Car Dealership Business Plan Template
Car dealership business plan.
You’ve come to the right place to create your Car Dealership business plan.
We have helped over 5,000 entrepreneurs and business owners create business plans and many have used them to start or grow their Car Dealerships.
Below is a template to help you create each section of your Car Dealership business plan.
Wilson Toyota, located in Albuquerque, New Mexico, is a brand-new Toyota dealership that sells, leases, and services new and used Toyota vehicles. Our dealership will feature all the models that Toyota makes, from budget models to hybrids. In addition to our large inventory, we also offer in-house financing and service and repairs for all Toyota owners. With our competitive prices and world-class customer service, we plan to be the #1 Toyota dealer in the Albuquerque area in the next five years.
Wilson Toyota is led by Dylan Wilson who has extensive sales experience, including selling used cars for a previous employer. His experience and knowledge make him the perfect candidate to run a Toyota franchise.
Wilson Toyota will maintain an inventory of new and used Toyota vehicles. We will sell all Toyota models, including hybrid and electric vehicles. Some of the models we plan to sell include:
Wilson Toyota will also have a service center to help Toyota owners with routine maintenance, repairs, recalls, and part replacements. Additionally, Wilson Toyota will offer financing and insurance options for customers with all credit scores. Customers will find financing options at Wilson Toyota that they will not find at other area dealerships.
Wilson Toyota will primarily serve the residents in the Albuquerque area. The city is home to thousands of families, professionals, and businesses in need of vehicles. We will offer budget vehicles to those who only need a basic model as well as luxury vehicles to those who have the disposable income to purchase something high-end.
Wilson Toyota is led by Dylan Wilson who has been in sales for 20 years. Dylan Wilson has sold products in numerous industries, with his most recent experience being at a competitor dealership. Dylan Wilson is a car aficionado. He knows everything about the most popular models and how to find the perfect vehicle for every customer. His experience and knowledge make him the perfect candidate to run a Toyota franchise.
While Dylan Wilson has never run a dealership himself, he has worked in the industry for years. As such Dylan Wilson has an in-depth knowledge of the dealerships industry, including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
Wilson Toyota will be able to achieve success by offering the following competitive advantages:
- Location: Wilson Toyota’s location is near the center of town, giving us access to thousands of residents, local office workers, and passersby shopping in the city.
- Great service at an affordable price: The complete array of auto services offered by Wilson Toyota is comprehensive, and Wilson Toyota will offer these services at a much more affordable price.
- Management: Our management team has years of business and marketing experience that allows us to market to and serve customers in a much more sophisticated manner than our competitors.
- Relationships: Having lived in the community for 25 years, Dylan Wilson knows all of the local leaders, newspapers and other influencers. As such, it will be relatively easy for Wilson Toyota to build brand awareness and an initial customer base.
Wilson Toyota is currently seeking $10 million to launch. Specifically, these funds will be used as follows:
- Lot design/build: $100,000
- Franchise fee: $400,000
- Inventory: $9 million
- Office equipment, supplies, and materials: $50,000
- Three months of overhead expenses (payroll, rent, utilities): $250,000
- Marketing costs: $100,000
- Working capital: $100,000
Who is wilson toyota, wilson toyota’s history.
Dylan Wilson incorporated Wilson Toyota as an S-Corporation in February 2023. The business is currently being run out of Dylan’s private office, but once the build-out on Wilson Toyota’s commercial location is finalized, all operations will be run from there.
Since incorporation, the company has achieved the following milestones:
- Found commercial space and signed Letter of Intent to purchase it
- Developed the company’s name, logo, and website
- Hired an architect to design the showroom
- Determined equipment and inventory requirements
- Begun recruiting key employees
Wilson Toyota’s Services
Wilson Toyota competes against other new and used car dealerships, as well as online-only auto dealers and private consumer sales. The major trend in auto sales is that more people are purchasing vehicles online rather than through a salesperson. To meet this challenge, Wilson Toyota will offer flexible online purchasing through our website.
Even though the industry is changing, it is still growing and remaining profitable. According to Mordor Intelligence, the industry is expected to grow at a CAGR of 4% over the next five years. Even with the increasing demand for public transportation and cleaner forms of transportation, vehicles are still an essential purchase for most Americans.
According to a report by the National Automobile Dealers Association, the car dealership industry is a fragmented one, as the majority of operators are single-location businesses and employ fewer than 20 people. The market is estimated to grow to over $1 trillion in five years. Since there are no truly dominant competitors, barriers to entry are not as high as in many other industries, and a start-up can expect to have success in this growing market, Wilson Toyota is well-positioned for success. There is plenty of room in the industry particularly for conveniently located dealerships that cater to specific demographic trends and demands. In this industry, size does not necessarily mean an advantage, which bodes well for Wilson Toyota.
Demographic profile of target market.
Wilson Toyota will serve the residents of Albuquerque, New Mexico and the immediately surrounding areas as well as those who work in the area.
The area we serve is populated mostly by middle-class Millennials; as a result, they have the means to pay for higher-quality vehicles. Further, many are looking to transition to hybrid or electric vehicles, and middle-class earners are the primary demographic for these types of vehicles.
Wilson Toyota will primarily target the following customer profiles:
Direct and indirect competitors.
Wilson Toyota will face competition from other companies with similar business profiles. A description of each competitor company is below.
Gibson Toyota’s goal is to give its customers the best possible experience online and at its physical store. The professional and fun-loving sales team is committed to its customers’ complete satisfaction. Gibson Toyota prides itself on building relationships with its customers throughout all phases of the automotive journey whether it’s sales, service, or parts. Gibson Toyota provides auto sales and services for both new Toyotas and used cars.
While we expect that Gibson Toyota will continue to thrive. But since it is located in the next city, we expect more and more customers will frequent Wilson Toyota based on proximity and competitive prices we offer.
Johnson Auto is an independent used car dealership specializing in certified pre-owned vehicles. The team believes that the car-buying process should be as hassle-free as possible. The team takes pride in serving its customers to the fullest. The service center is one of the best in the area, and the team strives to get its customers back on the road as soon as possible. Johnson Auto maintains a convenient online parts inventory, and if a customer can’t find what they want there, the team will help them find what they are looking for. At Johnson Auto, the team is willing to answer each and every question a customer might have during the car buying process.
Wilson Toyota has several advantages over Johnson Auto, in that it specializes in selling and servicing one make of vehicle. Wilson Toyota will provide these specialized services at an affordable price point.
Foster’s Chrysler, Jeep, Dodge, Ram
Foster’s Chrysler, Jeep, Dodge, and Ram offers both new and used inventory, as well as providing service for these makes. The dealership also retails auto parts and accessories. This location also participates in Toyota Rent a Car, in which new Toyotas are rented by the day. Camrys rent for $48.50 per day and Corollas rent for $37.80 per day.
Foster’s Chrysler, Jeep, Dodge, Ram offers some services which are unique to the area, and thus we expect it will continue to draw a large clientele. However, because many of its services are geared toward a rental clientele, we expect to draw buyers who seek the same level of support.
Wilson Toyota will be able to offer the following advantages over its competition:
- Relationships: Having lived in the community for 25 years, Dylan Wilson knows all of the local leaders, newspapers, and other influencers. As such, it will be relatively easy for Wilson Toyota to build brand awareness and an initial customer base.
Brand & value proposition.
Wilson Toyota will offer a unique value proposition to its clientele:
- Convenient location
- Large inventory of new and used vehicles
- Highly trained specialists
- Significant personal attention
- Moderate price point
- Comfortable, customer-focused environment
The promotions strategy for Wilson Toyota is as follows:
We will drive attention toward Wilson Toyota by leasing a billboard alongside multiple highways. Advertising on heavily traveled commute routes is an opportunity to alert large numbers of working individuals with disposable income of our opening.
Website & SEO Marketing
The company will utilize the website and SEO to attract new customers. The website will be easy to navigate and provide all the information and pictures needed to show our dealership and the vehicles we sell. The SEO strategy will also be managed to ensure that anyone searching for new Toyota vehicles will see our company listed at the top of the Bing or Google search engines.
Social Media Marketing
Social media is one of the most cost-effective and practical marketing methods for improving brand visibility. The company will use social media to develop engaging content, such as educational content about vehicles and customer reviews that will increase audience awareness and loyalty. Engaging with prospective clients and business partners on social media platforms like Facebook, Instagram, Twitter, and LinkedIn will also help understand changing customer needs.
Advertisements in print publications like newspapers, magazines, etc., are an excellent way for businesses to connect with their audience. The company will advertise its brand in popular magazines and news dailies. Obtaining relevant placements in industry magazines and journals will also help in increasing brand visibility.
Wilson Toyota’s pricing will be competitive so customers feel they receive great value when shopping for a new car. The customer can expect to receive quality services and personalized attention when patronizing the dealership.
The following will be the operations plan for Wilson Toyota.
- Dylan Wilson will be the Owner of the company. He will oversee all staff and manage the general operations of the company. He will also partake in customer service and sales until he has employed a full staff of sales professionals. Dylan has spent the past year recruiting the following staff:
- Janie Wilson will serve as the dealership’s Administrative Assistant. She will assist Dylan with all the operational, executive, and administrative aspects of the business. She will also manage the phones until Dylan hires a receptionist.
- Joe Smith will be the Services Manager. He will oversee all the operations of the services department.
- Maria Kenway will be the Sales Manager. She will oversee all the sales staff and help out with customer service, managing sales, and the appraisal process for used vehicles.
- Dylan will hire a full staff of service technicians and sales professionals to help with the service, sales, and customer services functions.
Wilson Toyota will have the following milestones completed in the next six months.
- 3/202X Finalize lease agreement
- 4/202X Design and build out Wilson Toyota
- 5/202X Hire and train initial staff
- 6/202X Kickoff of promotional campaign
- 7/202X Launch Wilson Toyota
- 8/202X Reach break-even
Key revenue & costs.
Wilson Toyota’s revenues will come primarily from the sale of vehicles and secondarily from the sales of parts/accessories and auto services.
Labor expenses are a major cost driver for dealerships with service departments. Service technicians are salaried; therefore, attractive compensation packages are necessary to maintain qualified staff. Furthermore, large commissions help the dealership keep the best salespeople on staff. Other major cost drivers for the company include the lease, franchise fees, inventory and parts, and marketing expenses.
Funding Requirements and Use of Funds
The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.
- Average annual franchise fees: $100,000
- Annual lease costs: $100,000
Income statement, balance sheet, cash flow statement, car dealership business plan faqs, what is a car dealership business plan.
A car dealership business plan is a plan to start and/or grow your car dealership business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.
You can easily complete your Car Dealership business plan using our Car Dealership Business Plan Template here .
What are the Main Types of Car Dealership Businesses?
There are a number of different kinds of car dealership businesses , some examples include: New Car Dealers, Used Car Dealership, and Online Car Dealership.
How Do You Get Funding for Your Car Dealership Business Plan?
Car Dealership businesses are often funded through small business loans. Personal savings, credit card financing and angel investors are also popular forms of funding.
This is true for a used car dealership business plan as well.
What are the Steps To Start a Car Dealership Business?
Starting a car dealership business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.
1. Develop A Car Dealership Business Plan - The first step in starting a business is to create a detailed car dealership business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.
2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your car dealership business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your car dealership business is in compliance with local laws.
3. Register Your Car Dealership Business - Once you have chosen a legal structure, the next step is to register your car dealership business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws.
4. Identify Financing Options - It’s likely that you’ll need some capital to start your car dealership business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms.
5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations.
6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events.
7. Acquire Necessary Car Dealership Equipment & Supplies - In order to start your car dealership business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation.
8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your car dealership business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising.
Learn more about how to start a successful car dealership business:
- How to Start a Car Dealership Business
Where Can I Get a Car Dealership Business Plan PDF?
You can download our free car dealership business plan template PDF here . This is a sample car dealership business plan template you can use in PDF format.
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Back to All Business Ideas
How to Start a Car Dealership
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on December 20, 2021 Updated on November 9, 2023
$29,750 - $112,600
$500,000 - $2 million p.a.
Time to build
1 – 3 months
$200,000 - $300,000 p.a.
Most of us have purchased a car at some point. Did you ever wonder how much the dealership raked in on your purchase? You could be the one doing the raking if you start your own car dealership. You could start with a small lot of used cars and build from there until you’ve got your own auto mall!
The US car industry is worth over a trillion dollars, so why not grab hold of the wheel and snatch a share of the market. Of course, starting a business has its challenges and you’ll likely need some guidance.
Fortunately, this step-by-step guide is full of insights and information to get you started on your journey to becoming a car mogul.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Form your business immediately using ZenBusiness LLC formation service or hire one of the Best LLC Services .
Step 1: Decide if the Business Is Right for You
Pros and cons.
Every business, including a car dealership, has pros and cons that you should consider before deciding whether it’s right for you.
- Socializing – You’ll meet and work with a lot of people every day
- Steady Demand – Somebody is always in need of a quality ride
- Good Money – Cars have big profit potential that can drive growth
- Startup Costs – An inventory of cars does not come cheap
- Long Hours – Most dealerships are open 10 – 12 hours six days a week
Car dealership industry trends
Hybrid and electric vehicles are among the hotter trends in the car industry. Tesla and its electric cars have been in the spotlight for years, and seem to be popping up everywhere lately. Market research firm Statista reports that Tesla sales increased over 800% from 2016 to 2021. Eco-friendly auto options such as superior fuel efficiency and lighter weight cars made of composite materials are in demand, as are digital safety features such as forward-collision warnings and automatic emergency braking.(( https://www.statista.com/statistics/502208/tesla-quarterly-vehicle-deliveries/ ))
Despite a 40% price increase since March 2020, as reported by the US Bureau of Labor Statistics, consumers are flocking to the used car market due to supply chain disruptions for new cars. This presents a significant opportunity for the smart and aggressive entrepreneur.(( https://www.bls.gov/news.release/cpi.t01.htm ))
Another industry trend is the ongoing shift to the online marketplace, which is no longer just for new cars. Shift, Vroom, and Carvana are major online players in this market, selling nearly 250,000 used cars combined in the first half of 2021.(( https://www.bloomberg.com/news/articles/2021-09-28/used-car-sales-vroom-carvana-shift-thrive-during-pandemic#xj4y7vzkg ))
Industry size and growth
- Industry size and past growth – Market analyst IBISWorld values the US new car market at an incredible $1.2 trillion(( https://www.ibisworld.com/industry-statistics/market-size/new-car-dealers-united-states/ )) and the used car dealers market at $160 billion(( https://www.ibisworld.com/industry-statistics/market-size/used-car-dealers-united-states/ ))
- Growth forecast – Car sales have yet to recover from the pandemic-driven slump, but are predicted to grow more than 3% annually from 2023 to 2025.(( https://www.statista.com/statistics/267128/outlook-on-worldwide-passenger-car-sales/ ))
- Number of businesses – The US is home to more than 18,000 new car dealers(( https://www.ibisworld.com/industry-statistics/number-of-businesses/new-car-dealers-united-states/ )) and around 140,000 used car dealers.(( https://www.ibisworld.com/industry-statistics/number-of-businesses/used-car-dealers-united-states/ ))
- Number of people employed – New car dealers employ more than 1.2 million people(( https://www.ibisworld.com/industry-statistics/employment/new-car-dealers-united-states/ )), while used car dealers have only around 290,000 employees.(( https://www.ibisworld.com/industry-statistics/employment/used-car-dealers-united-states/ ))
Trends and challenges
Car dealership trends are:
- Hybrids, plug-in hybrids, and pure battery electric vehicles are gaining popularity
- Direct-to-consumer vehicle sales are increasing
- Consumers would rather buy a car online than go physically to a dealership
Challenges in car dealerships include:
- Rising car prices due to tight supply and high demand
- Growing consumer preference for ride-sharing apps
- High fuel prices
- Average consumer spend – The average American household spends $5,435 a year on auto loans and auto insurance.(( https://www.businesswire.com/news/home/20210624005254/en/Cost-of-Car-Ownership-in-the-U.S.-the-Average-American-Household-Spends-5435-a-Year-on-Auto-Loans-and-Auto-Insurance-Combined ))
- Potential customer base – 91% of US households own at least one car(( https://www.statista.com/statistics/551403/number-of-vehicles-per-household-in-the-united-states/ ))
- Average prices – Automotive research company Kelley Blue Book says the average price of a new car in the US topped $47,000 for the first time in December 2021(( https://www.kbb.com/car-news/average-new-car-price-tops-47000/ )), while a used car was sold for an average of $28,205.(( https://www.kbb.com/car-news/average-used-car-price-now-over-28000/ ))
Price differences across the country
- More expensive – Used cars are most expensive in Alaska, Wyoming, Montana, Arkansas, and Idaho, with the prices ranging from $26,600 to $29,600.(( https://www.iseecars.com/most-expensive-cars-by-state-study ))
- Less expensive – Used cars are cheapest in Indiana, Ohio, Connecticut, Virginia, and Kentucky, with prices ranging from almost $22,000 to just under $23,000.
What kind of people work in car dealerships?
- Gender – 71% of car dealers in the US are male, while 29% are female.(( https://www.zippia.com/car-dealer-jobs/demographics/#gender-statistics ))
- Average level of education – 41% of car dealers hold a bachelor’s degree.(( https://www.zippia.com/car-dealer-jobs/demographics/#degree-level-types ))
- Average age – The average age of a car dealer in the US is 41 years old.(( https://www.zippia.com/car-dealer-jobs/demographics/#age-statistics ))
How much does it cost to start a car dealership?
Startup costs for a car dealership range from around $30,000 for a small used car lot to well over $100,000 for a large new car dealership. The biggest expense is, of course, the initial inventory of vehicles, though you can start small but with just a handful of used cars and a great website.
How much can you earn from a car dealership?
Markups on used cars range from 25% to 45%, while the average markup on a new car is 8% to 13%. You can use our markup calculator to calculate your sale price and how much revenue and profit you will earn with different markup percentages. When you work by yourself, your profit margin should be around 40%. The average price of a used car is about $25,000. But at least initially you will probably be handling lower-priced cars, so let’s assume you start selling used cars for an average price of $10,000.
In your first year or two, you could run your own used car lot and sell 50 cars in a year, bringing in $500,000 in annual revenue. This would mean $200,000 in profit, assuming that 40% margin. As your brand gains recognition, sales could climb to 200 cars a year. But due to your new staff, your margin would fall to around 15%, the industry average. With expected annual revenue of $2 million, you’d have a pre-tax profit of $300,000.
What barriers to entry are there?
There are a few barriers to entry for a car dealership. Your biggest challenges will be:
- Costs – All those cars will cost a pretty penny, even used
- Competition – You will face competition from physical and online dealers
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Step 2: hone your idea.
Now that you know what’s involved in starting a car dealership, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research car dealerships in your area to see what they offer. Maybe there’s no used car dealership that offers warranties, or focuses on lower-priced used cars. You’re looking for a gap in the market in a particular part of town that you can fill.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as only used trucks or classic American models like Mustangs and Camaros.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
First, determine what kinds of cars you want to specialize in. You can offer used cars, new cars, or both, but you also need to determine if you’re going to offer value-priced models or higher-end models. Then determine what else you might offer, such as:
- Financing options
- Repair and maintenance services
In addition to a car dealership, you can also incorporate a motorcycle dealership into your business.
How much should you charge for cars?
The typical markup for used cars is 25%-45% and the markup for new cars is between 8% and 13%. If you specialize in used cars, your price will depend on what price you can acquire cars for. You’ll need to know the value of various models, so you’ll want to keep the Kelley Blue Book nearby, to provide value estimates. You should purchase cars at below market value so that you can mark them up to a reasonable price. For new cars, you’ll be marking up from the wholesale price offered by the manufacturer.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will depend on what type of cars you decide to specialize in. If you sell used cars that are lower priced, your customers may be younger, so you are more likely to find them on sites like Instagram or TikTok rather than Facebook.
Where? Choose your car dealership location
You’ll probably want to rent a location that has a big enough lot for you to park your cars, and it should be big enough for you to grow. You can sell cars online, but you still need a lot to store them. It should also have a structure that you can use as an office.
You should choose a location that has a lot of road traffic but also have a great website to make online sales. You can find commercial space to rent in your area on Craigslist , Crexi , and Commercial Cafe .
When choosing a commercial space, you may want to follow these rules of thumb:
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Car Dealership Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- The name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords, such as “cars” or “used cars”, boosts SEO
- Choose a name that allows for expansion: “Premier Automotive Group” over “Electric Car Dealership”
- Avoid location-based names that might hinder future expansion
Discover over 300 unique car dealership name ideas here . If you want your business name to include specific keywords, you can also use our car dealership name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Car Dealership Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
- Executive Summary: A brief overview outlining the business’s mission, goals, and key highlights to provide a snapshot of the entire car dealership business plan.
- Business Overview: A comprehensive description of the car dealership, including its history, mission, vision, and key objectives, to give readers a clear understanding of the business.
- Product and Services: Detailed information on the range of cars and related services offered by the dealership, emphasizing unique selling points and value propositions.
- Market Analysis: An in-depth examination of the automotive market, identifying target demographics, market trends, and potential opportunities for the car dealership.
- Competitive Analysis: Evaluation of competitors in the automotive industry, highlighting strengths, weaknesses, and strategies to position the dealership effectively.
- Sales and Marketing: Strategies for promoting and selling cars, including advertising, promotions, and customer relationship management to drive sales and brand awareness.
- Management Team: Introduction and background of key individuals responsible for managing and steering the car dealership, emphasizing their expertise and roles.
- Operations Plan: Details on day-to-day operations, from inventory management to customer service, ensuring a smooth and efficient running of the dealership.
- Financial Plan: A comprehensive financial overview, including projections, budgets, and funding requirements, providing a clear picture of the dealership’s financial health and sustainability.
- Appendix: Supplementary materials such as charts, graphs, and additional data supporting the information presented in the business plan.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to a car dealership.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your car dealership will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
- Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
- General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
- C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
- S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC , which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization , and answer any questions you might have.
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Step 6: Register for Taxes
The final step before you’re able to pay taxes is getting an Employer Identification Number , or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist , and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans : This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans : The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan .
- Government grants : A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital : Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
- Friends and Family : Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
- Crowdfunding : Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
- Personal : Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best options, other than friends and family, for funding a car dealership. You might also try crowdfunding if you have an innovative concept.
Step 8: Apply for Car Dealership Business Licenses and Permits
Starting a car dealership requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration ( OSHA ), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You need to meet the requirements of your state to get a dealer license, and you need an Auto Dealer Bond as required by your state.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package . They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Step 9: Open a Business Bank Account
Before you start making money you’ll need a place to keep it, and that requires opening a bank account .
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your car dealership as a sole proprietorship. Opening a business bank account is quite simple and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Frazer , CDK Global , and vAuto , to manage your inventory and sales.
- Popular web-based accounting programs for smaller businesses include Quickbooks , Freshbooks , and Xero .
- If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders . This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization ( SEO ) practices. These are steps that help pages rank higher in the results of top search engines like Google.
To successfully market your car dealership, it’s crucial to blend a variety of strategies that emphasize the diversity and quality of your inventory, exceptional customer service, and the unique experience your dealership offers.
Professional Branding and Direct Outreach
- Establish a strong brand identity: This involves creating a consistent and professional image across all your marketing materials, from your logo to the design of your showroom. A strong brand identity helps in building trust and recognition.
- Engage with local businesses and community organizations: By creating partnerships and networks with local entities, you can tap into corporate sales opportunities and execute community-focused promotions, enhancing your local presence and reputation.
Digital Presence and Online Marketing
- Develop a user-friendly website optimized for SEO: A well-designed website that is easy to navigate and optimized for search engines will help potential customers find your dealership online, increasing your visibility.
- Utilize social media platforms for targeted advertising: Use platforms like Facebook, Instagram, and LinkedIn to reach specific audiences with vehicle highlights, promotional events, and customer testimonials. Each platform offers unique ways to target and engage potential customers.
- Implement targeted advertising and Pay-Per-Click marketing: Using digital advertising tools to reach potential buyers based on their online behaviors can increase your dealership’s visibility and attract interested buyers.
Content Marketing and Customer Engagement
- Launch an automotive blog: A blog with relevant content like car maintenance tips and vehicle reviews can attract and engage an audience interested in automotive topics, establishing your dealership as a knowledgeable source.
- Feature customer testimonials and success stories: Sharing experiences of satisfied customers builds credibility and trust with potential buyers.
- Develop helpful guides and infographics: Offering educational content helps in engaging customers by providing them with valuable information, thus enhancing your brand’s value proposition.
Experiential Marketing and Community Involvement
- Host test drive events and open houses: Giving potential customers firsthand experience with your vehicles can significantly influence their buying decision.
- Sponsor and participate in local events: Being visible and active in local events can improve your dealership’s community presence and appeal to local customers.
Innovative Promotions and Customer Loyalty Programs
- Implement referral and loyalty programs: These programs incentivize existing customers to refer new ones and reward repeat business, fostering a loyal customer base.
- Organize competitions and giveaways: Such activities generate excitement and engagement around your dealership, attracting new customers.
Additional Marketing Techniques
- Experiment with website calls to action: Optimizing elements on your website can significantly affect user engagement and conversion rates.
- Leverage local business platforms like Yelp and Google My Business: These platforms are essential for local businesses to increase visibility and credibility in their community.
- Engage in influencer marketing: Collaborating with individuals who have a significant social media following can broaden your reach and appeal to new market segments.
- Create a podcast: This helps in building a personal connection with your audience, diversifying your outreach and content strategy.
- Explore video marketing: Creative and engaging videos can enhance online visibility and have the potential to reach a wide audience.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your car dealership meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its strong USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your car dealership could be:
- Reliable cars for less, guaranteed
- Upscale used cars for your luxury life
- Family cars that keep your family safe
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a car dealership, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in a car dealership for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in cars. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
Step 12: Build Your Team
If you’re starting small, you may not need any employees right away. But as your business grows, you will likely need workers to fill various roles. Potential positions for a car dealership would include:
- Sales People – Sell cars, customer service
- Finance Manager – Work with lenders to get customers’ financing
- Marketing Lead – SEO, social media strategies
- General Manager – Manage staff, order inventory
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed , Glassdoor , or ZipRecruiter . Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Run a Car Dealership – Start Making Money!
In good times and bad, people buy cars. It’s a trillion-dollar market, and with hard work and determination, you could grab your share and make a great living. It’s also important to keep up with the trends, such as going digital and maintaining a strong online presence to attract consumers who prefer to shop online.
Start small, build a name, add to your inventory, and grow your business. One day you could be that celebrity local auto dealer with an acre of cars. Now that you have the knowledge you need, you should be off to the races on your entrepreneurial journey!
- Car Dealership Business FAQs
The new and used car industry in the United States is worth over a trillion dollars, and even a small used car dealership can tap into a share of that. You can markup used cars between 25% and 45% so your profit margins will be healthy.
Toyota was the world’s most profitable car company, although most reports say that Ferrari is the most profitable.
The Ford F-Series and Range Rover have the highest profit margin. Next is the GMT 800.
Used cars tend to be more profitable than new cars. It’s best for car dealerships to bring in revenue from new cars, used cars, and repairs.
The growth potential of a car dealership is really unlimited. You can expand to multiple locations in your area, or even across the country.
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- Decide if the Business Is Right for You
- Hone Your Idea
- Brainstorm a Car Dealership Name
- Create a Car Dealership Business Plan
- Register Your Business
- Register for Taxes
- Fund your Business
- Apply for Car Dealership Business Licenses and Permits
- Open a Business Bank Account
- Get Business Insurance
- Prepare to Launch
- Build Your Team
- Run a Car Dealership - Start Making Money!
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Car Dealership Business Plan: Complete Guide
- January 11, 2023
Whether you’re looking to raise funding from private investors or to get a loan from a bank (like a SBA loan) for your car dealership, you will need to prepare a solid business plan.
In this article we go through, step-by-step, all the different sections you need in your car dealership business plan. Use this template to create a complete, clear and solid business plan that get you funded.
1. Executive Summary
The executive summary of a business plan gives a sneak peek of the information about your business plan to lenders and/or investors.
If the information you provide here is not concise, informative, and scannable, potential lenders and investors may lose interest.
Though the executive summary is the first and the most important section, it should normally be the last section you write because it will have the summary of different sections included in the entire business plan below.
Why do you need a business plan for your car dealership?
The purpose of a business plan is to secure funding through one of the following channels:
- Obtain bank financing or secure a loan from other lenders (such as a SBA loan )
- Obtain private investments from investment funds, angel investors, etc.
- Obtain a public or a private grant
How to write an executive summary for your car dealership?
Provide a precise and high-level summary of every section that you have included in the business plan. The information and the data you include in this segment should grab the attention of potential investors and lenders immediately. Also make sure that the executive summary doesn’t exceed 2 pages.
The executive summary usually consists of the 5 main paragraphs:
- Business overview : introduce your car dealership: what is your business model (franchise vs. independent business ; new vs. used car dealership), how many cars will you have in inventory? Are you partnering with any car manufacturer(s)? Where would your store be located? Etc.
- Market overview : briefly analyze the car dealership industry in your area (market size and growth), your competitors and target customers: average income of your target audience, demographic distribution, customer preferences etc.
- Management & people : introduce the management team and their industry experience. Mention your business partner(s), if any. Also give here an overview of the different teams, roles and their reporting lines
- Financial plan : how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? Also include here a small chart with your key financials (revenue, net profit )
- Funding ask : what loan/investment/grant are you seeking? How much do you need? How long will this last? How will you spend the money?
Car Dealership Business Plan + Financial model
30+ slides Business plan template
5-year Excel Financial model
2. Business Overview
In the business overview section of your car dealership business plan, you should expand on what your company sells, to whom, and how it is structured. A few examples of questions you must answer here are:
- The history behind the project: why did you choose to open a car dealership today?
- Your business model : Are you franchising or is this an independent store? Are you selling new or used vehicles?
- Products & services : What vehicles / brands do you plan to sell? Are you planning to add any additional services (e.g. car repair & checkups, etc.)
- What is the legal structure of your company? Who are the directors / shareholders?
a) History of the Project
Briefly explain how did you come up with the plan to start a car dealership business. What motivated you to get into this business venture?
Also try to demonstrate to investors your interest and passion for the car industry and car dealership in general.
For example, you might have worked in a car dealership and/or at a car manufacturer sales department in the past, and found immense growth potential for this type of business in your area.
b) Business Model
Explain in this section what business model you chose for your car dealership. Here are a few questions you must answer:
- Will you start an independent dealership, franchise model, chain store, etc.?
- Will you open a brand-specific dealership?
- Would your car dealership deal in new cars, used cars, or both?
- Do you plan to open an online dealership?
- Would you offer service and repairs in your car dealership?
c) Products & Services
Now that we have briefly introduced what your business model is, you must explain in detail what exactly you intend to sell. There are 2 things here:
- Products (cars): what vehicles and brands do you intend to sell? Why did you choose these vehicles / brands?
- Services : if you offer additional services (e.g. car repairs, checkups), explain what they are
In addition to the products and services, you should also include a list of prices for each. Of course, this doesn’t need to be exact. Car prices fluctuate based on various factors. Yet, you must be able to provide a range of prices for each category (e.g. sedan, luxury cars, vans, etc.).
If you specialize in a specific brand, you can provide a list of prices per model in appendix as well.
The prices are important as they will allow investors to tie your product offering with your financial projections later on.
d) Legal Structure
Explain the legal structure of your nursing home in this section. Are you starting a corporation, a limited liability company, or a partnership? Who are the investors? How much equity do they actually own? Is there a board of directors? Do they have prior industry experience?
3. Car Dealership Market Overview
A complete understanding of the car dealership industry is important for the success of your business.
Therefore, you must cover here 3 important areas:
- Status quo : how big is the car dealership industry in your area? How fast is the market growing? What are the trends fuelling this growth (or decline)?
- Competition overview : how many car dealership competitors are there? How do they compare vs. your business? How can you differentiate yourself from them?
- Customer analysis: what are your target customers? What are their customer preferences?
a) Status quo
When looking at the car dealership industry, try to start at the national level (US) and narrow it down to your service area (a city for example). You should answer 2 important questions here:
How big is the car dealership industry in your area?
How fast is the car dealership industry growing in your area, how big is the car dealership industry in the us.
The auto parts and car dealership industry in the US is huge: it was worth $1.18 trillion in 2021 as per the National Automobile Dealers Association . As per the same report, there were 16,676 light vehicles car dealerships in the US in 2021 which generate an average revenue of $71 million.
Sales are divided between new (52%) and used vehicles (37%) as well as services and parts (11%).
After the US, assess the size of the car wash industry in your city or area. Focus on the zone where you plan to offer your services.
Naturally, you might not be able to get the data for your specific city or region. Instead, you can estimate the size of your market, for more information on how to do it, read our article on how to estimate TAM, SAM and SOM for your startup .
Luckily, NADA publishes statistics per state so you can narrow it down easily. For your city instead, you will need to do work out some estimates. To give you an example, let’s assume you plan to operate in an area where there are already 30 car dealership businesses (in a 25 miles radius for example).
Assuming our business is based in Connecticut, we can use the state’s average annual turnover of $49,661 : we can reasonably assume that the car dealership industry is worth $1.5 million in your area . In other words, there are over 35,100 light vehicles (new and used) being sold in your area each year (assuming the average retail price of $43,000).
Now that we know your area’s market size, let’s look at growth instead.
Fortunately, you can use NADA’s number again as they publish annual reports. Just use your state’s market size growth, and explain the growth (or decline). This can be due to average car prices, or volume.
b) Competition overview
You should discuss both your direct and indirect competition in your business plan. Other car dealerships in the region will be your immediate competitors. Internet auctions, individual dealers, etc., will be your indirect competitors.
In this section, you should also discuss the essential components of the business models of your main competitors. Your research should be focused on their clientele, the kinds of cars they offer, and their strengths and weaknesses.
A thorough competitive analysis is crucial as it may allow you to discover and address a customer need or preference that none of your rivals is addressing today.
Here are some of the questions that you must answer in this section:
- How many competitors are there in the area where you want to open your car dealership?
- Are they franchises or independent stores?
- Do they partner with specific car manufacturers?
- What type of cars do they offer (luxury, economy, used, new, etc.)?
- What is the average price range of the cars they sell?
- How many employees do they have?
- Do they offer services and repairs?
- Do your competitors offer buyback on the cars sold by them previously to the client?
- What type of offers and discounts do they offer to attract customers?
- How many cars / vehicles do they sell on average per month?
c) Customer analysis
Now that we have a good idea of the car dealership industry in your area as well as competition, now is time to focus on your target audience: customers.
Knowing your customer is extremely important before you get into any business. This is all the more relevant for car dealership where customer preferences and tastes are very different.
For example, if you are planning to get into a luxury car dealership business, you should look into:
- The estimated population of high-income people in your area
- Types of luxury cars that are in demand (hatchback, sedan, SUV, etc.)
- Shopping preference of your target customers (online or offline)
- How frequently do they buy (or exchange) new cars?
- Is their buying decision influenced by offers or discounts?
- What features do your target customers want in their new luxury cars?
- What type of additional services do they expect from their dealers?
4. Sales & Marketing Strategy
This is the section of your business plan where you outline your customer acquisition strategy. Try to answer the following questions:
- What are the different marketing strategies you will use?
- What are your Unique Selling Points (USPs)? In other words, how do you differentiate from your competitors?
- How do you intend to track the success of your marketing strategy?
- What is your CAC or customer acquisition cost?
- What is your marketing budget?
What marketing channels do car dealerships use?
A few marketing channels that car dealership businesses typically use are:
- Signage, billboards
- PPC ads, Facebook ads, etc.
- Print media
- Loyalty programs
- Online local listing (Google Business)
- Content marketing (share content like vehicle maintenance tips, safe driving tips, etc.) on platforms like blogs, social media, etc.
- Word of mouth, recommendations
You must have a fair and nearly accurate estimate of your marketing budget. Therefore, make sure to budget for marketing accordingly in your financial projections.
What are your Unique Selling Propositions (USPs)?
In other words, how do you differentiate yourself vs. competitors? This is very important as you might need to win customers from competitors.
A few examples of USPs are:
- Products: you may be the exclusive distributor or a car make in your area for example
- Services : you may offer repairs and regular checkups for your customers
- Location : you store is closer to a busy road and/or to where your customers live
Your USPs will depend on your business model, competitor analysis, and target audience. Whatever your USPs are, it should appeal to your potential customers and attract them.
5. Management & People
You must address 2 things here:
- The management team and their experience/track record
- The organizational structure: the different team members and who reports to whom
Small businesses often fail because of managerial weaknesses. Thus, having a strong management team is vital. Highlight the experience and education of senior managers that you intend to hire to oversee your car dealership.
Describe their duties, responsibilities, and roles. Also, highlight their previous experience and explain how they succeeded in their previous roles.
Even if you haven’t already hired a VP of sales, sales managers, support staff and any other relevant staff members, you must provide a chart of the organizational structure outlining the different teams, roles and their reporting lines.
6. Financial Plan
The financial plan is perhaps, with the executive summary, the most important section of any business plan.
Indeed, a solid financial plan tells lenders that your business is viable and can repay the loan you need from them. If you’re looking to raise equity from private investors, a solid financial plan will prove them your car dealership is an attractive investment.
There should be 3 sections to your financial plan section:
- Your historical financials (only if you already operate the business and have financial accounts to show)
- The startup costs of your project (if you plan to start a new car dealership, or purchase new inventory, expand your store, etc.)
- The 5-year financial projections
a) Historical Financials (if any)
In the scenario where you already have some historical financials (a few quarters or a few years), include them. A summary of your financial statements in the form of charts e.g. revenue, gross profit and net profit is enough, save the rest for the appendix.
If you don’t have any, don’t worry, most new businesses don’t have any historical financials and that’s ok. If so, jump to Startup Costs instead.
b) Startup Costs
Before we expand on 5-year financial projections in the following section, it’s always best practice to start with listing the startup costs of your project. For a car dealership, startup costs are all the expenses you incur before you open your shop and starting making sales. These expenses typically are:
- The lease deposit for the commercial space you rent (if you don’t buy it)
- The design and renovation of the existing facilities
- The inventory costs (the initial stock of vehicles you must buy to sell them at opening)
For example, let’s assume you want to buy 30 light vehicles as a start for inventory, and you take on a loan where you need to put down 15% upfront. Now, assuming these vehicles each cost $50,000 on average, this means you must put down $300,000 yourself. This comes in addition with any other startup cost mentioned above (lease deposit, renovation costs, etc.).
c) 5-Year Financial Projections
In addition to startup costs, you will now need to build a solid 5-year financial model as part of your business plan for your car dealership.
Your financial projections should be built using a spreadsheet (e.g. Excel or Google Sheets) and presented in the form of tables and charts in your business plan.
As usual, keep it concise here and save details (for example detailed financial statements, financial metrics, key assumptions used for the projections) for the appendix instead.
Your financial projections should answer at least the following questions:
- How much revenue do you expect to generate over the next 5 years?
- When do you expect to break even?
- How much cash will you burn until you get there?
- What’s the impact of a change in pricing (say 20%) on your margins?
- What is your average customer acquisition cost?
You should include here your 3 financial statements (income statement, balance sheet and cash flow statement). This means you must forecast:
- The number of vehicles you sell over time ;
- Your expected revenue ;
- Operating costs to run the business ;
- Any other cash flow items (e.g. capex, debt repayment, etc.).
When projecting your revenue, make sure to sensitize pricing and the number of customers as a small change in these assumptions will have a big impact on your revenues.
7. Funding Ask
This is the last section of the business plan of your car dealership. Now that we have explained what type of vehicles your company sells to whom and at what price, but also what’s your marketing strategy, where you go and how you get there, this section must answer the following questions:
- How much funding do you need?
- What financial instrument(s) do you need: is this equity or debt, or even a free-money public grant?
- How long will this funding last?
- Where else does the money come from? If you apply for a SBA loan for example, where does the other part of the investment come from (your own capital, private investors?)
If you raise debt:
- What percentage of the total funding the loan represents?
- What is the corresponding Debt Service Coverage Ratio ?
If you raise equity
- What percentage ownership are you selling as part of this funding round?
- What is the corresponding valuation of your business?
Use of Funds
Any business plan should include a clear use of funds section. This is where you explain how the money will be spent.
Will you spend most of the loan / investment to acquire the cost for the inventory (the vehicles)? Or will it cover mostly the cost of buying the land and building the store?
Those are very important questions you should be able to answer in the blink of an eye. Don’t worry, this should come straight from your financial projections. If you’ve built solid projections like in our car dealership financial model template , you won’t have any issues answering these questions.
For the use of funds, we recommend using a pie chart like the one we have in our financial model template where we outline the main expenses categories as shown below.
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Car Dealership Business Plan
A car dealership is a company that sells new or used vehicles to the general public under the terms of a dealership agreement with a carmaker or its sales subsidiary. Car dealerships are rewarding because they are connected to both the wholesale and retail markets.
Are you looking to start writing a business plan for your car dealership business? Creating a business plan is essential to starting, growing, and securing funding for your business. We have prepared a car dealership business plan template for you to help in start writing yours.
Free Business Plan Template
Download our free business plan template now and pave the way to success. Let’s turn your vision into an actionable strategy!
- Fill in the blanks – Outline
- Financial Tables
How to Write a Car Dealership Business Plan?
Writing a car dealership business plan is a crucial step toward the success of your business. Here are the key steps to consider when writing a business plan:
1. Executive Summary
An executive summary is the first section of the business plan intended to provide an overview of the whole business plan. Generally, it is written after the entire business plan is ready. Here are some components to add to your summary:
Start with a brief introduction:
Market opportunity:, mention your services:, management team:, financial highlights:, call to action:.
Ensure you keep your executive summary concise and clear, use simple language, and avoid jargon.
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2. Business Overview
Depending on what details of your business are important, you’ll need different elements in your business overview. Still, there are some foundational elements like business name, legal structure, location, history, and mission statement that every business overview should include:
About the business:
Provide all the basic information about your business in this section like:
- The name of the car dealership business and the concept behind it: new car dealership, used car dealership, small car dealership, luxury car dealership, private seller, online retailer, or something else.
- Company structure of your car dealership business whether it is a sole proprietorship, LLC, partnership firm, or others.
- Location of your car dealership and the reason why you selected that place.
Business history:, future goals:.
This section should provide an in-depth understanding of your car dealership business. Also, the business overview section should be engaging and precise.
3. Market Analysis
Market analysis provides a clear understanding of the market in which your car dealership business will run along with the target market, competitors, and growth opportunities. Your market analysis should contain the following essential components:
Market size and growth potential:, competitive analysis:, market trends:, regulatory environment:.
Some additional tips for writing the market analysis section of your business plan:
- Use a variety of sources to gather data, including industry reports, market research studies, and surveys.
- Be specific and provide detailed information wherever possible.
- Include charts and graphs to help illustrate your key points.
- Keep your target audience in mind while writing the business plan.
4. Products And Services
The product and services section of a car dealership business plan should describe the specific services and products that will be offered to customers. To write this section should include the following:
List the product and services:
- Create a list of the services that your car dealership will offer, which may luxury cars, new cars, used cars, maintenance, repairs, etc.
- Describe each product and service: For each service, provide a detailed description of what it entails, and the qualifications of the professionals who will provide the service.
Emphasize safety and quality:
Overall, a business plan’s product and services section should be detailed, informative, and customer-focused. By providing a clear and compelling description of your offerings, you can help potential investors and readers understand the value of your business.
5. Sales And Marketing Strategies
Writing the sales and marketing strategies section means a list of strategies you will use to attract and retain your clients. Here are some key elements to include in your sales & marketing plan:
Develop your unique selling proposition (USP):
Determine your pricing strategy:, marketing strategies:, sales strategies:.
Overall, the sales and marketing strategies section of your business plan should outline your plans to attract and retain customers and generate revenue. Be specific, realistic, and data-driven in your approach, and be prepared to adjust your strategies based on feedback and results.
6. Operations Plan
When writing the operations plan section, it’s important to consider the various aspects of your business processes and procedures involved in operating a business. Here are the components to include in an operations plan:
Operational process:, inventory management:.
By including these key elements in your operations plan section, you can create a comprehensive plan that outlines how you will run your car dealership business.
7. Management Team
The management team section provides an overview of the individuals responsible for running the car dealership business. This section should provide a detailed description of the experience and qualifications of each manager, as well as their responsibilities and roles.
Organizational structure:, compensation plan:, board of advisors:.
Describe the key personnel of your company and highlight why your business has the fittest team.
8. Financial Plan
When writing the financial plan section of a business plan, it’s important to provide a comprehensive overview of your financial projections for the first few years of your business.
Profit & loss statement:
Cash flow statement:, balance sheet:, break-even point:, financing needs:.
Remember to be realistic with your financial projections, and to provide supporting evidence for all of your estimates.
When writing the appendix section, you should include any additional information that supports the main content of your plan. This may include financial statements, market research data, legal documents, and other relevant information.
- Include a table of contents for the appendix section to make it easy for readers to find specific information.
- Include financial statements such as income statements, balance sheets, and cash flow statements. These should be up-to-date and show your financial projections for at least the first three years of your business.
- Provide market research data, such as statistics on the size of the industry, consumer demographics, and trends in the industry.
- Include any legal documents such as permits, licenses, and contracts.
- Provide any additional documentation related to your business plans, such as marketing materials, product brochures, and operational procedures.
- Use clear headings and labels for each section of the appendix so that readers can easily find the necessary information.
Remember, the appendix section of your car dealership business should only include relevant and important information that supports the main content of your plan.
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This car dealership business plan sample will provide an idea for writing a successful business plan, including all the essential components of your business.
After this, if you are still confused about how to write an investment-ready business plan to impress your audience, then download our car dealership business plan pdf.
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Frequently asked questions, why do you need a car dealership business plan.
A business plan is essential for anyone looking to start or run a successful car dealership. It helps to get clarity in your business, secures funding, and identifies potential challenges while starting and growing your business.
Overall, a well-written plan can help you make informed decisions, which can contribute to the long-term success of your car dealership business.
How to get funding for your car dealership business?
There are several ways to get funding for your car dealership business, but one of the most efficient and speedy funding options is self-funding. Other options for funding are:
- Bank loan – You may apply for a loan in government or private banks.
- Small Business Administration (SBA) loan – SBA loans and schemes are available at affordable interest rates, so check the eligibility criteria before applying for it.
- Crowdfunding – The process of supporting a project or business by getting a lot of people to invest in your car dealership, usually online.
- Angel investors – Getting funds from angel investors is one of the most sought options for startups.
Apart from all these options, there are small business grants available, check for the same in your location and you can apply for it.
Where to find business plan writers for your car dealership business?
There are many business plan writers available, but no one knows your business and idea better than you, so we recommend you write your car dealership business plan and outline your vision as you have in your mind.
What is the easiest way to write your car dealership business plan?
A lot of research is necessary for writing a business plan, but you can write your plan most efficiently with the help of any car dealership business plan example and edit it as per your need. You can also quickly finish your plan in just a few hours or less with the help of our business plan software.
About the Author
Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more
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Opening a car dealership can be a risky venture without effective planning. It requires a large amount of overhead costs to acquire inventory, insurance coverage, pay structure for salesmen among other things. You’ll likely find yourself looking to apply for a loan to get your business off the ground, which can be difficult to do without a thorough business plan to use in your pitch.
Luckily we have sample business plans to help you get started and successfully launch your new car dealership.
If you’re looking to develop a more modern business plan, we recommend you try LivePlan . It contains the same templates and information you see here, but with additional guidance to help you develop the perfect plan.
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How to write a business plan for a car dealership?
Whether you are starting up a new dealership or looking to grow and improve the profitability of an existing one, having a well-crafted and comprehensive business plan is essential.
In this guide, we will cover why it's important to write a business plan for your car dealership, what information you need to include in it, the structure and format of such plans, as well as the tools that can help you create one quickly and easily.
With these resources at hand, you'll be able to confidently start or grow your own car dealership with success!
In this guide:
Why write a business plan for a car dealership?
- Information needed to create a business plan for a car dealership
- What goes into your car dealership's financial forecast?
- The written part of a car dealership business plan
- What tool should I use to write my car dealership business plan?
Writing a business plan for your car dealership forces you - the entrepreneur - to think critically about your objectives over the next 3 to 5 years, and create actionable plans to achieve them.
The business plan, therefore, serves as the roadmap for the expansion of your car dealership.
Once the plan is in place, you can compare your financial performance to what was planned and recalibrate your financial forecast as time goes by in order to maintain visibility on your future cash flows.
This process is crucial in helping you ensure that you know where the business is headed and have sufficient capital to fund operations and expansion.
Additionally, having a comprehensive car dealership business plan is mandatory if you need to attract potential investors (or lenders) who can provide vital capital to accelerate growth.
Investors will be looking for evidence that investing in your car dealership can generate a good return on investment. Therefore, they will want to see healthy growth, profitability and cash generation outlined clearly in the business plan.
Similarly, banks will use this document to assess whether or not you have what it takes to repay their loan and ensure that your dealership succeeds.
Now that we know why writing the business plan matters, let’s have a look at the information needed to assemble it.
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What information is needed to create a business plan for a car dealership?
Carrying out market research for your car dealership.
Carrying out market research is an essential step prior to drafting any car dealership business plan.
It helps identify target markets and understand customer needs, and allows you to evaluate the competitive landscape and develop strategies for positioning your dealership in a way that will give it a competitive edge in the marketplace.
Having this data is key in order to accurately forecast potential revenues, and to present a compelling commercial opportunity in the written presentation of your business plan.
Developing the marketing plan of your car dealership
Creating a sales and marketing plan is another prerequisite that ensures that your financial forecast includes an accurate budget for sales and marketing expenses.
This budget should include specific details regarding costs associated with advertising, promotions, sponsorships, and incentives in order to maximize the dealership’s sales.
The staff and equipment required for your car dealership
Comprehensive recruitment and investment plans also need to be outlined prior to writing your business plan as they will be needed when creating your financial forecast.
You will need to think thoroughly about how many staff members are required for the business to operate and what equipment will need to be purchased, and cost it all as accurately as possible.
Once you have gathered the necessary information for creating a business plan for your car dealership, it is time to move on to developing the financial forecast.
What goes in the financial forecast for a car dealership?
The financial forecast of a car dealership includes a Profit and Loss (P&L) statement, a Balance Sheet, a Cash Flow Statement, and Sources and Uses table.
Let’s have a look at each of these financial tables in a bit more detail.
The projected P&L statement of your car dealership
The projected P&L statement for a car dealership shows how much growth and profit are expected in the years to come.
The projected balance sheet of your car dealership
The balance sheet is an important financial report that provides insight into the overall financial health of a car dealership.
It includes all assets owned by the dealership, such as cars, inventory, buildings and equipment, as well as liabilities such as accounts payable, loans and other debt.
This document gives an overview of what the company owns and owes at any given time, and how much your equity is worth.
The balance sheet is especially useful for lenders and investors, who want to understand the solvability and liquidity of the car dealership. It provides insight into how much money is available to pay creditors or invest in new projects.
For example, if there are more liabilities than assets on the balance sheet, it could signal that the business is over-leveraged or that there is a need for more capital.
On the other hand, if there are more assets than liabilities, the dealership may have enough money to invest in new projects and give lenders peace of mind.
For car dealership owners, the balance sheet can be used to identify potential risks, gauge financial performance and make plans for future growth. It provides an overall picture of the dealership’s financial health and can help owners understand if their business is on track or needs to be improved.
The projected cash flow statement of your car dealership
A forecasted cash flow statement for a car dealership is a document that shows how money comes in and out of the business.
It is useful because it helps people understand how much money the dealership makes and spends, which helps make decisions about financing.
The initial financing plan
An initial financing plan is like a money map that shows where the money at the beginning of your car dealership business plan will come from and how it will be used.
It is important to have an initial financing plan when starting a car dealership so you can make sure you have enough money to cover all of your initial investments.
The plan should include information such as the total cost, who will provide the funds, what kind of loans or investments are needed, and other sources of capital such as grants or credit from suppliers.
Having this information in advance helps ensure that there are no financial surprises down the road.
Now that you have a better idea of what goes in the financial forecast for your car dealership, it is time to look at what goes in the written presentation which provides the context needed to understand how these projections were made and how they fit into the larger picture.
The written part of a car dealership plan
The written part of a car dealership plan is composed of the 7 main sections:
- The executive summary
- The presentation of the company
- The products and services section
- The market research analysis
- The strategy section
- The operations section
- The financial plan
Let’s dive into each section!
1. The executive summary
The executive summary of a car dealership plan should include the following key points: business overview, market overview, key financials, and the “ask” i.e. how much funding is required.
The business overview section should provide an overall description of the business, including its vision and objectives.
This includes information about the size of the dealership, type of vehicles sold, and any unique features the dealership may offer.
The market overview should include information about the size of the addressable market, current trends in the vehicle industry, and how the car dealership’s offerings intend to meet customer demand.
Next come the key financial highlights where you will include a brief description of the dealership’s financial situation and any expected future profits or losses.
Finally, the “our ask” section should include a thorough explanation as to what you are looking for from the reader of your plan. It is also important to detail how these funds will be used and what kind of return on investment can be expected.
2. The presentation of the company
The presentation of the company should start with detailed information about the structure and ownership of the company.
You should clearly explain what legal entity has been created to run the business, and who owns what percentage.
Additionally, it is important to state the exact location of the dealership, as well as give details about the management team that will be responsible for the day-to-day operations and implementation of the business plan.
3. The products and services section
When writing the products and services section of a car dealership's business plan, it is important for you - the business owner - to provide detailed information about the types of vehicles you offer, along with any additional services such as repairs or financing.
The goal of this section should be to show potential investors or lenders that customers will have access to quality cars, parts and service at competitive prices.
The type of vehicles offered by the car dealership should be clearly outlined in the business plan. This includes identifying which makes and models are available, as well as whether used cars are also sold.
It is also helpful to include information on who supplies these vehicles so investors can assess their reliability and reputation in the marketplace.
Additionally, if there are special features that make certain vehicle models stand out from competitors, those details should be included in this section as well.
4. The market analysis
The presentation of your market analysis should include information about demographics and segmentation, target markets, competition, barriers at entry, and regulation.
This will help provide potential investors or banks with an understanding of the size of the local market and how your car dealership is best positioned to capture market share.
The demographics and segmentation section will focus on the demand side, explaining how many customers are in the local market and what their expectations and preferences are.
In the target market section you will explain who you are targeting and why your offering fits the needs of these customers.
The competition part will focus on your competitors and you will explain how and why customers will prefer your dealership over theirs.
You will then explain what barriers at entry exist on the market, if any. This could include licensing requirements with car manufacturers or an important upfront investment to enter the market.
5. The strategy section
When crafting the strategy section of your car dealership's business plan, you should focus on the following key elements in order to appeal to potential investors or lenders: competitive edge, pricing strategy, marketing plan, milestones and risks and mitigants.
Having a unique competitive edge is essential for success in any competitive industry. This could include offering special promotions or services that are not available from competitors.Or you could benefit from territorial exclusivity with a car manufacturer preventing other competitors from selling the same vehicles you offer.
A clear pricing strategy should also be outlined as well which details how prices will be set and adjusted over time based on market conditions.
Your marketing plan will then outline how customers will learn about the dealership’s offerings and how customer loyalty can be maintained over time.
Finally, you should outline achievable milestones as well as strategies for dealing with potential risks or issues that may arise during operations.
Addressing these topics within the strategy section of your business plan will help demonstrate to lenders and investors your knowledge of the industry as well as show the steps you’ve taken to reduce risk associated with running your business.
6. The operations section
The operations section of your car dealership business plan should include detailed information about the staffing team and roles of staff members, recruitment plan, opening hours, key assets and intellectual property that the business needs to operate, as well as the suppliers it plans to work with.
When detailing the staffing team and roles of staff members, the plan should include information about the number of employees, their job titles and descriptions, as well as any qualifications needed for each position.
Additionally, it should include a recruitment plan that outlines how new staff members will be hired and onboarded into the business.
The operations section should also outline the opening hours of the dealership: when it opens and closes, as well as any special operating hours for specific services.
Furthermore, the plan should include information about key assets and property needed to run the business, such as a dealership license, customer databases, technology platforms or software licenses. Finally, it should list all of its suppliers that are critical to the running of the dealership.
By having a comprehensive operations section, the business owner can show potential lenders or investors that they have planned ahead and are well-prepared to successfully run their dealership.
7. The presentation of the financial plan
The financial plan section is where you will show the financial forecast that we talked about before.
Now that we have an understanding of the content a car dealership business plan should include, let's take a look at the tools and resources available to help us create one.
What tool should I use to write my car dealership's business plan?
In this section, we will review the different solutions for creating a business plan for your car dealership, including using Word and Excel, hiring a consultant or using an online software.
Create your car dealership's business plan using Word or Excel
Using Excel and Word to write a car dealership business plan can be an effective solution for some, but it should not be the first choice.
While Excel is cheap, creating a financial forecast without expert accounting knowledge is challenging to say the least. Creating a financial forecast on excel is often long and tedious and difficult to keep updated.
Using Word can help to create a plan from scratch, but it is time consuming as you have to start from a blank page and it requires hours of formatting the document once written.
Hire a consultant to write your car dealership's business plan
Outsourcing your car dealership business plan to a consultant or accountant is another potential solution.
Consultants are experienced in writing such plans and accountants are knowledgeable about creating financial forecasts that are accurate and free from errors though they may lack the industry expertise to forecast sales with precision.
The main drawback of outsourcing a plan though is the steep cost. Budget at least $2,000 (or £1,500) for a first iteration, more if revisions are needed after initial meetings with lenders and investors.
Overall, this is a good solution if you need your plan fast and are trying to raise a significant amount of capital.
Using a business plan software to write your car dealership business plan
Another alternative is to use online business plan software . There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the financial calculations for you without errors
- You get a professional document, formatted and ready to be sent to your bank
- The software will enable you to easily track your actual financial performance against your forecast and update your forecast as time goes by
If you're interested in using this type of solution, you can try our software for free by signing up here .
We hope that this article has helped you to better understand how to write the business plan for a car dealership. If you still have questions, do not hesitate to contact us.
Also on The Business Plan Shop
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Know someone in the car dealership industry? Share this article with them!
Founder & CEO at The Business Plan Shop Ltd
Guillaume Le Brouster is a seasoned entrepreneur and financier.
Guillaume has been an entrepreneur for more than a decade and has first-hand experience of starting, running, and growing a successful business.
Prior to being a business owner, Guillaume worked in investment banking and private equity, where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and investment decisions.
Guillaume holds a Master's Degree in Finance from ESCP Business School and a Bachelor of Science in Business & Management from Paris Dauphine University.
Published on 20 Mar 2023 , last update on 27 Jun 2023 , as per our editorial standards .
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Car Dealership Business Plan Template & Guidebook
If you are looking to start a car dealership, you have come to the right place. With the #1 Car Dealership Business Plan Template & Guidebook, you will have all the resources necessary to create a successful business plan that will help you launch your car dealership with confidence. This comprehensive guidebook provides an extensive template for developing the perfect car dealership business plan that will help you with everything from setting up your organization to finding the best financing options for your dealership. Read on for more details about this incredible resource.
Get worry-free services and support to launch your business starting at $0 plus state fees.
- How to Start a Car Dealership Business [11+ Steps]
- List of the Best Marketing Ideas For Your Car Dealership Business:
How to Write a Car Dealership Business Plan in 7 Steps:
1. describe the purpose of your car dealership business..
The first step to writing your business plan is to describe the purpose of your car dealership business. This includes describing why you are starting this type of business, and what problems it will solve for customers. This is a quick way to get your mind thinking about the customers’ problems. It also helps you identify what makes your business different from others in its industry.
It also helps to include a vision statement so that readers can understand what type of company you want to build.
Here is an example of a purpose mission statement for a car dealership business:
Our mission at ABC Car Dealership is to provide quality vehicles and a superior customer experience by becoming the dealership clients turn to for their automotive needs. We strive to create a warm and welcoming environment, personalized service, and one-stop convenience from sales to service. Our team of highly trained professionals will work hard to ensure our clients receive the highest quality product as well as the best car buying experience possible.
2. Products & Services Offered by Your Car Dealership Business.
The next step is to outline your products and services for your car dealership business.
When you think about the products and services that you offer, it's helpful to ask yourself the following questions:
- What is my business?
- What are the products and/or services that I offer?
- Why am I offering these particular products and/or services?
- How do I differentiate myself from competitors with similar offerings?
- How will I market my products and services?
You may want to do a comparison of your business plan against those of other competitors in the area, or even with online reviews. This way, you can find out what people like about them and what they don’t like, so that you can either improve upon their offerings or avoid doing so altogether.
3. Build a Creative Marketing Stratgey.
If you don't have a marketing plan for your car dealership business, it's time to write one. Your marketing plan should be part of your business plan and be a roadmap to your goals.
A good marketing plan for your car dealership business includes the following elements:
- Who is your target market?
- What do these customers have in common?
- How many of them are there?
- How can you best reach them with your message or product?
- Who are your current customers?
- Where did they come from (i.e., referrals)?
- How can their experience with your car dealership business help make them repeat customers, consumers, visitors, subscribers, or advocates for other people in their network or industry who might also benefit from using this service, product, or brand?
Product or service description
- How does it work, what features does it have, and what are its benefits?
- Can anyone use this product or service regardless of age or gender?
- Can anyone visually see themselves using this product or service?
- How will they feel when they do so? If so, how long will the feeling last after purchasing (or trying) the product/service for the first time?
- Which companies are competing with yours today (and why)?
- Which ones may enter into competition with yours tomorrow if they find out about it now through word-of-mouth advertising; social media networks; friends' recommendations; etc.)
- What specific advantages does each competitor offer over yours currently?
- Which marketing channel do you intend to leverage to attract new customers?
- What is your estimated marketing budget needed?
- What is the projected cost to acquire a new customer?
- How many of your customers do you instead will return?
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4. Write Your Operational Plan.
Next, you'll need to build your operational plan. This section describes the type of business you'll be running, and includes the steps involved in your operations.
In it, you should list:
- The equipment and facilities needed
- Who will be involved in the business (employees, contractors)
- Financial requirements for each step
- Milestones & KPIs
- Location of your business
- Zoning & permits required for the business
What equipment, supplies, or permits are needed to run a car dealership business?
- Car sales license
- Business permit/registration
- Financial documents and records
- Computer software programs for tracking inventory, sales, and customer data
- A display area and other fixtures for displaying vehicles
- Desks, phones, printers, and other office equipment for customers and sales people
- A website or online presence to market and sell cars across the internet
- Automotive lifts, tools, and other equipment for servicing vehicles
- Advertising materials such as flyers, posters, banners, and television commercials
5. Management & Organization of Your Car Dealership Business.
The second part of your car dealership business plan is to develop a management and organization section.
This section will cover all of the following:
- How many employees you need in order to run your car dealership business. This should include the roles they will play (for example, one person may be responsible for managing administrative duties while another might be in charge of customer service).
- The structure of your management team. The higher-ups like yourself should be able to delegate tasks through lower-level managers who are directly responsible for their given department (inventory and sales, etc.).
- How you’re going to make sure that everyone on board is doing their job well. You’ll want check-ins with employees regularly so they have time to ask questions or voice concerns if needed; this also gives you time to offer support where necessary while staying informed on how things are going within individual departments too!
6. Car Dealership Business Startup Expenses & Captial Needed.
This section should be broken down by month and year. If you are still in the planning stage of your business, it may be helpful to estimate how much money will be needed each month until you reach profitability.
Typically, expenses for your business can be broken into a few basic categories:
Startup costs are typically the first expenses you will incur when beginning an enterprise. These include legal fees, accounting expenses, and other costs associated with getting your business off the ground. The amount of money needed to start a car dealership business varies based on many different variables, but below are a few different types of startup costs for a car dealership business.
Running & Operating Costs
Running costs refer to ongoing expenses related directly with operating your business over time like electricity bills or salaries paid out each month. These types of expenses will vary greatly depending on multiple variables such as location, team size, utility costs, etc.
Marketing & Sales Expenses
You should include any costs associated with marketing and sales, such as advertising and promotions, website design or maintenance. Also, consider any additional expenses that may be incurred if you decide to launch a new product or service line. For example, if your car dealership business has an existing website that needs an upgrade in order to sell more products or services, then this should be listed here.
7. Financial Plan & Projections
A financial plan is an important part of any business plan, as it outlines how the business will generate revenue and profit, and how it will use that profit to grow and sustain itself. To devise a financial plan for your car dealership business, you will need to consider a number of factors, including your start-up costs, operating costs, projected revenue, and expenses.
Here are some steps you can follow to devise a financial plan for your car dealership business plan:
- Determine your start-up costs: This will include the cost of purchasing or leasing the space where you will operate your business, as well as the cost of buying or leasing any equipment or supplies that you need to start the business.
- Estimate your operating costs: Operating costs will include utilities, such as electricity, gas, and water, as well as labor costs for employees, if any, and the cost of purchasing any materials or supplies that you will need to run your business.
- Project your revenue: To project your revenue, you will need to consider the number of customers you expect to have and the average amount they will spend on each visit. You can use this information to estimate how much money you will make from selling your products or services.
- Estimate your expenses: In addition to your operating costs, you will need to consider other expenses, such as insurance, marketing, and maintenance. You will also need to set aside money for taxes and other fees.
- Create a budget: Once you have estimated your start-up costs, operating costs, revenue, and expenses, you can use this information to create a budget for your business. This will help you to see how much money you will need to start the business, and how much profit you can expect to make.
- Develop a plan for using your profit: Finally, you will need to decide how you will use your profit to grow and sustain your business. This might include investing in new equipment, expanding the business, or saving for a rainy day.
Frequently Asked Questions About Car Dealership Business Plans:
Why do you need a business plan for a car dealership business.
A business plan for a car dealership business is important in order to set goals and objectives, define strategies, develop an operational plan, identify your target market, and determine the financial resources needed to get started. It also serves as a roadmap for the direction of the business and helps you stay on track with your long-term vision.
Who should you ask for help with your car dealership business plan?
You should ask an experienced financial planner or accountant for help with your car dealership business plan. Additionally, you could consult with a business coach, business consultant, or mentor who has experience in the automotive industry. It is also a good idea to speak to entrepreneurial experts or other successful car dealerships owners who can provide valuable insights on the business.
Can you write a car dealership business plan yourself?
Yes, you can write your own car dealership business plan. Writing a business plan for a car dealership is like writing any other business plan. It should include your mission, market analysis, financial projections, competitive analysis and marketing strategy. Additionally, researching the car dealership industry in your area can help you tailor your plan and make it more specific to the local market. With a bit of research and preparation, you can develop a comprehensive business plan for your car dealership.
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I'm Nick, co-founder of newfoundr.com, dedicated to helping aspiring entrepreneurs succeed. As a small business owner with over five years of experience, I have garnered valuable knowledge and insights across a diverse range of industries. My passion for entrepreneurship drives me to share my expertise with aspiring entrepreneurs, empowering them to turn their business dreams into reality.
Through meticulous research and firsthand experience, I uncover the essential steps, software, tools, and costs associated with launching and maintaining a successful business. By demystifying the complexities of entrepreneurship, I provide the guidance and support needed for others to embark on their journey with confidence.
From assessing market viability and formulating business plans to selecting the right technology and navigating the financial landscape, I am dedicated to helping fellow entrepreneurs overcome challenges and unlock their full potential. As a steadfast advocate for small business success, my mission is to pave the way for a new generation of innovative and driven entrepreneurs who are ready to make their mark on the world.
How to Start a Car Dealership
It’s a business that relies on buying wholesale and marking the vehicle up for retail. Sometimes, a car dealer contracts directly with a car manufacturer to sell new vehicles. However, used car dealers often obtain their stock from the secondary market through auctions. A dealer may operate exclusively online, but it’s still more common to keep a physical showroom to display the vehicles.
Learn how to start your own Car Dealership and whether it is the right fit for you.
Ready to form your LLC? Check out the Top LLC Formation Services .
Start a car dealership by following these 10 steps:
- Plan your Car Dealership
- Form your Car Dealership into a Legal Entity
- Register your Car Dealership for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Car Dealership
- Get the Necessary Permits & Licenses for your Car Dealership
- Get Car Dealership Insurance
- Define your Car Dealership Brand
- Create your Car Dealership Website
- Set up your Business Phone System
We have put together this simple guide to starting your car dealership. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas .
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
What will you name your business?
- What are the startup and ongoing costs?
- Who is your target market?
How much can you charge customers?
Luckily we have done a lot of this research for you.
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Car Dealership Name Generator
If you operate a sole proprietorship , you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
When registering a business name , we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability .
It's very important to secure your domain name before someone else does.
Want some help naming your car dealership?
Business name generator, what are the costs involved in opening a car dealership.
Becoming a car dealer isn’t easy in most states. You will need a surety bond, proper licensing, and business experience to compete in this industry.
Auto dealers usually must file a surety bond with the resident state’s DMV before they get an auto dealer license. The license allows them to sell vehicles in that state. Purchasing a bond can be very confusing. A surety bond is a form of insurance which is designed to protect consumers and the state from fraud.
There are several types of bonds you may need, depending on the kind of dealership you want to run. Some general bonds include:
- Used car dealer bonds.
- Wholesale car dealer bonds.
- Motorcycle dealer bonds.
Bond premiums depend entirely on your unique situation, which makes it difficult to quantify exact costs to start a dealership. In general, the surety bonds you need are priced based on:
- The amount of the bond needed.
- Your financial credentials.
- Whether or not you choose to finance the premium.
- Your credit score.
If you have good credit, for example, your premium might be just 1% of the total bond amount. So, on a $10,000 bond, you would pay a $100 premium.
In addition to the bond, you will need licensing. The types of licenses needed depend on the state, county, and locale where you intend to conduct business.
Most states have several categories of dealer licenses, such as:
- New car dealer
- Used car dealer (retailers)
- Wholesaler licensing
- Rebuilder licensing
- Reconditioner licensing
The general process for getting into business is:
- Fill out an application form.
- Get a surety bond (states specify the minimum amount based on your line of business).
- Buy liability insurance for your inventory (vehicles).
- Get your sales tax number.
- Establish your permanent business location.
- Take photographs of your business sign and location and adhere to your state’s specific photo and signage rules and regulations.
- Pay the mandated fees.
- Get your dealer’s tags from the local county courthouse.
- Get your sales license to sell vehicles (if you intend to be a salesperson in the business).
What are the ongoing expenses for a car dealership?
Dealer costs vary a lot by the type of dealership and the specific bonds and insurances needed. A dealership can be run for several thousand dollars per year in operating costs or $15 million for a franchise operation.
Who is the target market?
Dealers typically run advertisements locally for customers, but most of the business is generated by referrals through the salesforce. Friends, family, neighbors, and community members are the “target market” for a dealership.
Good customers usually have fair to good credit (minimum). Many customers will finance the purchase so they need the ability to qualify for a vehicle loan. Dealerships typically have a difficult time selling to individuals with poor credit. However, some dealerships specialize in hard money loans and “buy here, pay here” plans where customers with poor credit are able to finance a vehicle directly from the dealership through a special financing program, similar to “rent to own” payment schemes found in other industries.
How does a car dealership make money?
A dealership makes money by selling vehicles above the dealer’s invoice price and by doing routine maintenance on vehicles sold. Customers typically pay commissions on vehicles they purchase (which is bundled into the total sales price of the vehicle) and pay hourly or a flat fee for maintenance.
Dealers usually charge the manufacturer’s suggested retail price (MSRP) for their vehicles. However, a dealer may discount their vehicles to entice prospects to buy. When this is done, a dealer may discount the vehicle to the dealer invoice price. Dealers often also receive incentives and “holdback” from the manufacturer. Pricing to the consumer is not transparent. Meaning, a consumer doesn’t typically see the costs and profit for the manufacturer. Instead, consumers see total vehicle price.
How much profit can a car dealership make?
As with dealer operating costs, profit depends entirely on the dealer’s wholesale pricing and cost for inventory, cost for bonds and insurance, and other overhead. In general, a dealer can make between 2% and 3% of the sticker or invoice price of the vehicle.
How can you make your business more profitable?
Making a dealership profitable isn’t easy. Because there are so many laws and regulations governing the sale of vehicles, most dealerships rely on good customer service to fuel future growth. However, a dealer can increase the odds of making more money by specializing. For example, a Honda dealership may make more than a general used car dealership. Luxury dealers may also make more than dealers selling mid to entry-level brands.
Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!
STEP 2: Form a legal entity
The most common business structure types are the sole proprietorship , partnership , limited liability company (LLC) , and corporation .
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your car dealership is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Have a Professional Service Form your LLC for You
Two such reliable services:
You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services . You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN through the IRS website . If you would like to learn more about EINs, read our article, What is an EIN?
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil .
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history , which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a dealer’s license. Applications for this license will vary by state. This article offers general advice on how to get one.
State specific licensing information can be found here.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses .
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance . This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance . If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
FInd out what types of insurance your Car Dealership needs and how much it will cost you by reading our guide Business Insurance for Car Dealership.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners , we'll give you helpful tips and advice for creating the best unique logo for your business.
Recommended : Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker .
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator . Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a car dealership
Getting new customers can be difficult. Some new dealers hold a tent sale. This is a special sale conducted off-site (away from the primary business location) to attract new customers. Every state and county has different rules and regulations regarding tent sales. In some states, for example, you will be expected to give notice to the local authorities and pay a fee for a license to hold the sale.
How to keep customers coming back
Auto dealerships are relationship-driven. Many customers are past customers, so referral business and retaining customers through excellent customer service is key. Offer special incentives to customers, like special dealer financing or dealership perks (special deals on service) to attract new customers. Some dealers also go beyond sales and service to provide a unique experience for the customer. For example, a dealer might create a “play area” for children and offer day care services while parents shop.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business .
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Recommended : Get started today using our recommended website builder or check out our review of the Best Website Builders .
Other popular website builders are: WordPress , WIX , Weebly , Squarespace , and Shopify .
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
TRUiC's Startup Podcast
Welcome to the Startup Savant podcast , where we interview real startup founders at every stage of the entrepreneurial journey, from launch to scale.
Is this Business Right For You?
This business is perfect for individuals who are auto enthusiasts and who have a good business sense. Former sales managers and car salesmen are also good candidates for this type of business. As the owner, you may have a flexible work schedule, but this is not guaranteed.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a car dealership?
Day-to-day activities include checking invoices, talking to prospects and customers on the lot, negotiating deals, and managing a sales force. Dealerships have a strong sales culture and interpersonal communication skills are important. So salespeople (including the owner) who work for a dealership may spend most of their day speaking with prospects face-to-face.
What are some skills and experiences that will help you build a successful car dealership?
While there are no special skills required by the state, there are practical skills most business owners in this industry have. First, they have a strong sales background. They also have a strong business and management background. Some dealership owners have worked as a mechanic in the past, which helps them better understand the service side of the business.
What is the growth potential for a car dealership?
Small dealerships are usually used car dealers. These types of dealerships purchase used vehicles at auctions and mark them up for resale to consumers. This type of business can be highly profitable and doesn’t require a lot of overhead or inventory.
A larger dealership might secure a contract with a major manufacturer to sell new and certified used vehicles. This type of dealership business is typically large scale, requires significant upfront costs (including franchise fees), and may require high volume sales to keep the manufacturer’s contract.
TRUiC's YouTube Channel
For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.
Take the Next Step
Find a business mentor.
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
Most dealerships need a crew of salespeople, accounting and bookkeeping professionals, and service technicians. Unless you’re a small one-man operation, you’ll probably want to hire a team of professionals immediately.
Read our car dealership hiring guide to learn about the different roles a car dealership typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.
- TRUiC's Car Dealership Hiring Guide
- Auto dealer training program
- Franchise opportunity
- National Automobile Dealership Association
Real World Examples
- Gus's Used Auto Sales
- Five Star Auto Center
- Car Source Detroit
- Video: steps to open a car dealership
- Example used auto sales business plan
- How to start a used car dealership
- How to start an internet car dealership
Have a Question? Leave a Comment!
Growthink's Ultimate Business Plan Template
The world's #1 business plan template.
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Car Dealership Business Plan Template
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It Took Us 17 Years to Create the Ultimate Car Dealership Business Plan Template for You
Hi, I’m Dave Lavinsky, the co-founder and President of Growthink.
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Seventeen years ago we started writing business plans for entrepreneurs, executives and business owners like you.
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Improve Your Strategy
Growthink’s Ultimate Car Dealership Business Plan Template helps you build a strategically sound business.
It guides you through key questions about your company, marketing and operations strategies, and gives you tons of ideas for improvement.
For example, in the Marketing Plan section, you’ll see several of the best marketing tactics to get new customers.
Our Ultimate Car Dealership Business Plan Template “Members Area” gives answers to all your questions, plus access to our amazing customer support team.
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Frequently Asked Questions
Below are answers to your most frequently asked questions:.
Immediately upon purchasing Growthink’s Ultimate Car Dealership Business Plan Template, you will be taken to our Member’s Area where you can instantly download our template and begin working on your business plan.
If for any reason you are not delighted with our product, simply contact our friendly support desk and you’ll be issued a full refund. You have an entire year to request a refund if desired.
Unlike other software that charges you a fee month after month after month, you only pay once for Growthink’s Ultimate Car Dealership Business Plan Template and you own it.
You can create an unlimited number of business plans with Growthink’s Ultimate Car Dealership Business Plan Template. Once you purchase it, you have lifetime access to use it for any business in which you’re involved, now or in the future.
Yes, Growthink’s Ultimate Car Dealership Business Plan Template works flawlessly on both PCs and Macs.
Growthink’s Ultimate Car Dealership Business Plan Template is designed for both established Car Dealerships and startups.
Yes , you can! Anyone can easily follow our basic instructions and create a great business plan quickly and easily. Plus, my expert team is available to help you if you have any questions.
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Car Dealership Business Plan Template [Updated 2023]
Car Dealership Business Plan Template
If you want to start a new car dealership or expand your current dealership, you need a business plan.
The following Car Dealership business plan template gives you the key elements to include in a winning business plan. In addition to this template, a successful car dealership business plan will include market research to support your business concept, help you better understand the car dealership industry, market trends, car prices and your target customers. It will also help you craft a smart marketing plan and a strong financial plan.
You can download our Car Dealership Business Plan Template (including a full, customizable financial model) to your computer here.
Below are links to each of the key sections of a sample business plan that can be used for all types of car dealerships including a luxury car dealership business, an online car dealership, used and new car dealers.
I. Executive Summary II. Company Overview III. Industry Analysis IV. Customer Analysis V. Competitive Analysis VI. Marketing Plan VII. Operations Plan VIII. Management Team IX. Financial Plan
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Car Dealership Business Plan Home I. Executive Summary II. Company Overview III. Industry Analysis IV. Customer Analysis V. Competitive Analysis VI. Marketing Plan VII. Operations Plan VIII. Management Team IX. Financial Plan
Boost Your Car Business: New Dealership Acquisition Checklist
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"Looking to get into the lucrative business of new car dealerships? With the US automotive industry experiencing steady growth year after year, now is a great time to embark on this exciting venture. According to the National Automobile Dealers Association, new car dealerships sold over 17 million vehicles in 2020, generating approximately $1 trillion in sales revenue. With a solid business plan and careful preparation, you can seize the opportunity to acquire a new car dealership and tap into this thriving market."
If you're considering buying or acquiring a new car dealership, there are several important steps to follow to ensure success. Researching the market, securing financing, conducting due diligence, and developing a comprehensive business plan are just a few key components of the journey. This article will guide you through each step of the process, providing you with a helpful checklist to follow along the way.
Step 1: Research the market and identify potential dealership opportunities.
Step 2: Determine your budget and secure financing if needed.
Step 3: Conduct a thorough due diligence on the selected dealership.
Step 4: Develop a comprehensive business plan outlining your goals and strategies.
Step 5: Create a financial model to evaluate the potential profitability of the dealership.
Step 6: Negotiate the purchase agreement and engage legal advisors.
Step 7: Seek professional assistance in assessing the dealership's assets, liabilities, and inventory.
Step 8: Obtain necessary licenses and permits for the automotive dealership.
Step 9: Develop a transition plan to smoothly take over the business operations.
By following this comprehensive checklist, you'll be well on your way to acquiring a new car dealership business and tapping into the thriving automotive market. With careful planning and diligent execution, you can establish a successful dealership that not only generates significant profits but also builds lasting customer relationships through exceptional service and customer satisfaction.
Research The Market And Identify Potential Dealership Opportunities
When considering buying or acquiring a new car dealership business, it is crucial to thoroughly research the market and identify potential dealership opportunities. Here are some important steps to help you in this process:
- Understand the local market: Begin by understanding the local market dynamics, including the demand for vehicles, competition, and consumer preferences. Analyze demographics, economic indicators, and trends that may impact the automotive industry.
- Explore different dealership models: Familiarize yourself with various dealership models, such as franchised dealerships, independent dealerships, or dealership groups. Understand the advantages and disadvantages of each model to determine the right fit for your business goals.
- Identify potential dealership opportunities: Conduct targeted research to identify potential dealership opportunities in your desired location. Utilize resources such as industry publications, online directories, and dealership associations to find information on available dealerships for sale or looking for acquisitions.
- Assess the reputation and performance: Once you identify potential opportunities, thoroughly assess the reputation and performance of the dealerships. Review customer reviews, sales data, profitability, market share, and any relevant industry rankings or accolades.
- Seek expert advice: Consider consulting with experts in the automotive industry, such as business brokers or consultants, who can provide valuable insights and guidance during your research process. They can assist in evaluating the viability and potential of different dealership opportunities.
Tips for Researching the Market:
- Attend automotive industry events, trade shows, and conferences to network and gain industry knowledge.
- Utilize market research reports and data to understand industry trends and forecasts.
- Visit local dealerships and engage with their staff to gain firsthand insights into their operations and customer experience.
- Consider conducting surveys or focus groups to gather feedback from potential customers and understand their preferences and needs.
Determine Your Budget and Secure Financing If Needed
Once you have identified potential dealership opportunities, it is important to assess your financial capabilities and determine the budget for acquiring a new car dealership. This step is crucial as it will help you understand the financial viability of your venture and guide your decision-making process.
Start by thoroughly evaluating your personal finances and assessing how much capital you can allocate towards this business venture. Consider factors such as your savings, investments, and any potential loans or lines of credit you may have access to. It is essential to have a realistic understanding of your financial resources to ensure you can comfortably handle the financial obligations associated with purchasing and running a new car dealership.
- Seek the guidance of a financial advisor or accountant to help analyze your financial situation and determine an appropriate budget for the dealership acquisition.
- Research potential financing options available for new car dealership acquisitions, such as business loans or partnerships with financial institutions. Compare terms, interest rates, and repayment plans to make an informed decision.
- Prepare a comprehensive business plan that outlines your financial projections and the potential return on investment. This will not only help you secure financing but also serve as a roadmap for your dealership's success.
If you determine that additional financing is required to acquire the dealership, it is essential to explore your options and secure the necessary funding. Reach out to banks, credit unions, or other financial institutions that specialize in providing loans to automotive businesses. Present your business plan, financial projections, and other supporting documents to demonstrate your credibility and the potential profitability of the dealership.
Remember, securing financing for a new car dealership can be a complex process, and it is crucial to understand the terms and conditions, including interest rates, repayment periods, and any collateral requirements. Consulting with legal and financial professionals can help ensure that you make well-informed decisions and negotiate favorable financing terms.
Conduct A Thorough Due Diligence On The Selected Dealership.
When considering purchasing a new car dealership business, it is crucial to conduct a thorough due diligence on the selected dealership. Due diligence involves a comprehensive examination and evaluation of the dealership's financial, operational, and legal aspects to ensure that you have a clear understanding of its current state and potential risks.
Here are key areas to focus on during the due diligence process:
- Financial Records and Performance: Review the dealership's financial statements, including income statements, balance sheets, and cash flow statements. Analyze revenue trends, profit margins, and expenses to assess the dealership's financial health and profitability.
- Inventory and Sales Analysis: Evaluate the dealership's inventory levels, including the types and quantities of vehicles in stock. Determine the dealership's sales history and assess the effectiveness of its sales strategies.
- Customer Base and Reputation: Research the dealership's customer base and reputation in the market. Check customer reviews and ratings to gauge the dealership's customer satisfaction levels and overall reputation.
- Operational Processes and Systems: Assess the dealership's operational processes, including sales, service, and parts departments. Review the effectiveness of its systems and procedures to ensure efficient and smooth business operations.
- Legal and Compliance Issues: Engage legal advisors to conduct a thorough review of the dealership's legal and compliance documents. Look for any pending lawsuits, regulatory violations, or potential liabilities that may impact the business.
Tips for Conducting Due Diligence:
- Consider hiring a professional due diligence team or consultant experienced in the automotive industry to assist you in evaluating the dealership.
- Thoroughly review all dealership contracts, including supplier agreements, service contracts, and lease agreements.
- Request access to historical performance data and customer records to validate the accuracy of the information provided by the seller.
- Conduct interviews or surveys with existing customers to gather their feedback and insights on the dealership's products and services.
- Seek clarification on any unclear or ambiguous information identified during the due diligence process.
By conducting a thorough due diligence on the selected dealership, you can minimize the risks associated with the business acquisition and make informed decisions based on accurate and reliable information. This step is crucial in ensuring the long-term success and profitability of your new car dealership business.
Develop A Comprehensive Business Plan Outlining Your Goals And Strategies.
Creating a comprehensive business plan is essential when buying or acquiring a new car dealership. This plan serves as a roadmap that outlines your goals and strategies for the future success of the business. It provides a clear vision of how you intend to operate the dealership, attract customers, and generate profits.
When developing your business plan, identify your goals for the dealership. These goals can include increasing sales, expanding the customer base, improving profitability, or enhancing customer satisfaction. Clearly defining your goals will help you stay focused and make informed decisions throughout the acquisition process.
Outline your strategies for achieving these goals. Consider the marketing and advertising strategies you will employ to promote your dealership, attract potential customers, and create brand awareness. Additionally, think about your sales strategies, such as offering competitive pricing, providing exceptional customer service, and leveraging technology to streamline the sales process.
It is also important to analyze and understand your target market . Research the demographics and preferences of the local community to tailor your strategies accordingly. Determine the demand for different vehicle models and adjust your inventory and marketing efforts to meet those demands.
Assess the competitive landscape and identify your unique selling points. Determine how you will differentiate your dealership from competitors, whether it's through personalized customer service, exclusive offers, or a wide selection of vehicles. Highlight these advantages in your business plan to attract customers and gain a competitive edge.
Furthermore, consider the financial aspects of your dealership . Outline your projected revenue and expenses, including operational costs, financing options, and potential profit margins. Develop a sales forecast and profitability analysis that takes into account industry trends and economic conditions.
- Include a SWOT analysis in your business plan to identify the strengths, weaknesses, opportunities, and threats facing your dealership.
- Consider sustainability and incorporate environmentally friendly practices into your strategies. Being an eco-conscious dealership can attract customers who prioritize sustainability.
- Stay updated with industry trends and continually refine your business plan to adapt to changes in consumer preferences, technology, and regulations.
- Seek feedback from industry experts or experienced individuals in the automotive dealership business to gain valuable insights and refine your strategies.
By developing a comprehensive business plan, you will have a clear roadmap for success, aligning your goals, strategies, and financial projections. This plan will not only guide you through the acquisition process but also serve as a reference tool for managing and growing your new car dealership business.
Create A Financial Model To Evaluate The Potential Profitability Of The Dealership
Creating a financial model is an essential step in the process of acquiring a new car dealership business, as it helps evaluate the potential profitability and financial viability of the investment. A well-designed financial model takes into account various factors that can impact the dealership's performance and allows you to make informed decisions.
When creating a financial model for evaluating the potential profitability of the dealership, consider the following key components:
- Revenue Projections: Start by estimating the dealership's potential revenue based on factors such as vehicle sales volume, average selling price, and additional revenue streams like financing, extended warranties, and maintenance services.
- Costs and Expenses: Identify the various costs associated with running the dealership, including vehicle acquisition costs, personnel expenses, marketing expenses, rent or mortgage payments, utilities, insurance, and other operating costs.
- Profit Margins: Analyze the profit margins of the dealership by comparing the costs and expenses to the projected revenues. This will help determine if the dealership can generate sufficient profits to cover its expenses and generate a return on investment.
- Financing and Capital Structure: Take into account the financing options available to you and determine the optimal capital structure for the dealership. Consider the potential interest rates, repayment terms, and required capital investment, and incorporate them into your financial model.
- Market Trends and Analysis: Stay aware of the current market trends and factor them into your financial model. Consider variables such as consumer demand for certain vehicle models, interest rates, and competition levels in the market.
- Consider conducting a sensitivity analysis to assess the impact of potential changes in key variables, such as vehicle sales volume or average selling price, on the profitability of the dealership.
- Seek guidance from financial and automotive industry professionals to validate your assumptions and ensure the accuracy of your financial model.
- Regularly update and adjust your financial model as market conditions change or new information becomes available to maintain its relevance and usefulness.
By meticulously creating a financial model that considers all relevant factors, you will be equipped with the necessary insights to make informed decisions regarding the potential profitability of the dealership. This will help you determine if acquiring the business aligns with your financial goals and aspirations.
Negotiate The Purchase Agreement And Engage Legal Advisors.
Once you have identified a potential new car dealership to acquire, the next crucial step is to negotiate the purchase agreement . This agreement outlines the terms and conditions of the transaction, including the purchase price, financing arrangements, and any contingencies that need to be met.
Engaging legal advisors during this process is essential to ensure that the purchase agreement protects your interests and complies with all applicable laws and regulations. They will review the agreement, identify any potential risks or loopholes, and help you negotiate favorable terms.
Here are some important considerations to keep in mind during the negotiation process:
- Price and payment terms: Determine a fair purchase price for the dealership based on its financial performance, assets, and market conditions. Negotiate the payment terms, such as the down payment amount, financing options, and any seller financing agreements.
- Due diligence: Conduct a thorough due diligence on the dealership to uncover any potential liabilities, pending legal issues, or undisclosed information. Address any concerns or issues revealed during this process in the purchase agreement.
- Assets and inventory: Determine which assets are included in the sale, such as the dealership's real estate, equipment, inventory, and customer database. Clarify the condition of these assets and any warranties that may transfer to you as the buyer.
- Non-compete and non-disclosure agreements: Include provisions in the purchase agreement that prevent the seller from competing with you or disclosing sensitive business information for a specified period of time.
- Contingencies: Define any conditions that must be met before the purchase agreement becomes binding, such as obtaining financing or obtaining necessary licenses and permits.
- Consider seeking the assistance of a skilled business negotiator or broker to help you navigate the negotiation process and ensure you secure the best possible deal.
- Be prepared to negotiate and compromise to reach a mutually beneficial agreement. Remember that both parties should walk away feeling satisfied with the outcome.
- Review the purchase agreement in detail with your legal advisors before signing it. Ask questions and seek clarification on any terms that are unclear or raise concerns.
By negotiating the purchase agreement and engaging legal advisors, you can protect your interests and ensure a smooth and legally sound acquisition of the new car dealership.
Seek Professional Assistance In Assessing The Dealership's Assets, Liabilities, And Inventory.
When acquiring a new car dealership business, it is crucial to seek professional assistance in assessing the dealership's assets, liabilities, and inventory. This step is important to gain a clear understanding of the financial health and value of the business you are considering purchasing. By conducting a comprehensive analysis, you can make informed decisions and negotiate a fair deal.
There are several professionals who can provide valuable insights and expertise during this assessment process. Consider hiring:
- Accountants: An experienced accountant can review the dealership's financial statements and analyze its profitability, cash flow, and financial health. They can help identify any red flags, such as outstanding debts or financial discrepancies, and provide you with an accurate picture of the business's financial position.
- Appraisers: Certified appraisers can evaluate the value of the dealership's assets, including its vehicles, equipment, and real estate. They can determine the fair market value of these assets, helping you understand their worth and negotiate a fair purchase price.
- Legal advisors: Engaging legal advisors who specialize in automotive dealership transactions can be beneficial. They can assist in reviewing contracts, lease agreements, and any legal obligations to ensure compliance and protect your interests throughout the acquisition process.
- Choose professionals with experience in the automotive industry or dealership acquisitions to ensure they understand the specific complexities and nuances involved.
- Request referrals or conduct thorough research to find reputable professionals who have a track record of successfully assisting with similar assessments.
- Collaborate closely with your chosen professionals throughout the assessment process, providing them with all the necessary information to conduct a thorough analysis.
- Take the findings from the assessment into consideration when negotiating the purchase agreement, as any identified issues can impact the value and terms of the deal.
Seeking professional assistance in assessing the dealership's assets, liabilities, and inventory is a critical step in the acquisition process. With their expertise, you can gain a comprehensive understanding of the business's financial situation and ensure a smooth transition into ownership.
Obtain Necessary Licenses And Permits For The Automotive Dealership.
When acquiring a new car dealership business, it is crucial to obtain all the necessary licenses and permits to ensure legal compliance and smooth operations. This process involves understanding the specific requirements of the automotive industry in your location and diligently completing the necessary paperwork.
- Research Local Regulations: Start by researching the licensing and permit requirements for automotive dealerships in your specific area. Each jurisdiction may have unique regulations, so it is important to understand what documents and approvals you will need.
- Identify Licensing Authorities: Determine the relevant licensing authorities responsible for issuing permits and licenses for automotive dealerships. This may include state and local departments, such as the Department of Motor Vehicles or the Secretary of State's office.
- Complete Required Applications: Once you have identified the necessary permits and licenses, prepare and submit the required applications. These applications typically include providing detailed information about the dealership, such as its location, ownership structure, and business operations.
- Fulfill Financial Requirements: Some licensing authorities may require proof of financial stability, such as a surety bond or proof of adequate insurance coverage. Be sure to fulfill these requirements to ensure a smooth approval process.
- Attend Required Trainings: In some jurisdictions, dealership owners may be required to attend training programs or seminars on legal and ethical business practices related to the automotive industry. Stay informed about any mandatory trainings and make sure to attend them.
- Start the licensing process as early as possible to allow for any unexpected delays or additional requirements.
- Consult with legal advisors or business consultants specializing in automotive dealership licensing to ensure compliance with all regulations.
- Keep detailed records of all documents submitted and the status of each application to stay organized throughout the process.
Develop A Transition Plan To Smoothly Take Over The Business Operations.
When acquiring a new car dealership business, it is crucial to develop a comprehensive transition plan to ensure a smooth takeover of the business operations. This plan should outline the steps and strategies to be implemented during the transition period, allowing for a seamless transfer of responsibilities and processes.
Here are some important considerations to include in your transition plan:
- Establish Communication Channels: Ensure clear communication channels are established with the existing dealership staff, suppliers, and key stakeholders. This will help to manage expectations and maintain continuity during the transition period.
- Assess Current Operations: Conduct a detailed assessment of the current dealership's operations and identify any areas that require immediate attention or improvement. This could include reviewing inventory management systems, sales processes, customer service protocols, or employee training programs.
- Retain Key Employees: Identify and retain key employees who possess valuable knowledge and experience in the industry. Their expertise can be instrumental in maintaining customer relationships and effectively managing the transition process.
- Provide Training and Support: Implement a training program to familiarize new employees with the dealership's processes, systems, and customer service standards. This will ensure a smooth transition and help maintain consistent service levels.
- Review Financials: Analyze the dealership's financial statements to gain an understanding of its revenue streams, profit margins, and expenses. This will help identify areas for potential improvement and set realistic financial goals for the business.
- Establish frequent communication with key stakeholders to keep them informed of the transition progress.
- Consider conducting a comprehensive inventory audit to ensure accurate records and reconcile any discrepancies.
- Review existing customer relationships and develop strategies to enhance customer satisfaction.
- Create a timeline for implementing changes and monitor progress to identify any roadblocks or adjustments needed.
By developing a thorough transition plan, you can minimize disruptions, maintain customer loyalty, and set the foundation for the successful operation of your new car dealership business. Investing time and effort in this crucial step will help ensure a seamless transition and position your dealership for long-term success in the competitive automotive industry.
Acquiring a new car dealership business requires careful planning and consideration. By following the checklist outlined in this blog post, prospective buyers can position themselves for success in the dealership industry.
Thorough market research, financial evaluation, and due diligence are crucial to identifying viable dealership opportunities and ensuring profitability. Engaging legal advisors and seeking professional assistance in assessing the dealership's assets and liabilities are important steps in the acquisition process.
Obtaining the necessary licenses and permits, developing a comprehensive business plan, and creating a transition plan are essential for a smooth takeover of the dealership operations. By focusing on customer relationships, exceptional service, and effective marketing strategies, new car dealerships can differentiate themselves and thrive in a competitive market.
Overall, purchasing a new car dealership business requires strategic planning, financial resources, and a commitment to delivering quality products and services. By carefully following this checklist, entrepreneurs can embark on a successful journey in the dealership industry.
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How to Create a Business Plan for a Car Dealership
Featured image by duxx.
A car dealership can be a lucrative business. Even though public transportation offers a safe and reliable way to get from Point A to Point B, many Americans prefer, if not need, their cars. Further, with the typical vehicle lasting for only eight years or approximately 150,000 miles, the chances are that traffic to your dealership will be relatively steady.
Plan Your Business
In this article we provide insight into the elements of a business plan for a successful car dealership. Taking the appropriate amount of time along each step of the way will ensure that you understand the start-up and ongoing expenses related to a car dealership, how to identify your target market, how much you can expect to make, and more.
RELATED ARTICLE: HOW TO START A SUCCESSFUL AUTO DEALERSHIP
Before you begin documenting your business plan, it is important to know that this document will be about far more than some chicken scratches on a napkin. Your business plan needs to outline how your car dealership is going to operate and the steps you are going to take to make it succeed. Further, your business plan should be dynamic, meaning that you will add to it as your business grows.
The core components of a business plan include:
- An executive summary
- An overview of your car dealership business
- Information on the vehicles that you plan to sell at your dealership
- Your marketing and advertising plan
- An outline of the milestones that you plan to accomplish with your business
- Information on the roles and responsibilities that you will have within your organization, and who will fill the leadership roles
- Your car dealership’s financial plan
To help prepare you to document your business plan, we have provided some helpful information below. These insights will help you think through critical components of your business.
What Are the Costs Involved in Operating a Car Dealership?
Though car dealerships can be lucrative, starting one isn’t always the easiest thing to do. To start, you will need to obtain the proper licensing and a surety bond. Auto dealers must file a surety bond with the appropriate department or agency in their state before they can get an auto dealer license. This surety bond protects consumers from fraud and is the license that allows car dealers to sell vehicles within that state.
However, purchasing a bond can be a confusing process. The type of bond you will need to obtain will vary depending on whether your dealership will sell new vehicles, used vehicles, motorcycles, recreational vehicles, or some other type of vehicle. The bond’s cost will vary as well based on your financial credentials, your credit score, and whether or not you wish to finance the premium and the amount of the bond itself.
On average, it will cost between $100,000 to $200,000 to start a car dealership.
Who Are the People in Your Target Market?
A target market comprises the people who will be interested in the products or services you have to sell. Thus, for a car dealership, the target market will include those interested in purchasing a car, as well as precisely the type of car you sell.
The best customers will have good credit, though this can vary depending on the types of cars you sell. Some dealerships focus on luxury cars. In those cases, a very good to an excellent credit score will be necessary (unless the customer is purchasing with cash). Other dealerships might focus on low-cost used cars. In that case, sometimes, there are different requirements related to the customer’s credit score.
Before you open a car dealership, it is important to determine the types of customers that you want to target. Moreover, you don’t want to open a dealership in an area where those customers can’t be found.
Form a Legal Entity
Before you can conduct any business (and likely before you can purchase or lease the space for your car dealership), you will need to form your legal entity. This process consists of the following key steps:
- Select the name of your LLC (limited liability company). To do this, start by searching the local Secretary of State website to see if your desired car dealership name is available.
- Apply for a Federal Employer Identification Number (FEIN) with the Internal Revenue Service (IRS).
- Complete the articles of organization and pay any applicable registration fees.
- Develop your LLC operating agreement.
You will also need to complete any remaining steps as required by your local secretary of state. In many cases, consulting with a business attorney can help reduce business risk and ensure you do not miss any appropriate steps.
Register Your Car Dealership for Taxes
If you have obtained your FEIN through the IRS , then you are already covered for this step. The FEIN, sometimes referred to as the EIN, works much like a Social Security number. This number is what enables the IRS to keep track of your car dealership’s tax reporting. Further, you will need an EIN before you can lawfully hire any employees.
Set up the Accounting for Your Car Dealership
Unless you have a strong background in economics and accounting, then you may want to consider hiring a professional accountant or bookkeeper. This person will be responsible for recording the various expenses that your car dealership incurs, as well as the sources of income.
Keeping detailed and accurate records is crucial in any business. This helps prevent unlawful activity. Though you do not need to document all of the details about this information in your business plan, you should be sure to reference how and where you will maintain the accounting for your business.
Obtain the Necessary Permits and Licenses
You must obtain the necessary business permits and licenses. Failure to do so can lead to a shut-down of your business as well as hefty fines. Further, reopening a company that has been shut down due to improper licensure is not an easy task.
Be sure to document information about your company’s permits and licenses within your business plan.
Get Business Insurance
Business insurance is also necessary to ensure that your car dealership is operating both lawfully and safely. This type of insurance will protect the well-being of your company in the event of a loss.
RELATED ARTICLE: CRITICAL BUSINESS INSURANCE EVERY ENTREPRENEUR SHOULD HAVE
There are many types of insurance policies, and all serve different purposes. In most cases, it will be best to start with general liability insurance. Small businesses commonly use this.
If the car dealership needs additional employees beyond a sole proprietor, then workers’ compensation insurance will also be necessary. Workers’ compensation insurance protects employers (the car dealership) from litigation related to workplace accidents. Further, it can provide compensation for employees who are injured on the job.
Will Your Dealership Buy Damaged Cars?
Though it is not a start-up cost, nor is it an insurance expense, you need to identify if your car dealership will purchase cars that have been damaged. Further, customers will often trade in poorly functioning cars . This will entail a business expense to the car dealership. Those vehicles will need to be fixed before you can sell them to another customer. In other cases, you might even need to sell the parts for scrap metal.
If your car dealership will be in the business of purchasing damaged or nonfunctional vehicles, you can add this segment to your target audience. Further, a strong brand can help your business differentiate from others, and make what you have to offer more lucrative.
Market and Promote Your Car Dealership
Attracting new customers can be a challenge, especially in the beginning. In some cases, a tent sale can help attract in new customers, especially when you advertise it in the local newspaper and online .
However, this introduces the concept of the website. Any business, big or small, can benefit from a business website. The website adds credibility to the business. Further, you can arrange to create content on the company’s website, such as in a blog. Then you can promote the same content on social media to help create awareness of the business.
The benefits of a website for your car dealership include:
- Attracting new customers and making more money for the business
- Adding instant credibility to the business
- Staying in control of your brand
Websites are relatively inexpensive to build and maintain. In fact, freelancers can help build a website at a low cost. Plus, your website can save you time, especially when you maintain an FAQ (frequently asked questions) page. This page can answer many customers’ basic questions.
Be sure to outline the key elements of your marketing and advertising plan in your business plan.
Image by mohamed Hassan from Pixabay
Keep customers coming back.
The best way to keep customers coming back is to ensure that they have a positive experience with every interaction. An honest, transparent, and responsive car dealership, by nature, will be sure to generate positive word-of-mouth advertising, which is essential. A happy customer will provide some of the best advertising, and it is often worth far more than what money can buy.
Quite simply, car dealerships are driven by relationships. Referrals from past customers will go a long way. Also, special incentives can motivate repeat customers. Consider offering deals on service or a value-add (such as free car washes for a year or free floor mats). Even providing a safe play area for children to play in while parents are car shopping can be a value add.
As with any new business, it is crucial to do your homework before starting out. Proper research will ensure that a new car dealership is set up lawfully and is well-equipped to offer excellent service to customers. Further, with proper advertising and marketing, and excellent customer service, a car dealership can be a highly profitable and rewarding business.
Finally, businesses of all types and sizes can benefit from a business plan. Not only is this documentation important to help you get started, but it can help you manage your business for years to come.
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Used Car Dealership Business Plan Template
Written by Dave Lavinsky
Used Car Dealership Plan
Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their used car dealerships.
If you’re unfamiliar with creating a used car dealership business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.
In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a used car dealership business plan step-by-step so you can create your plan today.
Download our Ultimate Used Car Dealership Business Plan Template here >
What Is a Business Plan?
A business plan provides a snapshot of your used car dealership as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a used car dealership or grow your existing used car dealership company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your used car dealership to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Used Car Dealerships
With regards to funding, the main sources of funding for a used car dealership are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for used car dealers.
How to Write a Business Plan for a Used Car Dealership
If you want to start a used car dealership or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your used car dealership business plan.
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your executive summary is to quickly engage the reader. Explain to them the kind of used car dealership you are running and the status. For example, are you a startup, do you have a used car dealership that you would like to grow, or are you operating a chain of used car dealerships?
Next, provide an overview of each of the subsequent sections of your plan.
- Give a brief overview of the used car dealership industry.
- Discuss the type of used car dealership you are operating.
- Detail your direct competitors. Give an overview of your target customers.
- Provide a snapshot of your marketing strategy. Identify the key members of your team.
- Offer an overview of your financial plan.
In your company overview, you will detail the type of used car dealership you are operating.
For example, you might specialize in one of the following types of used car dealerships:
- Franchised dealership : this type of dealership operates as part of a franchise, which enables them to offer a broader range of services than an independent dealership. Franchised dealership services can include competitive quality assurance and warranty programs, as well as certified used vehicles.
- Independent dealerships: this type of dealership is typically a single-location, locally owned dealership. Independent dealers typically offer the lowest prices, but may also sell lower-quality vehicles
- “Bad Credit” dealerships: this type of dealership caters to consumers who have bad credit, offering used automobiles with high-interest financing.
In addition to explaining the type of used car dealership you will operate, the company overview needs to provide background on the business.
Include answers to questions such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of cars sold, the number of service jobs performed (maintenance, repairs, etc.), number of vehicles financed in-house, etc.
- Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry or market analysis, you need to provide an overview of the industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the used car dealership industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.
The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section:
- How big is the used car dealership industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential target market for your used car dealership? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
The customer analysis section must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: prime customers, subprime customers, super-prime customers, and deep subprime customers.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of dealership you operate. Clearly, individuals with prime credit ratings would respond to different marketing promotions than deep subprime customers, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.
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Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other used car dealerships.
Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes new car dealers, online marketplaces, or consumers who opt to maintain/repair their existing vehicle. You need to mention such competition as well.
For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as
- What types of customers do they serve (prime, subprime, etc.)?
- What type of vehicles are in their inventory (cars, minivans, pickup trucks, etc.)?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide options for those with bad credit?
- Will you offer products or services that your competition doesn’t?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a used car dealership, your marketing strategy should include the following:
Product : In the product section, you should reiterate the type of used car dealership company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide certified pre-owned vehicles, warranties, and financing? Or will you focus on the sale of used vehicles alone?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.
Place : Place refers to the site of your used car dealership company. Document where your company is situated and mention how the site will impact your success. For example, is your used car dealership located in a busy retail district, a business district, or do you operate purely online? Discuss how your site might be the ideal location for your customers.
Promotions : The final part of your used car dealership marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:
- Advertise in local papers, radio stations and/or magazines
- Reach out to websites
- Distribute flyers
- Engage in email marketing
- Advertise on social media platforms
- Improve the SEO (search engine optimization) on your website for targeted keywords
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your used car dealership, including answering calls, engaging with prospective buyers on the lot, filling out paperwork, overseeing the service department, prepping inventory, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to sell your Xth car, or when you hope to reach $X in revenue. It could also be when you expect to expand your used car dealership to a new location.
To demonstrate your used car dealership’s potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally, you and/or your team members have direct experience in managing used car dealerships. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a used car dealership or successfully running an auto repair shop.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.
An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you sell 10 cars per week, and service 15 per week? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your used car dealership, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement
Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.
When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a used car dealership:
- Cost of inventory and office supplies
- Payroll or salaries paid to staff
- Business insurance
- Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your dealership location lease or a list of repair and maintenance services you offer.
Writing a business plan for your used car dealership is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the used car dealership industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful used car dealership.
Used Car Dealership Plan Template FAQs
What is the easiest way to complete my used car dealership business plan.
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How Do You Start a Used Car Dealership?
Starting a used car dealership is easy with these 14 steps:
- Choose the Name for Your Used Car Dealership
- Create Your Used Car Dealership Business Plan
- Choose the Legal Structure for Your Used Car Dealership
- Secure Startup Funding for Your Used Car Dealership (If Needed)
- Secure a Location for Your Business
- Register Your Used Car Dealership with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Used Car Dealership
- Buy or Lease the Right Used Car Dealership Equipment
- Develop Your Used Car Dealership Marketing Materials
- Purchase and Setup the Software Needed to Run Your Used Car Dealership
- Open for Business
Learn more about how to start your own used car business .
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