How Do You Open a Car Lot?

Starting an auto dealership involves researching auto industry regulations and requirements, creating a business plan and choosing an auto dealer sales model. Obtaining a dealers license to sell cars is a necessity, as is insurance. Finding a legally zoned location for the car lot is another must.

Auto dealerships operating within a state are regulated according to state laws. An individual interested in starting an auto dealership business to sell cars from a lot must consult the state's unique version of the Dealers Handbook, which lays out the legal requirements that must be met when setting up a dealership. Although not required, a business plan is helpful for mapping out a strategy for financing, operating and marketing the car lot.

A decision must be made about whether to become a retail or wholesale car dealer. A retail dealer sells cars directly to the public, whereas a wholesale dealer sells only to other licensed auto dealers. Another option is to enter into a dealer partnership with a major automobile manufacturer, which provides new cars to associated dealerships.

To legally operate a car lot and sell cars, a prospective dealer must obtain a dealers license from the state's Department of Motor Vehicles. A business license is also required. Any business that sells vehicles must have adequate liability insurance, including a surety bond.