(Image: Sergey Rodovnichenko under CC 2.0)

There are certain things that people will always need to buy and one of them is vehicles, be that commercial or domestic. For this reason, opening a car dealership makes a lot of sense.
With good business decisions and sensible prices you are likely to be successful.
The most important thing you will need to do is get the best finance rates on your property and assets. Here’s everything you need to know about financing a dealership:

Takeover or Start New?

The type of finance you will need to acquire depends largely on the project you have in mind. Buying an existing dealership tends to be a much more expensive process initially but it comes with a lot less hassle as you’ll have the company’s resources, established suppliers and even customer relations.

Buying new can be cheaper and gives you more flexibility in terms of business model, but it will require a lot more planning and several different types of finance to get everything you need in place.

Commercial Mortgage

You will need to acquire a showroom with a lot where you can set up your dealership and to do thisyou will need a commercial mortgage. How much this premises will cost you will depend largely on the size and location of the plot.

For a decent sized car dealership lot you can expect to pay anything up to around £15 million for the building and surrounding land. If you are buying the land with the goal of developing then the initial purchase will be cheaper, but you will need specific development finance to pay for the build.

Business Loan

A mortgage won’t cover the costs of the cars you need to buy in, for this you will need to talk to lenders about securing a business loan. Typically, a business loan will provide you with the capital you need to purchase the vehicles that you will be selling with low enough rates to make a profit.

If you have applied to be an authorised dealer of a specific manufacturer then they may offer you special rates or even provide free new model display cars. There are several specific types of funding that you could tap into here, including:

• Business line of credit
• Floor plan financing
• Stocking finance

Knowing what type of financing is right for you will depend largely on your business model and the type of vehicles that you are dealing with. A specialist commercial broker will know exactly what type of finance you need and will be able to get you the deal that accurately matches your needs.

Advertising, Licences & Additional Costs

In order to be successful you will need to have a legal and well displayed business. If you have bought an existing dealership then many of these things will already be in place, but if you’ve started from scratch you will need a sales licence and an auto dealer licence. Additionally, you will need to advertise your opening, pay for staff, insure the premises and your assets, and pay for cleaning – this all costs money.

The funds you need for these ventures should be covered by your business loan or profits, however there are often government grants available for new businesses. It is worth looking into this, as if you are applicable you could receive thousands towards advertisements and promotion.

For more help and information or to get the perfect finance package for your needs give Pure Commercial Finance a call today on 02920 766 565.