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Old 11th February 2011, 11:21   #31
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Default Re: Feasibility of a *pre owned* Car Dealership

[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![/quote]

I do not know much about the business model on which FirstChoice operates, but I can surely share what I know of from my 3-4 visits to the Firstchoice here from where I bought my car. The guy who owns the franchisee was involved hands on in the daily going ons of the place. He seemed to be really knowledgeable about cars. It was later on that I found out that he owns a workshop; not exactly a workshop, but a shop which sells spares/parts in a market specializing in auto parts. In this so-called workshop, he has around 5-6 guys who repair and do all sorts of works on cars on the footpath in front of their shop which includes denting/painting etc. What this guy does is, since he has some basic knowledge of cars anyways, buys from the seller and sends it off to his workshop, here he does all the minor touch-ups and if any other work is to be done. This way he saves a lot on the labour as well as he is paying his workers monthly anyways. The only cost incurred are the spares which I doubt (since the whole market is kind of shady) are refurbished ones bought in the market itself. Now, he adds his margin and sells it further.
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Old 11th February 2011, 11:29   #32
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by raghav.carfreak View Post
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?
Apart from Maruti's used car business True Value, none of the other players have been really able to get it off correctly for a couple of simple reasons.

1. The cars they sell are costlier than the unorganised/private used car market.
2. Their contacts with the local market/ dealers is minimal and they are not in a position to arrange the number of examples that a buyer would want to look at when making a purchase.

I would suggest you work for a used car dealer for at least 6 months both in the branded and the unbranded segment to know the nitty gritties of the trade and to get your hands dirty before you invest hard earned money in it.

I have known this business for more than 6 years now and believe me, it is worthwhile being very cautious. Very cautious.
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Old 11th February 2011, 11:42   #33
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Default Re: Feasibility of a *pre owned* Car Dealership

Hi,
Great to know you are interested in having your own pre-owned car dealership.
But as far as I know, its a really tricky world. Sometimes you get a good profit and other times you may even have to shell something from your own pocket just to keep things rolling.
By the way what education qualification do you have? (Are you a Mechanical/Automobile Engg. by any chance?)


I have a doubt,
When a person sells a car to an individual, the transfer of ownership is mentioned in the RC book.

Now, if a dealer buys the car, he isn't going to get the car transfered on his name as if this is mentioned in the RC book, it shows that the car has already had 2 owners, which might reduce the overall value of the vehicle.
So how do these Dealers manage to do so?
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Old 11th February 2011, 14:05   #34
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by n.devdath View Post
Apart from Maruti's used car business True Value, none of the other players have been really able to get it off correctly for a couple of simple reasons.
I would suggest you work for a used car dealer for at least 6 months both in the branded and the unbranded segment to know the nitty gritties of the trade and to get your hands dirty before you invest hard earned money in it.
I have known this business for more than 6 years now and believe me, it is worthwhile being very cautious. Very cautious.
+1 to the first statement.
Working for a car dealer may not be feasible but working as freelancer/broker might workout.
True again. Few years ago, i was talking to a dealer who is into this business since 20 years. I asked him why didn't he didn't chose real estate.After all, it is one and the same. He said if had done that, he would be enjoying his retirement by now. He added it is a dirty business.

Raghav, another important info for you. You could buy from bangalore and sell in tier 2 or 3 cities. I have seen a couple of small places where you tie up with a bank for loan and showcase about 20 to 30 vehicles. You will have many buyers. Those are the guys who never bother to check service history and are not aware of market price.Good paint job is all it takes.
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Old 11th February 2011, 17:59   #35
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Default Re: Feasibility of a *pre owned* Car Dealership

Raghav,

The used car business is a real tricky one as per my experience.

Instead of investing in a showroom/facilities, i suggest you to set aside an amount according to your financial capacity (as less as 1 lakh) and buy a M800 single owner (for example) from paper ads/friends/relative.

Refurbish it. no ICE etc. Just cover the basics like good mats, good polishing, OK tyres (2nd hand will do), good seat covers, perfume etc. Remember you are most likely to sell to a non-enthusiast.

Try reselling it with expenditure+profit added before changing the Registration to your name so that it remains single owner. You can use online/paper ads/magazines etc for this.

This exercise will teach you the required know-how to operate a used car business.

As you become successful you can up the ante & a time will come when it is not possible for you to operate without an office/showroom.

Believe me it is the safest way. maybe a bit slower but you will learn things which you may not be able to learn from the forum, because used car preferences are different location wise.

In Kerala some towns give a better resale value for a Maruti 800 (personal experience; upto 30K difference!) Some things can be learnt only if you are deep into it.

I hope you become successful and create your own brand according to standards you set.

All The Best.

Last edited by Skyline GT-R : 11th February 2011 at 18:01. Reason: Missed an important point
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Old 11th February 2011, 18:56   #36
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Default Re: Feasibility of a *pre owned* Car Dealership

Lets take into account your expenses at the minimum:
Rent for at least 1000sq. ft @ Rs. 60/sq.ft = Rs. 60,000 plus some parking space the other cars you have in stock = Rs. 15,000.
Salary for the mechanics, at least 2 @ Rs. 10,000 = Rs. 20,000
1 Receptionist for making the calls and quotations, followup etc. @ Rs. 12 - 15,000.
Electricity, telephone at least Rs. 5,000
Housekeeping, repair and maintenance = Rs. 5,000
Legal and insurance expenses Rs. 2000
Advertisement at least Rs. 10,000
Interest on capital of Rs. 15,00,000 = Rs. 15,000
Stationary = Rs. 1,000
Total Expenses = Rs. 1,48,000 = Rs. 1.5 Lakh/month

Thus, is you sell small cars at a profit of Rs. 10,000/car, you need to sell at least 15 cars/month i.e. 3-4 cars per week, and if you sell higher end cars, you may be able to make a profit of 25-30,000/car, in that case, i feel your plan may work as those customers would be able to appreciate the work that you would have put into the cars and you would be able to give individualized attention to your customers.

Regards
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Old 12th February 2011, 00:21   #37
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Default Re: Feasibility of a *pre owned* Car Dealership



I do not know much about the business model on which FirstChoice operates, but I can surely share what I know of from my 3-4 visits to the Firstchoice here from where I bought my car. The guy who owns the franchisee was involved hands on in the daily going ons of the place. He seemed to be really knowledgeable about cars. It was later on that I found out that he owns a workshop; not exactly a workshop, but a shop which sells spares/parts in a market specializing in auto parts. In this so-called workshop, he has around 5-6 guys who repair and do all sorts of works on cars on the footpath in front of their shop which includes denting/painting etc. What this guy does is, since he has some basic knowledge of cars anyways, buys from the seller and sends it off to his workshop, here he does all the minor touch-ups and if any other work is to be done. This way he saves a lot on the labour as well as he is paying his workers monthly anyways. The only cost incurred are the spares which I doubt (since the whole market is kind of shady) are refurbished ones bought in the market itself. Now, he adds his margin and sells it further.[/quote]
I THINK this is also how first choice operates,they buy a car, refurbish it and then sell for a profit, I'm guessing, it's a difference of workshop, they probably have that officially on their premises and a dedicated bodywork shop,I'm not sure how payments are done to the employees

Quote:
Originally Posted by n.devdath View Post
Apart from Maruti's used car business True Value, none of the other players have been really able to get it off correctly for a couple of simple reasons.

1. The cars they sell are costlier than the unorganised/private used car market.
2. Their contacts with the local market/ dealers is minimal and they are not in a position to arrange the number of examples that a buyer would want to look at when making a purchase.

I would suggest you work for a used car dealer for at least 6 months both in the branded and the unbranded segment to know the nitty gritties of the trade and to get your hands dirty before you invest hard earned money in it.

I have known this business for more than 6 years now and believe me, it is worthwhile being very cautious. Very cautious.
But from the feedback i've received here, I believe maruti True Value is the most exorbitantly priced of the lot, simply because its maruti true value and people trust a used maruti blindly and don't mind paying a premium for it,
shouldn't this concept work with mahindra first choice, as they too are authorized?
Quote:
Originally Posted by SRK View Post
Hi,
Great to know you are interested in having your own pre-owned car dealership.
But as far as I know, its a really tricky world. Sometimes you get a good profit and other times you may even have to shell something from your own pocket just to keep things rolling.
By the way what education qualification do you have? (Are you a Mechanical/Automobile Engg. by any chance?)


I have a doubt,
When a person sells a car to an individual, the transfer of ownership is mentioned in the RC book.

Now, if a dealer buys the car, he isn't going to get the car transfered on his name as if this is mentioned in the RC book, it shows that the car has already had 2 owners, which might reduce the overall value of the vehicle.
So how do these Dealers manage to do so?
I'm currently pursuing my final semester in electrical and electronics engineering from bangalore, and as suggested by many people here, I'm also looking at the option of studying further next year
I'm not sure how the transfer of ownership works, I'll leave that answer upto experts
Quote:
Originally Posted by blackbeast View Post
+1 to the first statement.
Working for a car dealer may not be feasible but working as freelancer/broker might workout.
True again. Few years ago, i was talking to a dealer who is into this business since 20 years. I asked him why didn't he didn't chose real estate.After all, it is one and the same. He said if had done that, he would be enjoying his retirement by now. He added it is a dirty business.

Raghav, another important info for you. You could buy from bangalore and sell in tier 2 or 3 cities. I have seen a couple of small places where you tie up with a bank for loan and showcase about 20 to 30 vehicles. You will have many buyers. Those are the guys who never bother to check service history and are not aware of market price.Good paint job is all it takes.
after the response i've received here, i think it makes alot of sense to work as a broker/freelancer before a big investment.
And don't you think i should do the opposite, buy cars from tier 2 or 3 cities for cheaper rates(we all know how expensive bangalore can get) and sell it for a profit after refurbishment in bangalore, because people out here are ready to pay a premium for a car that's worth it.This again requires contacts!
Quote:
Originally Posted by Skyline GT-R View Post
Raghav,

The used car business is a real tricky one as per my experience.

Instead of investing in a showroom/facilities, i suggest you to set aside an amount according to your financial capacity (as less as 1 lakh) and buy a M800 single owner (for example) from paper ads/friends/relative.

Refurbish it. no ICE etc. Just cover the basics like good mats, good polishing, OK tyres (2nd hand will do), good seat covers, perfume etc. Remember you are most likely to sell to a non-enthusiast.

Try reselling it with expenditure+profit added before changing the Registration to your name so that it remains single owner. You can use online/paper ads/magazines etc for this.

This exercise will teach you the required know-how to operate a used car business.

As you become successful you can up the ante & a time will come when it is not possible for you to operate without an office/showroom.

Believe me it is the safest way. maybe a bit slower but you will learn things which you may not be able to learn from the forum, because used car preferences are different location wise.

In Kerala some towns give a better resale value for a Maruti 800 (personal experience; upto 30K difference!) Some things can be learnt only if you are deep into it.

I hope you become successful and create your own brand according to standards you set.

All The Best.
I really like this advice, If at all i need to propose the idea to my dad as well, This is the minimum risk he'd be willing to take as opposed to 3-5crores, This can prove to me and him that the investment, eventually will be worth it.
Quote:
Originally Posted by godhatesmyguts View Post
Lets take into account your expenses at the minimum:
Rent for at least 1000sq. ft @ Rs. 60/sq.ft = Rs. 60,000 plus some parking space the other cars you have in stock = Rs. 15,000.
Salary for the mechanics, at least 2 @ Rs. 10,000 = Rs. 20,000
1 Receptionist for making the calls and quotations, followup etc. @ Rs. 12 - 15,000.
Electricity, telephone at least Rs. 5,000
Housekeeping, repair and maintenance = Rs. 5,000
Legal and insurance expenses Rs. 2000
Advertisement at least Rs. 10,000
Interest on capital of Rs. 15,00,000 = Rs. 15,000
Stationary = Rs. 1,000
Total Expenses = Rs. 1,48,000 = Rs. 1.5 Lakh/month

Thus, is you sell small cars at a profit of Rs. 10,000/car, you need to sell at least 15 cars/month i.e. 3-4 cars per week, and if you sell higher end cars, you may be able to make a profit of 25-30,000/car, in that case, i feel your plan may work as those customers would be able to appreciate the work that you would have put into the cars and you would be able to give individualized attention to your customers.

Regards
15cars a month would be just to keep the business in working, for me to make money on the venture, I'd be needing to look at alot more than 15cars a month, This is where i need a market study,of how many used cars exchange hands in bangalore on a monthly basis, and I'm not sure whom to approach to get this information
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Old 12th February 2011, 16:10   #38
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by raghav.carfreak View Post
after the response i've received here, i think it makes alot of sense to work as a broker/freelancer before a big investment.
And don't you think i should do the opposite, buy cars from tier 2 or 3 cities for cheaper rates(we all know how expensive bangalore can get) and sell it for a profit after refurbishment in bangalore, because people out here are ready to pay a premium for a car that's worth it.This again requires contacts!
Well Raghav, prices in bangalore are always cheaper than the smaller cities. Prices in mumbai/cheaper than prices in bangalore. On top of that, cars with non Bangalore registration don't sell. Forget about paying the premium, people will not even take a look. Things are not looking good here for you. You are still studying. so, i suggest take some more time.
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Old 12th February 2011, 16:20   #39
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Default Re: Feasibility of a *pre owned* Car Dealership

I remember reading somewhere long back that the reason some car companies have thier own buy-sell operations is to maintain a higher resale value of their cars.

Since if they are able to buy back most of what they sell, they get to dictate the resale value as well.

Sorry but I have no links to provide in support of this claim.
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Old 12th February 2011, 19:23   #40
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Default Re: Feasibility of a *pre owned* Car Dealership

Hey Raghav,
I do not have sufficient data to comment on the feasibility aspect of your business plan but being in US for 4 yrs now and looking for used cars myself in good and bad dealerships, has made me aware of what used car dealerships can do to differentiate it self from others.

There are several things to consider.
1. Have inventory of atleast 15-20 cars. (you can always start with less and then grow as you see the returns on your investment)
2. In order to rotate inventory quickly, always buy inventory that can be frequently rotated. Hondas, toyotas all good.. mitsubishi .. not so much..
3. Another thing to consider in terms of inventory is the odometer of the car. It is difficult to sell a car after it has reached a certain number of miles. So always try to find cars that have 50k or less..
4. Color of the car is important aswell. I have seen a green colored cars sit in inventory for months.
5. Before buying the car. Have it thoroughly inspected(it includes scratches, mechanics, electronics, power down window button etc.) and come up with an estimate of work that needs to be done.
6. Next important this is market research. Always be updated with the market situation. Look at other dealers ads in news papers, magazines etc. You should be aware of the value of vehicles that the market has to offer and what is unique with you inventory. (this does not mean unique vehicle) .
7. SERVICE. This one of the most important aspect of the used car business. Have a service station in house. Design Offer good service plans. This ties your customer with you and servicing is the part of automotive industry where you have huge margins.
8. Customer service.. Differentiation.. Most of the used car dealers do not have a modern showroom feel. Basically, your used car showroom should look like a new toyota or honda showroom. This will attract customers.
9. Marketing.. No business is possible without marketing. Start with a local newspaper ads, magazines. Referral discounts or goodies . Website (that is constantly updated with the new inventory) is a must in these times. Website must contain important information to build a customer interest but not so much that the consumers do not feel the need to come to your showroom. Show pics of your inventory on the website. this is what your website could look like (http://www.tampabayautonetwork.com,h...roautomart.com)
10. Your sales people must be professionals. Attractive staff is always helpful, but they also need to have a knowhow in the product they are selling. Base their salary on the sales they make. (a fixed amount + % of sales)
11. Make a step by step process of all the business activities you do. That is the best measure of quality control. Make sure every car goes through inspection process, market value comparison, etc and then set the selling price of the car. (Always be a little flexibe- indians like to bargain).
12. This may be for later time when your business is established but i will mention it anyways. Create a standard up to which all your inventory should meet.

Other things include presentation attributes. General clean up, vacuum etc.


These were the basics of starting a used car dealership. You can always improvise on it. These were just some suggestions .. i hope it will help.
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Old 12th February 2011, 19:48   #41
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Default Re: Feasibility of a *pre owned* Car Dealership

@ blackbeast, Havn't we cribbed that the tax element in bangalore is highest in the country, and on road prices are highest in bangalore, and that appropriately applies to used cars as well,So i'm not sure how you say that prices in bangalore are cheaper than other cities, I wasn't referring to out of state, i was referring to tier 2-3 cities in karnataka itself, Mysore, mangalore and the likes, and that again requires contacts! which will be built with time.
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Old 12th February 2011, 20:20   #42
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Raghav, I know that you were not comparing to the places outside karnataka. But i just gave you the camparo. Bigger the city lesser are the prices.( Even if you take the tax into consideration). And i do not know what makes you think one would buy non bangalore registered vehicles in bangalore. Put yourself in the place. Small places have no good roads,no skilled service centres and no skilled owners. ( Relatively ). But if you sell Bangalore vehicles there, you will have lot of buyers.
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Old 13th February 2011, 10:56   #43
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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[/quote]

Precisely my thought when I started reading this thread. If you bargain with people to display their cars for a certain period of time and a minimum "guaranteed" price, I think that no one should have any issues with that. This could be your USP as a buyer. You already got yours as a seller!! Best of luck buddy.

regards,
adg_andy
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Old 13th February 2011, 15:00   #44
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by bblost View Post
I remember reading somewhere long back that the reason some car companies have thier own buy-sell operations is to maintain a higher resale value of their cars.

Since if they are able to buy back most of what they sell, they get to dictate the resale value as well.

Sorry but I have no links to provide in support of this claim.
Very True,

A sales executive at a dealership has a target for trade-ins also.

If a car is sold, the customer is tagged as "1st time buyer", "additional buyer" or "replacement buyer".

If the "replacement buyer's" car is not traded in, the SE will be grilled by the dealership & if the Trade In ratio is less consistently he will be further grilled by the Territory Sales Manager of the manufacturer. (Suspecting that the SE is routing the trade in sales to outside dealers)

The seemingly unimportant tele-sales executive (usually a lady because customers are mostly men ) does the follow up on ALL prospects on a daily basis and finds out details of present car/price expected etc to strike a deal which, the customer is made to believe is very fair.

Used car dealers pay at least 5-8K per car (in Kerala) to an SE for a successful deal passed on to them. This is a reason why a good used car costs almost same with a company dealer & private broker/dealer. The company has many overheads whereas the dealer/broker needs to grease a couple of palms.

Manufacturer wants ALL used cars to end up with the dealers so that:

1) There is a control over the prices
2) There is a good footfall of prospective customer into the dealership (for used cars) of which many may be converted to a new car sale by offering finance etc which again brings profit to the company.
3) A customer who purchases from the company dealer is more likely to bring the car for a service which is again beneficial for the manufacturer in terms of spares etc.
4) The manufacturer gets a cut of the profit made by the dealer in reselling a trade-in car purchased, in turn the mfgr offers limited warranty which cost nothing mostly.

OT: Maruti does not buy Tata Nano cars via True Value probably to spread a feeling among unsuspecting customers that Nano is "not good" or something like that.
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Old 14th February 2011, 09:48   #45
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Default Re: Feasibility of a *pre owned* Car Dealership

Quote:
Originally Posted by n.devdath View Post
I would suggest you work for a used car dealer for at least 6 months both in the branded and the unbranded segment to know the nitty gritties of the trade and to get your hands dirty before you invest hard earned money in it.
Million rupee advice, BRILLIANT! Obvious, logical, highly recommended.

Raghav, if you are serious about the business, go with what N.devdath has to say. Ideally, you'd work with a large player from the disorganised, independent segment for a couple of months, and then with an organised player (e.g. First Choice, True Value) for a couple of months. This training will be invaluable to you, trust me.
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