. 135,000/- and that for a heavily battered (with the paint scraped) 2004 Model Alto was for rs. 185,000/-. How much can a person negotiate on this price level? My friend offered me a 2004 Maruit 800, 30000 km run with the tyres just renewed for Rs. 80,000/-.

I guess with the production of 800 stopped, the True Value delaership may even fetch over Rs. 200,000/- for this vehicle in the lext two years.

The fact is, with the entry of these manufacturing companies in the Pre-Owned sector, customers are being taken for a ride. They give absoultely no explanation for these astronomical prices, calling it True Value certified.

Bring in more clarity in the business as to the prices and the vehicle condition in general. When i sold my 2001 accent, the first thing i pointed out to the prospective buyers was the problems with the car and then went to with the condition and service history. In this Pre-Owned segment the returns will be good provided you are able to convince the owner that you are selling him a car that is worth his money and do not let him feel cheated.
[]Well, The reason they're charging a premium is because they are authorised, If the local dealer offered you the same car with the same price, you would laugh at his face, but lots of people out there believe in maruti true value and the likes, and they strongly believe that the possibility of a breakdown is lesser in a truevalue car than that of a car sold by a local dealer.They offer a warranty(even if its for 6months) that (i maybe wrong) but i don't think other dealers do. Maruti charges a premium in the used car segment, like honda would in the new car segment, Because they know people will pay! call it monopoly, but thats how it works
[/b]
Quote:
Originally Posted by KMT View Post
I am sure this idea has crossed the minds of many car enthusiasts. At least you have taken the first strep of trying to find some detail on it.
Some suggestions from my end before youd ecide to go the whole hog-
1) Decide what cars/customer segment you will tap at first (eg college kids, middle income family graduating from bike, second car, IT professional etc etc) and start on just one of them.
2)Specialise in a just a few models at first.
3)Try to sell one or two cars from your backyard at first to see whether you are cut out for the business and understand the nitty gritty (ie good mechanics, RTO contacts etc) of the trade before sinking money in a full on shop & franchise.

Unfortunately realestate types and used car salesmen have very bad reputations and people do not trust them, however if you are able o change this perception, there is a lot of volume & money to be made here.

Overall, a good idea best of luck.
[b]Overtime, I would like to cater to everyone involved, right from a tata nano to a bmw,Definitely that'll take time, But there's no particular customer base that i'm looking at. What i would be looking at is, to start off, keep a few cars on park and sell basis(where i make money solely through commission and nothing through refurbishment), slowly but surely add the likes of the swifts and the accents by putting in money, because i think these models will sell well, The people looking to buy a 2box car, can end up with a 3box,(beauty of pre owned) and that base i can slowly extend over time to the civics, corollas and eventually higher segment cars[

Quote:
Originally Posted by GTO View Post
Raghav,

There are broadly two types of used car dealers:

- The broker : Doesn't own any cars himself. Merely links buyers & sellers (sellers can be individual or dealer) up and takes a commission (between 1 - 2%).

- The investor / dealer : Who "invests" in used cars and then, flips them for a profit.

Personally, I think it's a business of "yesterday" and today's youth can get into far better entrepreneurial ventures. You need to be shrewd, street-smart, have great bargaining skills (buy the lowest, sell at the highest), a lot of cash (working capital), property / parking, network and ad money to make it in the used car business. You also need to be tough as nails as the pressure can get mind-boggling.

Nevertheless, remember : What can make or break a used car dealer's reputation is good, used cars. That's all there is. 10 people buy reliable cars from you, your shop will have a 100 customers waiting out.

The tricky part is:

- You will have to verify each & every car before accepting it in your inventory. Not only does this entail a huge investment of time (and time is $$$), but you'll have to say no to a poor used car that could reap high profits. Even after all these precautions, you can end up with angry customers. After all, new cars break down too, right? The probability of a used car going kaput is higher.

- Alpha1 made a great point on cost of inventory. Even a small dealer has 30 - 40 lakhs buried in inventory at any given point of time.

- The used car market is very well-networked. You have to "be on the inside". That's the only way your inventory will move fast. The quicker you flip your inventory, the more you will earn.
[b]At first i would be starting off with the park and sell route and make commission out of it, as and when i'm able to finance a little more, i'll be adding cars to my inventory.
I agree, there are alot of other ventures that can be thought off, but i figured that with something like this, I'll probably make a little less money as compared to another business,(if done right, there's alot of money involved here too, given the sheer volume) but think of it this way, I'll be around cars for 10hours a day, be involved in restoring/refurbishing them,and we all know how we wait for our beauties to come back from the service station, the pleasure is simply umatched!) and ill be able to drive different cars everyday(atleast sometimes

Quote:
Originally Posted by Sinner666 View Post
The First Choice I had bought my car from in Gurgaon, they have these number plates with the same font on all their cars. It's the steel plates with the letters embossed on them. Costs around 700 in the market. Looks good and I have'nt seen many cars with the same ones, so now even I can guess the car is from that FirstChoice.
[b]As of now, I am studying the feasibility of taking a first choice franchisee, a little help from anyone that could offer any would be great![/B

Once again, Thanks for all the responses/encouragement, Really appreciate it!

Last edited by Mpower : 10th February 2011 at 23:03.
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Old 10th February 2011, 16:59   #19
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Default Re: Feasibility of a *pre owned* Car Dealership

My few cents:
1 Try to make sure that you buy car which is single owner. People like to buy single owned cars when it comes to buying a second hand car. Multiple owned cars generally people dont like & fetch less value.
2 Buy only those cars which you are getting at good rate & fetch you more. I have seen some rich people buy new cars & sold there old ones at available rates (mainly cash) as parking space is the issue in big cities.
3 Try to keep more popular cars with you which are most in demand. Like Santro, Swift, Wagon R etc. Keeping cars like Optra, Skoda etc is big risk, as not many people of these class like to buy second hand. Your money can get blocked for months also.
4 Make sure that people believe you. That is most important. If people feel that you are not genuine guy, people simply don't buy. You should make sure that people believes you.

One more point, building very good network is the key to success in any business. You should know as many people you can so that your business will grow. With good network u can easily get good customers.


All the best Raghav. Start business soon.

Last edited by aniketi : 10th February 2011 at 17:03.
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Old 10th February 2011, 17:11   #20
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Default Re: Feasibility of a *pre owned* Car Dealership

I'll just sight one example from what I've learnt about the market of pre-owned car market of Bangalore (assuming you'll start out from Bangalore).

I was actually planning to buy a used WagonR or Santro about 6-7 months back for under 1.5 and trust me I couldn't find one in Bangalore at all. Even the 1999/2000 model owners/dealers were asking for 1.8 to 2.2 for such old cars with 70-80K+ oddo-meter reading whereas Carwale suggest the price ranging from 90K to 120K (most of the cars had usually 2-3 owners already). I would have thought about 140k, but they just charged way too much. And now I've finally decided to go for a new car after a year when I get my appraisal.

So what I want to know is how do you plan to convince such owners who over-value their car by at least 20-30% and then when I come to you expecting a fair deal wouldn't you add another 5-10% to the value of the already over-valued car?

Just curious.

P.S.: If you already know someone selling a WagonR/Santro below 1.5L to 1.6L lemme know. I'll be your first customer.

Last edited by creative420 : 10th February 2011 at 17:13. Reason: more info
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Old 10th February 2011, 18:00   #21
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by aniketi View Post
My few cents:
1 Try to make sure that you buy car which is single owner. People like to buy single owned cars when it comes to buying a second hand car. Multiple owned cars generally people dont like & fetch less value.
2 Buy only those cars which you are getting at good rate & fetch you more. I have seen some rich people buy new cars & sold there old ones at available rates (mainly cash) as parking space is the issue in big cities.
3 Try to keep more popular cars with you which are most in demand. Like Santro, Swift, Wagon R etc. Keeping cars like Optra, Skoda etc is big risk, as not many people of these class like to buy second hand. Your money can get blocked for months also.
4 Make sure that people believe you. That is most important. If people feel that you are not genuine guy, people simply don't buy. You should make sure that people believes you.

One more point, building very good network is the key to success in any business. You should know as many people you can so that your business will grow. With good network u can easily get good customers.


All the best Raghav. Start business soon.
1)This is where the point of GTO comes in, where he said to check the cars i take into my inventory,I'd need contacts in the A.S.S to check the service history at a reasonable price on a regular basis,There will be times where you can buy 2 owner cars, the likes of the baleno, the OHC's,swifts, toyotas,driver oriented cars that have demand, it's upto me to refurbish it before selling it
2)some cars of the first category would come into this, like i said, the maruti's, hyundai's, toyota's, hondas, which are known to be reliable, last about 2,00,000kms, will have takers, I can buy low with the fact that they have two owners
3) i agree, the maruti's would be most money making and i would intend to start with them, gradually and eventually moving to bigger brands like honda and toyota, as someone said earlier, i'd loose a lakh for every 3months i'd keep a high priced german
4) Well, that's why i was thinking of going the franchisee route, because for me to build a name for myself would take forever, and given the investment, i'm not sure i'd be able to afford the gestation period,very honestly speaking, I would be looking at banks/partially my father to finance this whole proposition.I can't walk up to a bank/my father and say i want X crores(lets assume 3-5here), i want to open up a dealership. that can be done only when i have a proper business plan in place, I was just looking for the feasibility of such a project and the encouragement is amazing to say the least!
building networks can be done only once i actually start it up, for now, ill know my car accessories guy, my mechanic, and one or two people here or there, once this actually starts, only then can i become a dealer for accessories,spread the word etc


Quote:
Originally Posted by creative420 View Post
I'll just sight one example from what I've learnt about the market of pre-owned car market of Bangalore (assuming you'll start out from Bangalore).

I was actually planning to buy a used WagonR or Santro about 6-7 months back for under 1.5 and trust me I couldn't find one in Bangalore at all. Even the 1999/2000 model owners/dealers were asking for 1.8 to 2.2 for such old cars with 70-80K+ oddo-meter reading whereas Carwale suggest the price ranging from 90K to 120K (most of the cars had usually 2-3 owners already). I would have thought about 140k, but they just charged way too much. And now I've finally decided to go for a new car after a year when I get my appraisal.

So what I want to know is how do you plan to convince such owners who over-value their car by at least 20-30% and then when I come to you expecting a fair deal wouldn't you add another 5-10% to the value of the already over-valued car?

Just curious.

P.S.: If you already know someone selling a WagonR/Santro below 1.5L to 1.6L lemme know. I'll be your first customer.
Well, what can i say, the reason the cars are priced that high, is because, well, i'm sure there are takers, if not you(no offense, it's not personal), then someone else will, because if noone takes it, they wouldn't price it that high, and if it doesn't sell, then they'll have no choice but to lower the price,so in such a case, suppose you want to sell your car to me, and you think the price i'm offering is too low, I would suggest you to let me display your car in my showroom for an agreed amount of time (park and sell, commission basis sale) If you find a buyer at the price your looking for, great, if not, i'll buy the car from you at a substantially lower price(20-30% premium that your charging),refurbish it, and then sell it at a deserved premium of 20-30%,You were selling the car as is with the premium, i'm refurbishing it and then charging the premium, ie cost price+cost of refurbishment+profit, sounds fair right? because if at all i do refurbish the car, ultimately the buyer's going to be paying for my cost, otherwise it's a loss for me to refurbish it

Last edited by Mpower : 10th February 2011 at 23:01. Reason: do not bold the entire post
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Old 10th February 2011, 19:16   #22
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Default Re: Feasibility of a *pre owned* Car Dealership

I would say you are getting a biased opinion from the forum since majority here are well informed. Why don't you take some market research on why a common man would try a dealership instead of direct buy from a seller. You might find some interesting reasons which you can base your business model upon. Even if it is a small percentage, since the population is big, can make some difference.
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Old 10th February 2011, 19:26   #23
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this is exactly the problem I'm facing kutlee, I have zero knowledge as to how to go about these things, and thats exactly why i came to the forum
So if at all i had to do a market research to gauge how big the used car market is, and how many cars do exchange hands on a monthly basis, and how much money can be made of each car
where do i start?
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Old 10th February 2011, 19:41   #24
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Default Re: Feasibility of a *pre owned* Car Dealership

Raghav,


Quote:
Originally Posted by GTO View Post

Personally, I think it's a business of "yesterday" and today's youth can get into far better entrepreneurial ventures.
+1.


If love for cars, pulls you to venturing into business related to car, nothing wrong about it.

However, I would suggest a management course after your engineering.

If you don't get into the management education immediately, go for a job with some car dealer, do the mechanics, sales etc .

In management education, focus on financial calculation and economics. Take projects/papers relevant to Entrepreneurship.

Then, at the end of it if you are still in love with car, you would have discovered a niche in Automobile (it could be still pre-owned car dealership).

Then, take a plunge. VCs/Banks would love to fund you, if you provide a solid business plan.

Last edited by KumaravelS : 10th February 2011 at 19:44. Reason: clarity
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Old 10th February 2011, 19:51   #25
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Default Re: Feasibility of a *pre owned* Car Dealership

Thank you sir for your kind advice
What you say does make sense, coming from an engineering background, it would definitely help to have a commerce background of sorts. By then ill even know how to make the business plan that i'm struggling with as of now. Will give me a bigger reality check with the marketing and the finance that goes into a venture like this, Because as many people on this forum too advised, try small fish before you burn your fingers, which I'm sure has significance.
Nevertheless, It is great to get a perspective of what others think, The fact that it is possible(at least on paper) will help to have a goal to work towards!
But this discussion should continue just to see what other hurdles are expected and hence I would request the mods to not close the thread just yet.
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Old 10th February 2011, 23:11   #26
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Default Re: Feasibility of a *pre owned* Car Dealership

@raghav: My 2 cents.

One of my relative is working with two renowned car dealership (both owned by same person/s) in the second hand car division. According to him, they are opening a third dealership (of a reputed brand, sorry can't mention the brand) in Kolkata with a total bank finance of around INR 6 crores. Most of the second hand cars they get is via exchange. He was expected to sell around 150 car (avg) per month. Now, the question is:

a) If you are willing for a project of around 3-5 crores (as mentioned above), I would advise you to please increase your budget a bit and open a new dealership along with a second hand car operations which I think you have to keep. This way you can benefit from both world.

b) Think about your resources and then plan accordingly. If you are not into business and/or have a brand name, I think it is very difficult to convince a bank to fund your project with so much money without any co-lateral security, which itself is very risky considering the volatility of the market and you are completely new.

My opinion as suggested by somebody else before is that start small and test the market, that way you can have a feel of the market as well as your bank can have a look at your transactions and who knows they may decide to fund you.

No offence please. Anyway, Best of Luck for your upcoming venture.

Last edited by Joy : 10th February 2011 at 23:16. Reason: typos
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Old 10th February 2011, 23:36   #27
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@joy two renowned car dealership. are you saying they are operating an A.S.S of new cars? with which they have a second hand car outlet as well?
I'm a totaly newbie at this, but isn't 150cars a month pretty optimistic? (I'm sure bangalore can match kolkatta in terms of volume though) If we assume, even 10k made of each car, thats 15,00,000 lakhs a month! even if i manage to sell a 100, it means 10lakhs a month,question is, is there that much volume on a monthly basis?
and from what i've read online, to put up a full fledged A.S.S of any manufacture, the investment involved is alot more than 6crores, and the gestation period of that is alot more,
And yes, i agree, its very difficult to create a new name for myself and thats why i was exploring the franchisee route, but as someone rightly said, it probably makes more sense to do an mba before this

Last edited by raghav.carfreak : 10th February 2011 at 23:39.
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Old 10th February 2011, 23:36   #28
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by raghav.carfreak View Post

I apoligise for the confusion, I am not looking at a pre owned business, I was actually looking at starting my venture and am currently studying the feasability of the same, the venture was to deal with pre owned cars. I am now looking at the feasability of taking a franchisee of something like a mahindra first choice, That would give me the reliable name that I'm looking for,and the reason of mahindra is because they are a multibrand dealership vis a vis a maruti truevalue or honda terrace which restricts it to only the respective company cars,
And as far as buying cars, body work is concerned, I need capital for that, I can't ask my father to finance this whole project without a proper business plan, and neither can i approach a bank,Also, I would need a place to sell the cars that i refurbish,I like the idea, I just can't do it, Let me give you an example, My friend has a 2004 forester,little less than 50k done, that he's looking to sell, mechanically perfect, it needs new tyres, power windows, and new upholstery, I can't convince him to make that investment into the car before selling it, and he's not expecting much for it either, but I can buy it from him for about 4lakhs, do the required refurbishment for about 40k,and sell it at about 4 75-5lakhs? even if i did work on it worth 40k,and sold it for 4.50? i would still make 10k off it, but the question is, from where do i finance this, and whom do i sell it to? whereas, if i had a place, the whole process is a whole lot easier, I completely respect your views sir, I'm just letting you know why i can't do it[/b]
well, Any franchise to obtain would require a huge capital and to be shown in white. Besides , there is already a huge mahindra first choice in basavangudi ( prime location ), who according to me is not doing well to his expectations. I know only few places where cars move rapidly.ex- The one in residency road beside bishop cottons. Every nook and corner of bangalore has used car showrooms. And as far as bangalore consumers are concerned, i highly doubt if you could sell a forester (No doubt its a fantastic buy).Most would not even remember seeing them in the past. psyche of the people is very diesel oriented. A two year old innova would sell at the same price of a civic. I am not trying to demotivate you. I hope my thoughts help you in think in different directions.

The possibilities where you can reap is from owners who are flying abroad immediately, Very rich or someone who is caught in deep financial crisis. For all of the above, you should have $$$ ready at home and not in bank. If i were you, i would start as a freelancer and read the market.make contacts, learn the loopholes, mistakes, opportunities etc..
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Old 10th February 2011, 23:45   #29
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Default Re: Feasibility of a *pre owned* Car Dealership

This is all a learning curve for me blackbeast, And all feedback is being taken constructively.
Any particular reason you would say that mahindra in basvangudi isn't doing as well to his expectations?
and as far as a forester is concerned, I know that only an enthusiast will buy the car, its just that i'd need the place to showcase the car to sell it.
I would reserve my judgement about the innova vs civic because i have no knowledge on the same. I am exploring all the avenues before I try to make a breakthrough.
Once again, really appreciate the feedback
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Old 10th February 2011, 23:48   #30
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Default Re: Feasibility of a *pre owned* Car Dealership

First of all I wanted to encourage you into this venture and wish you "all the best".

Everyone here had many points and here is what I want you to consider.

Freebies/Offers/Discounts are now-a-days considered as price hiked. What wins would be the Quality what you offer and the Service you render. Tell your customers how much you bought the car for, and how much you spent and what profit you are looking for and keep the deal transparent.

Offer accessories at Genuine prices with installation. Make a small margin in what you do the best and see the volume go high.

Maruti is big in advertising and make a lot of crowd pulling with their existing reputation. You will need to work hard to get that kind of reputation (but never loose heart). If you do NOT get greedy you will make a good Used car dealer. You will be blessed with returning customers and lot of prosperity and success.

All the very best!

Remember, Quality & Service are the only crowd pullers.

Last edited by NFS : 10th February 2011 at 23:54.
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