Buying an auto, RV or boat dealership in Florida

A dealership makes money in several places at once, and selling the vehicle often isn't the biggest. There's the gross profit on each new or used unit, commissions for arranging loans and selling service contracts, labor and parts in the service department, and trade-ins sold wholesale.

Dealers usually finance their inventory with a floor plan: a revolving line of credit, repaid as each unit sells, with interest every month and required paydowns on units that sit too long. So how fast inventory sells, and your relationship with the lender, matter a great deal.

Franchised dealers sell new vehicles under an agreement with a manufacturer, which shapes the territory, the building and much of the economics. Independent used car lots buy at auction and take trade-ins, and they live or die on how well they buy. RV and boat dealers are more seasonal. They sell pricier units to fewer buyers and lean on service, storage and parts between sales.

A small independent lot may be the owner, a salesperson or two and a detailer. A franchised store has sales, finance, service and parts departments, each with its own manager.

• Service and parts income that covers much of the fixed costs, so a slow sales month doesn't sink the store.
• Inventory that sells steadily, with few units past the lender's paydown deadlines.
• Finance and service managers who would stay.
• For franchised stores: a manufacturer happy with sales and the facility, with no pending demands for costly renovations.
• For independent lots: buying skill that doesn't live only in the owner's head.
• Clean paperwork: titles handled promptly, deals funded quickly, few customer complaints.
• For RVs and boats: service, storage and parts customers who keep coming back between purchases.
• A visible location on a busy road, with room to show inventory and service bays that stay booked.

Car and truck dealers need a motor vehicle dealer license from the Florida Department of Highway Safety and Motor Vehicles (FLHSMV), plus a surety bond or letter of credit and liability insurance (section 320.27, Florida Statutes). Most new independent dealers must first finish a licensed dealer training course. RV dealers are licensed under section 320.771. Dealer licenses can't be transferred (rule 15C-7.003), so if you buy the assets you'll need your own. If you're buying the company itself, ask FLHSMV what it requires.

If you buy a franchised store, or shares in the company that owns it, the manufacturer must be notified. It may object only on the grounds, and within the deadlines, set in section 320.643 (cars) or 320.3206 (RVs). Selling on installment contracts takes a motor vehicle retail installment seller license from the Office of Financial Regulation, which also can't be transferred (section 520.03). Service departments fall under the repair shop rules of the Florida Department of Agriculture and Consumer Services.

Boat dealers don't need a state license the way car dealers do, just a sales tax registration and a local business license (section 327.02). The county tax collector issues dealer registrations for demonstration boats (section 328.52). Brokering used yachts over 32 feet takes a license from the Division of Florida Condominiums, Timeshares, and Mobile Homes at the Department of Business and Professional Regulation (chapter 326).

Get the floor plan statements and a report of how long each unit has been in stock. Units that have sat for months often carry losses the books don't show yet. The price usually splits into goodwill (the franchise and the name) plus inventory, parts and equipment at cost, so agree how inventory will be counted and valued on closing day.

Read a sample of deal files: titles, odometer statements, how quickly lenders funded, and chargebacks (finance and service contract commissions taken back when a loan pays off early or a contract is canceled). Check the dealer's history with FLHSMV and the Office of Financial Regulation.

For franchised stores, read the franchise agreement and the manufacturer's recent performance and facility reports, and talk to the manufacturer early. For RV and boat dealers, look at the seasonal cash swings and whether manufacturers help with floor plan interest. And ask how inventory is insured and moved before a storm: a full lot is a lot to lose.

• How much of your gross profit comes from service, parts and finance rather than selling vehicles?
• How old is the oldest unit on the lot, and what's it costing you each month?
• Who are your floor plan lenders, and would they finance a new owner on similar terms?
• Has the manufacturer asked you to upgrade the building, or raised concerns about sales?
• Who buys your used vehicles, and how do they go about it?
• What do you do with the inventory when a hurricane is coming?
• Have you had any customer complaints or title problems in the past few years?