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.
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
Growthink's Ultimate Business Plan Template allows you to quickly and easily write your used car dealership business plan.
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.
Finish Your Used Car Dealership Business Plan in 1 Day!
Don’t you wish there was a faster, easier way to finish your Used Car Dealership business plan?
With Growthink’s Ultimate Used Car Dealership Business Plan Template you can finish your plan in just 8 hours or less!
Click here to finish your Used Car Dealership business plan today.
OR, Let Us Develop Your Plan For You
Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.