If you’ve always wanted to own your own business and have a passion for autos, starting your own car dealership business could be the perfect way to get started. Because consumers are always in need of quality new and used cars, running a car dealership store provides an excellent job outlook and opportunities for advancement. Here are the prerequisites for beginning your very own auto dealership business to help you get started.
What is a Car?
An automobile is a four-wheeled vehicle that runs on various sources of energy such as petroleum, electricity, biofuel, natural gas, sun, propane, and so on. The majority of automobiles in use today run on gasoline, but with the need to save the environment and conserve natural resources, electric cars, solar cars, and biodiesel cars are now on the market. Flying cars are still in the works as of 2020 and will soon be available worldwide.
What is a Car Dealership Business?
A car dealership firm sells and distributes both used and new cars. A car dealer acts as a go-between for the automobile manufacturer and the buyers/users of the vehicles. Most vehicle dealerships operate independently of any manufacturer. They invest in cars and sell them to end users and customers.
How To Start a Car Dealership Business In Nigeria: a Step-By-Step Guide
This basic guide to beginning a car dealership has been put together by us. These stages will ensure that your new company is well-planned, properly registered, and legally compliant.
#1. New or used?
Before you start lining up cars on the lot, you must first decide whether you want to specialize in used or new car sales. The new or used approach will serve as the foundation for the rest of your dealership’s efforts. If you decide to open a new vehicle dealership, keep in mind that the initial expenditure is far more than that of a used car dealership. This means you’ll most likely need an investor or bank financing.
In contrast, starting a used car shop does not require such a huge initial investment, but the profit potential is lesser. Most used cars have a profit margin of N300,000 – N500,000, and price variations are normal.
#2. Create a business plan
Once you’ve decided whether to sell new or used vehicles, you’ll need to create a business plan for your potential dealership. This is especially true if you require finance. A solid dealership should start with the vehicles themselves; will you offer one brand or numerous brands? If selling both new and used cars is a possibility, this should be included in the business plan.
Other requirements for a business plan include estimating the costs of business equipment, investigating the costs of new versus used cars, calculating employee pay, lease and sales agreement costs, and arranging your advertising budget. All of these criteria will assist you in developing a realistic company plan. Remember, you can always contact us to help you create one for your business.
#3. Licensing and insurance
You must clear a number of hurdles before you can begin selling cars, one of which is obtaining your dealer’s license. If you want to run a full-service dealership, you’ll need a dealer’s license that allows you to sell an unlimited number of automobiles per year. A dealer’s license is also required if your sales activities are to be compliant with Consumer Rights and Safety legislation. Whether they sell used vehicles, new cars, or both, all car dealerships require complete insurance coverage. General liability, lot coverage, and comprehensive plans that cover everything from property damage to inventory loss are typical car dealership insurance coverages.
#4. Choose the Right Location
When deciding on a location for your car dealership, several variables must be considered. To begin, ensure that the place you select can sustain your firm. The more people there are, the more sales you’ll make. The visibility of the area must also be considered. Customers will be fewer if your lot is on an inconspicuous road or set back from the roadside.
A corner site near a major crossroads is ideal, but a roadside position on a busy road is also a good choice for a dealership. There’s also the issue of competition to consider. Shoppers choose dealerships that are close to one another since it allows them to walk away and easily find another lot and another deal. Depending on which end of the spectrum you fall on, this could be a good or negative thing for your company.
#5. Pay For A Car Dealership License
You must apply for and pay the ‘vehicle Dealership License’ charge to become a vehicle dealer in Nigeria. It recognizes you as a legitimate vehicle dealer, which has various advantages. You can then become a franchisee for a specific company, selling exclusively their automobile models. There are auction platforms that accept only certified vendors, where you will find incredible offers. Finally, you escape legal consequences.
#6. Recruit personnel
If you wish to manage a large business, you may need to hire extra help, as much as a man may require for labors such as driving cars in and out of the garage and parking them, cleaning the cars, and assisting with sales. On occasion, car maintenance are required. However, if the space is tiny, two of you may be sufficient for the entire work. Consider hiring someone who has prior knowledge with automobiles. Hire folks who are outgoing and have expertise dealing with a variety of consumers.
#7. Purchase of a vehicle
To make it big in this company, you’ll need to go to several well-known wholesale dealer auctions and buy used vehicles at lower prices than retail.
#8. Speak with a professional/expert.
As a beginner, you should visit certain specialists in the auto dealership area for further information; these experts may review secrets that will be very beneficial to the firm.
#9. Employ auto mobile repairer
It is a well-known truth that most cars sold as used or damaged vehicles are purchased at bargain prices from insurance companies or custom auctions. After obtaining the vehicles, clever dealers renovate them and resell them as used vehicles. When you use these auto-fixes, you will be able to recondition damaged vehicles for resale.
Business Opportunities in Car Dealership Business
There are various business opportunities available to you, such as:
#1. Car Sales And Distribution
Car sales are a hugely profitable company all around the world. The profit rate on a single car in Nigeria ranges from NGN300,000 to N600,000, excluding levies, import duties, customs fees, and other extras.
#2. Taxi/Shuttle Services
The shuttle company is another business possibility related with vehicle dealerships. Any interested person can enter the taxi and shuttle industry because it takes very few skills other than driving, thanks to the affordable used automobiles made available by car dealership businesses. The Uber business has recently acquired traction in most parts of the world. Anyone with a new or lightly used automobile can work for Uber or Bolt and earn a great income.
#3. Auto Electrical Repair Services
Automobiles must be fixed, serviced, and inspected on a regular basis in order to maximize profitability. Car dealers must keep their vehicles, particularly used vehicles, in good condition in order to sell them. This necessitates the services of qualified electrical engineers and mechanics.
#4. Auto Legal Services
The vehicle dealership industry has its own legal framework. This includes things like import clearance, buying and reselling used autos, and so on. Car dealers require the assistance of legal practitioners for correct paperwork in order to prevent engaging in damning transactions or purchasing stolen vehicles.
#5. Sales Of Auto Parts
automobile parts must be replaced in addition to maintenance and servicing to keep an automobile in good condition and boost its marketability.
Challenges Of Car Dealership Business In Nigeria
Some of the difficulties you may face when running this business are as follows:
- High initial investment
- Profit margins on specific car brands are narrow.
- The public has little faith in vehicle sellers.
- Obtaining effective and transparent salesmen is difficult.
- High levels of competitiveness
- The dangers of unscrupulous transactions
- Premiums, bonds, and permits are all quite expensive.
- Difficulty in obtaining vehicles in decent condition.
- Car dealers have a limited financing structure.
Is this Business Right For You?
This business is ideal for people who enjoy cars and have a strong business sense. Former sales managers and car salesmen are also excellent candidates for this line of work. You may have a flexible work schedule as the owner, but this is not guaranteed.
What Happens During a Typical Day at a Car Dealership?
Checking bills, interacting to prospects and clients on the lot, negotiating transactions, and managing a sales crew are all daily chores. Dealerships have a strong sales culture, thus good interpersonal communication skills are essential. As a result, dealership salesmen (including the owner) may spend the majority 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 no special talents are required by the state, most business owners in this area have practical expertise. First and foremost, they have a solid sales history. They also have extensive commercial and management experience. Some dealership owners have previously worked as mechanics, which allows them to better grasp the service aspect of the business.
What is the Growth Potential for a Car Dealership?
Small dealerships are mostly used car lots. These dealerships buy secondhand vehicles at auction and mark them up to resell to consumers. This type of business can be quite profitable and does not have a large amount of overhead or inventory.
A larger dealership may enter into an agreement with a major manufacturer to sell new and certified used vehicles. This sort of dealership business is often large-scale, necessitates significant upfront investments (including franchise fees), and may necessitate high-volume sales in order to maintain the manufacturer’s contract.
Costs of Starting a Car Retail Business in Nigeria
This business is entirely dependent on your capital. You can begin with as few as 1-2 automobiles and go to as many as 30-50 cars. Even if it is a franchise, the size of the firm may differ based on the agreement reached with the corporation. This is a rough price list for the essential items you will need to start your vehicle retail business in Nigeria. A N1.2 million Naira saloon automobile may be purchased for roughly N650,000. An N10 million Naira SUV car may be purchased for roughly N6-7 million Naira, where you might profit between N500,000 and N3,000,000.
Dealer’s licensing fee: This differs by state. N100,000 for Lagos State
- Land rent: The land rent of N200,000 may be less or more, depending on the locality.
- Garage construction: N500,000 for a steel garage.
- Salary: N25,000 per person
Conclusion
Car dealerships have economic downturns from time to time, but it is undeniably a lucrative business, especially if you understand your market and give them with the correct brand. Because of the massive market need and your potential to establish a large network, starting a vehicle dealership business in Nigeria can be a lucrative and profitable investment. If you’re searching for a profitable business to start, the auto dealership industry in Nigeria is an excellent place to start.
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