Investing in Car Dealerships – How to Do it Right


The truth is that any time is the right time. In 1991, within the depths of an automotive depression, John Elway asked me, before signing his purchase contract, if “this” (1991) turned into the proper time to shop for. I instructed him that it is how you buy it and how you sell it that you rely on. That year he made a $20 million funding. At the time, he had a single Mazda store on Arapahoe Road in Englewood. I sold the Mazda franchise for him, and Nissan gave him its franchise to place in the antique Mazda construction. Shortly thereafter, I prepare another transaction that had John buy the Mazda store on 104th Avenue in Thornton. John then terminated Suzuki and put the Mazda save together with his Oldsmobile and Hyundai franchises. After that, he offered one greater dealership (a Ford franchise), after which, in 1995, offering the complete package to Republic Industries for $86 million.

Car Dealerships

Many human beings have been afraid to shop for a dealership in 1991, and the concept that John took a large gamble. But, he failed to “gamble.” He based his purchases and income successfully and then capitalized on his funding. For example, even though GM and Ford lost cash (as they did in 1991), individual dealers made millions. In keeping with NADA (National Automobile Dealers Association) and Automotive News records, the average sellers’ pretax margin varies among one and percent in their total sales. Why? The dealers seize a broader business base than the producer. While the manufacturer makes its money on new automobile income, the dealers have the extra stability of the elements departments, service departments, used vehicle departments, finance departments, insurance departments, and, sometimes, frame stores. Consequently, while the producer relies upon every 12 months’ new car income, a supplier’s fulfillment is based totally on the entire range of vehicles in operation.


A little, however, don’t be intimidated by it. After Jimmy Vasser received the CART racing championship for Target, I put together a transaction for Jimmy to buy a dueled Chevrolet-Toyota franchise in Napa that misplaced money for the previous 10 consecutive years. I positioned Jimmy collectively with a dealership supervisor, and Jimmy’s dad, who had some previously used automobile revel in, signed on as used car supervisor. Subsequently, after going to dealer school and passing thru the chairs, Jimmy’s dad took over as General Manager; the store thrived, and Jimmy not only bought the dealership land and facility but bought the Ford shop inside the next city, and is currently building a brand new Toyota save so that his Chevrolet and Toyota franchises may have separate facilities.


Car Dealerships

Good recommendation. A good recommendation is both important and hard to find. In the phrases of Trace Armstrong, beyond president of the NFL Players Association: “There’s simply, so lots bad recommendation out there being given to these men. It’s clearly a form of scary.” [Reported by Eric Fisher, March 27, 2000.] As with the Entertainment and Sports Industries, there is so much money inside the car enterprise that everyone wants to get a piece of it. Consequently, everybody thinks they are an expert in analyzing and structuring offers, while in fact, they just need to be a broker that receives a fee from the deal. Sidebar: New automobile dealership sales reached nearly One Trillion Dollars in 2004. The dealerships and provider-related industries account for over 15% of the Gross National Product of the US.


An investor wishes a team. Generally, it is the identical team they have, supplemented with the aid of a professional in the automobile commercial enterprise. Don’t get lulled into a false security experience that loyalty is synonymous with the “factory” or “bankers”. For instance, Ford made considered one of its black sellers (a celeb athlete) the factor man, brokering meetings with senior executives and appearing as a conduit between the enterprise and Jesse Jackson. He mediated disputes between Ford and its dealers, and he promoted the enterprise in public appearances. He even had a near dating with a few of Ford’s own family participants.

“He had a few pals in high locations,” stated John Clissold, a retired Ford Credit govt. “[The head of Ford Credit] turned into a totally robust supporter.” But, when the problem got here, it failed to count. The business changed into an enterprise. ” …One factory govt acquainted with the situation summed up the winning feeling at corporate headquarters: ‘[the superstar] become headed for a cliff and we weren’t going over with him.'” [Story by Bill Vlasic and Mark Truby / The Detroit News Sunday, May 26, 2002.]

The truth is that the factory and financial institution personnel have an obligation to do what is quality for the manufacturing unit or financial institution, now not what is exceptional to your consumer. It’s the law. They have a prison obligation to their shareholders – regardless of how exceptional or how near your consumer is to them. Financial statements and an accountant are not enough. Your consumer needs a member of your group that could be a student of the enterprise. A worthwhile automobile statement can be licensed and observe each accounting principle, yet nonetheless, carry a misconception of fulfillment. There are many nuisances in defining and structuring car transactions that your patron desires a professional in the field who can decide each what automobile deal is satisfactory for the athlete and what is the exceptional way to get it.

So whilst your group may also consist of an accountant, attorneys, marketers, and bosses who might be high-quality at their jobs, except a pupil of the enterprise is introduced (someone who does nothing, however, shapes buys and sells regular), a key element to success will be missing. Think of it in phrases of any sport or business. If some one desires to create a championship crew in a specific sport, is it created with folks who play the game 50% of the time, 75% of the time, or someone who performs it regularly?

Car Dealerships

Mr. Pico served as a court docket appointed “Consultant to Debtor” in financial disaster instances, a “Court Appointed Mediator” in automobile disputes, the “Court Appointed Arbitrator / Appraiser” in partnership disputes, a “Court Approved Consultant to Receiver” in a test-kiting case, as a “Superior Court Mediator” in dealership/lender litigation and has been identified as an expert witness on both State and Federal degrees.