Costs and requirements for starting a car retail business in Nigeria
If you’ve always dreamed of owning your own business and you have a passion for automobiles, then starting your own car retail business might just be a perfect business venture for you to launch. Considering consumers are always in need of quality new and used cars, owning a car retail shop offers an impressive job outlook and plenty of career growth. In order to help you settle into the business, here are the costs and requirements for starting up your very own car retail business.
COSTS AND REQUIREMENTS FOR STARTING A CAR RETAIL BUSINESS IN NIGERIA
Requirements for starting a car retail business in Nigeria
New or used?
Before you begin lining up cars on the lot, you have to decide whether you want to deal primarily in used or new car sales. The new or used route will set the framework for the rest of your dealership endeavors. If you choose to start a new car dealership, it’s important to keep in mind that the initial investment is substantially higher than a used car dealership. This means you’ll likely need an investor or financial backing from a bank.
Starting a used car dealership, on the other hand, doesn’t require such a large initial investment, but the earning potential is lower. The profit margin for most used cars is around N300k – N500k, and price fluctuations are common.
Create a business plan
Once you decide between selling new or used cars, you’ll need to formulate a suitable business plan for your future dealership. This is especially the case if you need to acquire financing. A solid dealership should begin with the vehicles themselves; are you going to sell one brand or multiples? If selling both new and used cars is a possibility, it’s also important to include this in the business plan.
Other business plan stipulations include determining business equipment costs, researching manufacturer car costs versus used car prices, calculating employee salaries, lease and sales agreement costs, and planning your advertising budget. All of these factors will help you create a business plan that’s anchored in reality.
COSTS AND REQUIREMENTS FOR STARTING A CAR RETAIL BUSINESS IN NIGERIA
Licensing and insurance
There are a number of hurdles you have to jump before you can begin selling cars, and one of them is obtaining your dealer’s license. If you want a full-fledged dealership, then you need a dealer’s license that permits you to sell an unlimited number of vehicles a year. A dealer’s license is also necessary if you want your sales activities to fall within the Consumer Rights and Safety laws. All car dealerships require comprehensive insurance coverage whether they deal with used cars, new cars, or both. Typical car dealership insurance coverage includes general liability, lot coverage, and comprehensive plans that cover everything from property damage to inventory loss.
Choose the Right Location
There are a couple factors that come into play when choosing a location for your car dealership. For starters, you’ll want to make sure the location you choose can support your business. The larger the population, the more sales you’ll make. Then there’s the location’s visibility to take into consideration. If your lot is on an obscure road or set back from the roadside, you’ll likely draw fewer customers.
A corner lot at a major intersection is ideal, but a roadside location on a high-traffic road is also a smart dealership location. There’s also the competition to keep in mind. Dealerships that are right next to one another appeal to shoppers because it gives them the opportunity to walk away and quickly find another lot and another deal. This could be a good or bad thing for your business depending on which end of this scenario you’re on.
Pay For A Car Dealership License
To become a car dealer in Nigeria, you will need to apply for and pay the ‘Car Dealership License’ fee. It certifies you as an authenticated car dealer which comes with numerous advantages. With that, you can become a certain company’s franchise, i.e. selling only their car models. There are bidding sites that accept only certified dealers to their site, where you will come across overwhelming deals. Lastly, you avoid being prosecuted by the law.
COSTS AND REQUIREMENTS FOR STARTING A CAR RETAIL BUSINESS IN NIGERIA
Hire staff
If you want to run a big place you might need to hire extra hands, as much help as a man may need for labours such as driving the cars in and out of the garage and parking them, cleaning the cars, and help with sales. On occasions even repairs of the vehicles. Although if the place is small two of you might be okay for the whole job. When hiring, consider someone with experience with cars as this will serve well. Hire outgoing people experienced in handling many types of customers.
Vehicle acquisition
To make it big in this business you will need to visit some well recognized wholesale dealer auctions to buy used vehicles at lower rate than retail-rate prices.
Consult a professional/expert
As a beginner, you are expected to consult some experts in auto dealership field for more insights, these experts can review secrets than will be very useful to the business
Employ auto mobile repairer
It is a well known fact that most cars sold as second-hand or damaged vehicles bought from either insurance companies or custom auctions at giveaway prices. After purchasing the vehicles the smart dealers then refurbishes them and present them as used vehicles for resale. So when you employ these auto mobile repairs, they will help you recondition damaged cars for resale.
Costs of starting a car retail business in Nigeria
This business really depends on your capital. You can start with as little as 1-2 cars to as many as 30-50 cars. Even when it is a franchise, the size of the business may vary depending on the deal that was made with the company. This is a general list for prices of the essential things you must get to start your car retail business in Nigeria.
A N1.2 million Naira saloon car could be bought at around N650,000.
An N10 million Naira SUV car could be bought at around N6-7million Naira.
Where you could walk away with N500,000 to N3,000,000 in profits.
Dealer’s license fee: This varies from state to state. For Lagos State is N100,000
Land rent: N200,000 could be less or more depending on location.
Garage construction: For a steel garage; N500,000
Salary: Per person; N25,000
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