Was wondering if anyone had any experience running a used car lot, specifically the finance aspect of it - using a 3rd party finance company to help finance customer purchases vs. financing it through the used car business itself, and the paperwork required by law to complete such transactions.

I'm thinking of this for a long-term goal. I am familiar with the automotive part of the business but have no experience with the legal or finance/sales aspect of it. I'm starting a business plan now that I can hopefully perfect over the next couple of years, so any input is definately appreciated.

Hopeful bump!

Are you talking about "Buy Here Pay Here" for financing customers? That would be concentrating on the sub-prime business.

You can finance them yourself... if you have a pile of working capital lying around. I know that many of the BHPH dealers purchase the cars at auction for very low prices, and many times accept what they have in the car for a down payment. Therefore, the working capital needs are pretty well met, and the income comes in from the weekly payments.

I also know that there are many, many lenders which specialize in sub-prime auto lending. A web search should yield quite a few.

If you are not concentrating on the sub-prime market, but on the normal used (pre-owned) market, you will be able to get financing help from local, as well as national banks. You should be able to meet with each of their indirect lending departments, and they should help you out.

I any area of any size there will be some guys you never heard of who "buy paper" from the BHPH car lots. Get to know someone who will take you to a Manheim auto auction and you'll be able to meet some folks who can help you out.

Manheim has a BHPH software package that does it all for you, just like at the big dealerships. Drop a forms bundle in the printer and sit back.....

I have experience running a car lot for 2 years. I cant help you out with taxes but I can help you with the finance part of it. You will of course need a credit application form, a finance form ( I used a california 552 2005 you can get at reyrey.com ) a transfer of title form (i used a 262 from the dmv) and other forms to protect yourself "as is" no warranty or maybe you will give them a warranty ( i suggest giving them a warranty at least a few months. I used and liked westlake financial becuase they have a website that lets you see if your customer is approved or not. Lots of customers are inpluse buyers and if they have to wait 2 hours they will go somewhere else where they can approve them now.

Thanks alot for the response!

I was planning on offering a 6 month/6,000 mile warranty, to build the buyer's confidence. I figure if I'm selling cars that break down in that time frame I should reconsider the cars I put on the lot anyway, because a customer shouldn't have to take their car in for repairs within that time period. And if they do, I want them to know that they can come to me for the repairs.

I like the idea of financing customers in real-time - making the customer wait to get financed isn't something I want to do, and like you said, it could potentially cost sales. I'll keep the name of that business handy, thanks.

Do you also have a service facility at your lot, or are you strictly a dealer? I'm thinking of including a small quick lube/maintenence facility on the property as well. That could be beneficial not only for the business, but for repairs on the inventory before I put the cars on the lot, and for warrantee work. Also, is there information anywhere that outlines exactly what kinds of paperwork is needed for what type of sales?

Thanks alot for the info!

If you are going into this with no experience selling used cars and working at a lot, you should get in touch with your state used car dealers association. They can provide you with everything you need to know, the forms, etc.

While having an on-site repair facility and quick lube operation may seem like a good idea, how many combined operations like this are you aware of? Marketing a quick lube is an ongoing business, weekly newspaper coupons, etc. which will require some of your time. Keeping the shop full will be a requirement, so you can afford to pay the techs, again time away from the used car business.

While there are some repair shops that sell used cars on the side, there are few car lots that also promote service, since it is an entire "full time" business that will have you wearing a number of hats.

Near our car lot we had mechanics that we were friends with so they gave us good deals when we had problems. In time you will meet people like that because they want your almost guaranteed repeat business. What I would do for my first deal or before the first deal is to go around nearby lots and ask what kind of finance people they use. Then get into contact with a "rep" and they will gladly come to you and walk you threw it. Software is available a popular one is this one http://www.nowcom.com/dealerdesktop.asp I used automanager http://www.automanager.com/demo/. I like the nowcom company because they are the service that westlake and other finance companies use to see if the customers are approved. They use and own the site https://www.dealercenter.net to see the approvals instantly.

What kind of people will you be financing? Bad credit, good credit?

Thanks alot for all the info! I'm still in the planning stages so I don't have alot of the details worked out yet, but the county I'm thinking of locating the business in is an upper middle class/wealthy area. Many customers will have excellent credit ratings, but I know that some of the wealthiest also have the worst. I hope to carry mostly higher end luxury imports and cater to the business man, soccer mom, and the up-and-coming teenage drivers who convince their parents to buy them a fancy first car (there's alot of them in that area).

I'll defiantely check out all of those links, thanks alot for that. I'm also reconsidering the full-blown quick lube place because as pete said, that would double the size of the business and make it that much harder to run, especially for a new-commer to the area. I was hoping to do my own warrantee work, service and repairs for the cars I sold as well, as it would eliminate the cost of having another mechanic do that work, but maybe that would be something I could add later on, as the business grows.

Thanks again for the info, this is going to be a long research phase (couple of years probably) but I hope that all the planning will help me succeed if and when I follow through with it all.

Actually, you could sell (or include in the price) nationwide warranties provided by specialists in that area. It would relieve you of the hassle and improve your income or the value of your offering - or both.

OF course, the size of your bankroll will play a major part in any final configuration.