starting a car dealership

[smokey145]

daemon said:

singlecoil said:

smokey145 said:

daemon said:

You will be doing phenominally well to average £1K profit per car.

Surely it's in that ball park?

It works better if you put the post you are quoting first, and your comment afterwards

And I think what he is getting at it that no, it isn't in that ballpark. You might be able to buy it for £1000 less than what you sell it for, but it won't be pure profit, there will be a lot of expenses to come out of that.

I guess it depends on what you are selling and at what pricepoint. I'd say £500 is more realistic - and even that would be hard as an average. I know i'm well below that.

For talks sake, lets say you buy a car at £3,000. You're going to be doing very well to retail it at £4295.

Realistically, you're going to take £4K for it - or at least use that £295 to bolster up a trade in value.

You'll probably spend £200 on prep - service, valet, bumper scuffs, etc.

You then need to warrant the car in some capacity - whether self warrant or third party, so theres another £150 gone.

Assuming you're paying £2,000 a month for a site, and selling 20 cars a month, you'd need to allocate £100 of the profit to cover your site.

Also, say, an easy £50 per car on advertising.

Rates, electric, heating, say allocate another £100.

Thats us down to £400 profit.

VAT will be payable on the £1,000, so theres another £167 gone.

So we're down to £233....

I'd say once you're into the £7K+ cars then you've a better chance of getting more out of it. But then to have 20 £7K cars on your forecourt you need £140,000. Plus as we've said another 5 paid for but in prep, and another 5 sold but not paid for, so you can see how suddenly figures like £200K start popping up, and employing staff, etc, etc.

Edited by daemon on Saturday 12th November 19:53

Edited by daemon on Saturday 12th November 19:54

excellent, thank you. i did just want to open up the thread a little to discuss the finances of car dealship ownership, just to see how viable it is. good to have an idea of what you need to do to establish one, but also a good idea to know what profit levels you will be running at. great post.

[daemon]

smokey145 said:

daemon said:

singlecoil said:

smokey145 said:

daemon said:

You will be doing phenominally well to average £1K profit per car.

Surely it's in that ball park?

It works better if you put the post you are quoting first, and your comment afterwards

And I think what he is getting at it that no, it isn't in that ballpark. You might be able to buy it for £1000 less than what you sell it for, but it won't be pure profit, there will be a lot of expenses to come out of that.

I guess it depends on what you are selling and at what pricepoint. I'd say £500 is more realistic - and even that would be hard as an average. I know i'm well below that.

For talks sake, lets say you buy a car at £3,000. You're going to be doing very well to retail it at £4295.

Realistically, you're going to take £4K for it - or at least use that £295 to bolster up a trade in value.

You'll probably spend £200 on prep - service, valet, bumper scuffs, etc.

You then need to warrant the car in some capacity - whether self warrant or third party, so theres another £150 gone.

Assuming you're paying £2,000 a month for a site, and selling 20 cars a month, you'd need to allocate £100 of the profit to cover your site.

Also, say, an easy £50 per car on advertising.

Rates, electric, heating, say allocate another £100.

Thats us down to £400 profit.

VAT will be payable on the £1,000, so theres another £167 gone.

So we're down to £233....

I'd say once you're into the £7K+ cars then you've a better chance of getting more out of it. But then to have 20 £7K cars on your forecourt you need £140,000. Plus as we've said another 5 paid for but in prep, and another 5 sold but not paid for, so you can see how suddenly figures like £200K start popping up, and employing staff, etc, etc.

Edited by daemon on Saturday 12th November 19:53

Edited by daemon on Saturday 12th November 19:54

excellent, thank you. i did just want to open up the thread a little to discuss the finances of car dealship ownership, just to see how viable it is. good to have an idea of what you need to do to establish one, but also a good idea to know what profit levels you will be running at. great post.

I would class myself as a motor trader.

Main dealers probably wouldnt entertain having too many cars about them in that price and and will probably be looking for a £2K to £2.5K markup on used stock. Not sure how their net profit figures would look, given their collossal overheads.

Net profit on new cars is waifer thin though - i know of a few mainstream dealships who are selling new cars for just £50-100 net profit.

[POORCARDEALER]

V8mate said:

This is the bit which interests me. We hear of people who start by selling a couple of cars from home and a few years later are running 100-car sites.

To such folk: how did you expand? Making a grand car profit on each car is going to be a really sloooow way of getting to that super-site.

The big finance houses aren't going to provide car stocking finance to someone with three Corsas on their drive. How did you finance expansion?

Many cut corners, pay no VAT ot tax, very little warranty comeback...in days gone by you could make a grand a car, it doesnt take long to get a few quid together.

I remember selling 7 cars in a weekend whilst working full time as well, IIRC I made about £4.5K that weekend and thats going back 20 years...the motor trade back then really was very different to today.

Growth without borrwing these days is very very slow

[AudiSport]

A friend of the family is a car dealer. He sells lots of cars, well into the thousands per year. He sometimes works on £60 per car.

He is also very wealthy - so the numbers must be big. I believe many of the cars are new. Sorry I have little info, but the small margin always amazed me!

[Maz_uk]

AudiSport said:

A friend of the family is a car dealer. He sells lots of cars, well into the thousands per year. He sometimes works on £60 per car.

He is also very wealthy - so the numbers must be big. I believe many of the cars are new. Sorry I have little info, but the small margin always amazed me!

Sounds more like a trader as opposed to a retailer, I stock between 30-40 cars.

We put a minimum of £1000 margin across about 80% of cars, realistically more than 50% of cars have a margin of £1500-£3000.

My cars are not anywhere near the cheapest in the uk, however everything has service history, been prepped to a high standard and most are low mileage.

Immediately weeds out the hagglers and the wheeler dealer types because the cars too expensive to start with.

Sometimes it can take 5-6 months to turn certain cars over, but I make my money out of it.

Only problem is when it's quiet, it's really quiet!

[Emubiker]

Update:

I am going to the auctions next month to get a feel for the environment etc I have been looking at all the additional costs involved (as a private individual at this point) and I do not understand what the "Buyer's Indemnity" is actually for. Surely if a car has outstanding finance a quick HPI check would show this, instead of paying an extra £100+ to check. Or is it to somehow write off anything outstanding? Is it always payable?

Thanks in advance.

[V8mate]

Emubiker said:

Update:

I am going to the auctions next month to get a feel for the environment etc I have been looking at all the additional costs involved (as a private individual at this point) and I do not understand what the "Buyer's Indemnity" is actually for. Surely if a car has outstanding finance a quick HPI check would show this, instead of paying an extra £100+ to check. Or is it to somehow write off anything outstanding? Is it always payable?

Thanks in advance.

It's their fee dressed up. And, yes, it's always payable.
Don't even think about trying to trade from an auction by paying non-trade prices. The mix of the kind of stock which goes to auction together with the punishing fees will make it more unviable than a Greek tax demand.

[Emubiker]

Are the fees really that different between trade and private? I'm still working out all the costs at the moment, Its my day off so have some time (for once)

[V8mate]

I'd work on 5% as a private buyer and less than a third of that for trade.

[Jerry Can]

as a slight tangent, why do you want to buy/set up a car retail business, I would have thought there is less risk and probably more money to be made from buying an independent workshop, some of those guys make a decent wedge.

[Emubiker]

Jerry Can said:

as a slight tangent, why do you want to buy/set up a car retail business, I would have thought there is less risk and probably more money to be made from buying an independent workshop, some of those guys make a decent wedge.

In an ideal world, that was my plan when I was younger, but I went to university to study business instead of serving an apprenticeship. Now that means that I am not a proffessional mechanic, which would make setting up my own workshop would be less profitable at this stage as I wouldn't be able to help with many jobs and thus be paying others from the very start.

[Jerry Can]

you need to spend less time at the fubar, rocks, and touching up the cornton slappers, and more time developing your spannering skills.

there are several workshops going for sale, you buy the business and that includes the techs, all you have to do is manage, and lend a hand when necessary. your only real concern would be whether you can determine if they have done the job right and whether a student can manage a team of grizzly mechanics.

[Emubiker]

Jerry Can said:

you need to spend less time at the fubar, rocks, and touching up the cornton slappers, and more time developing your spannering skills.

there are several workshops going for sale, you buy the business and that includes the techs, all you have to do is manage, and lend a hand when necessary. your only real concern would be whether you can determine if they have done the job right and whether a student can manage a team of grizzly mechanics.

Local then are you, I've got plenty of skills ta managing the race team (very small) and making sure they do their job right, cos if they don't its my life on the line. Be a different story going in to an already established place though. But haven't thrown the idea right out the water just yet.

[cassie10]

Hi Everyone

First post so please be kind

I have read this post with interest but could I ask a question that was not properly explained please:

I want to set up on the finance side of the dealership, I have the warranty stuff taken care of so:

1. How do I find finance houses that will provide car finance (I have googled but could not find more than 2 and one would not consider me as I did not have 2 years dealer exp even tho I had 12 years finance exp!!)

2. Can anyone recommend the best financiers re bad credit as that is where I want to try to place more deals

3. Other than warranty comm and finance comms is there anything else I could consider to increase margins

4. anything you think may be useful re the above

thanking you in advance for helping me C

[POORCARDEALER]

First thing you need is a Consumer Credit Licence ( ccl).....if you are a limited company they are about £1200, or as an individual around 800 iirc.

Sub prime lenders in my experience are pretty poor.....they want people who are just sub, but charge high rates, anyone properly sub prime they just reject these days in my experience.

You could try firstresponse, ring them and ask them to send the rep in.

[CR11ENA]

I know this topic was started 3 years ago.

But this has been really helpful.

My plan is to buy 1 car, and sell that for a profit, save the profit.. turn it into 2 cars, or a car of a higher value, and so on and so on (obviously not that easily)

is that a good plan?

Thanks

x

[POORCARDEALER]

CR11ENA said:

I know this topic was started 3 years ago.

But this has been really helpful.

My plan is to buy 1 car, and sell that for a profit, save the profit.. turn it into 2 cars, or a car of a higher value, and so on and so on (obviously not that easily)

is that a good plan?

Thanks

x

Sounds good until you are stuck with 2 cars for months on end so nothing happens....could work but will be a very slow process

[n_const]

CR11ENA said:

I know this topic was started 3 years ago.

But this has been really helpful.

My plan is to buy 1 car, and sell that for a profit, save the profit.. turn it into 2 cars, or a car of a higher value, and so on and so on (obviously not that easily)

is that a good plan?

Thanks

x

Yes ! What a brilliant plan, I bet no one has ever thought of it. It really is that simple soon you'll have a number of dealerships. HTH

[Monkeylegend]

n_const said:

HTH

I doubt it.

[n_const]

Monkeylegend said:

I doubt it.

It was a stupid post and a stupid question. If it were that easy surely everybody would be doing it ?!