How to Open a Toyota Dealership

by Karen Gardner - Updated June 26, 2018
Car salesman watching couple customers signing financial contract paperwork in car dealership showroom

Opening a Toyota dealership is a little more complicated than starting your own used car dealership. But having experience running your own successful used car sales or other auto-related business will help you get on the path to landing a Toyota franchise.

To Get Started

You must apply for a Toyota franchise through the company. You’ll need to have experience in selling cars. You’ll also need to have full knowledge of parts and service. Previous ownership experience is also helpful, if not essential. One possible way to buy into a Toyota franchise is to buy into a smaller dealership featuring several different brands including Toyota. That may help you stand out to Toyota when you apply to purchase a dealership that exclusively sells Toyotas. You can find lists of available dealerships through the National Business Brokers. Another way to start is to buy a new car dealership that specializes in other makes, to beef up your qualifications before investigating a Toyota franchise.

You will need money. The National Automobile Dealers Association says the average dealership requires an investment of $11.3 million, including working capital, physical facilities, land and inventory.

Ways to Innovate

You may need to innovate to make a franchise healthy. Car sharing and ride sharing are the side aspects of the car business dealers may consider in order to broaden their market potential.

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Where to Locate

The retail business model now tends to favor big groups of dealers. Dealerships that survive as small businesses are in niche markets with community ties, or are situated in rural areas. Smaller dealers can offer services that are missing in major metro markets and may entice your customers to remain loyal to your business.

Minority Development Program

The Toyota/Lexus Minority Owners Dealer Development Program provides capital, operational and management support to qualified candidates for women-and-minority-owned dealerships. The program also works through minority organizations, including the National Association of Minority Automobile Dealers, to identify and select minority franchise applicants.

Toyota’s Avenues for Advancement program also provides partnership, education, training and financial assistance opportunities to future dealer candidates already working at Toyota or Lexus franchises. Lexus is a division of Toyota.

Franchise Laws and Regulations

Read up on your state’s franchise laws. Talk to other Toyota dealers, and other car dealers, and find out what they had to do to start their business, and what they did to make it profitable. Check into Toyota's training program. Consider hiring a lawyer and an accountant to go over the contract and analyze the legal documents.

Nearly every state in the U.S. uses franchises to sell new cars. This system was put in place to allow manufacturers to focus on making the cars, and dealers to focus on sales and service. The system also drives price competition.

Background Check

Expect to have a background check. Toyota will check your credit report and will also do a criminal background check.

Reasons to Buy

Toyota ranks high on the NADA feedback from dealers about their relationships with their automaker partners. Toyota's Lexus consistently gets top scores. Also, when you buy a car dealership, you are most likely buying into a profitable venture. The average dealership return on equity from 2006-to-2016 had an annual low of about 12 percent and a high of over 30 percent. The popularity of vehicle models mainly drives earnings margins. Also, dealerships continue to service the cars of about 70 percent of their customers.

Toyota is the fifth largest company in the world as of April 2017, with a revenue of $255 billion, as well as the world’s largest carmaker. It is the world’s market leader in sales of hybrid electric cars. Its Prius is one of the world’s top-selling hybrids, with over 6 million units sold as of January 2017. There are 1,500 Toyota, Lexus and Scion dealers in the U.S.

About the Author

Karen Gardner is a former features editor and reporter, and is now a freelance writer in Maryland. She enjoys writing about business for the rest of us.

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