Are you thinking about starting a Used Car Dealership in Australia? Starting a car dealership in Australia can be a lucrative business opportunity with the industry growing substantially year-on-year and showing no signs of slowing. However, one of the biggest challenges with starting any business in Australia let alone a car dealership is you need access to funding.
That brings us to the question, what funding options are available to Used Car Dealerships in Australia?
In this piece, EasyCars will explore the multiple different forms of financing and funding for Used Car Dealerships in Australia, helping you on your journey of starting or growing a used car dealership.
Let’s get into it.
1. Traditional Bank Loans
When it comes to funding and financing a business, the first and most used method is Traditional Bank Loans. One of the best things about operating a business in Australia is there are multiple banks available to draw loans from. Australian banks offer many different types of loans, whether small or large that can be tailored to suit the needs of your used car dealership.
Here are the two types of business loans available to start a car dealership in Australia.
Secured Business Loans: A secured business loan requires collateral like a house or other valuable assets to secure the loan and reduce the risk for a lender. The biggest advantage of a secured business loan in Australia is they often come with lower interest rates and allow you to borrow larger amounts of funds to start your used car dealership.
Unsecured Business Loans: The biggest difference between a secured business loan and an unsecured business loan is that you do not require any collateral like your house or car to gain an unsecured business loan. If you have a good credit history, many lenders will approve funding for your used car dealership. The biggest disadvantage of an unsecured loan is they typically come with higher interest rates and lower borrowing amounts.
What are the Advantages of Traditional Bank Loans for Used Car Dealership Funding:
- Access to larger amounts of funding.
- Structured loan repayment terms.
What are the Disadvantages of Traditional Bank Loans for Used Car Dealership Funding:
- Lengthy loan approval process.
- You will need a good credit history and financial statements.
2. Dealer Floor Plan Financing
Another commonly used form of financing for all types of Automotive Dealerships is Dealer Floor Plan Financing. Dealer Floor Plan financing is a specialised form of funding specifically tailored for car dealerships in Australia. Floor Plan financing allows dealers to purchase vehicle stock without paying for it upfront.
How Dealer Floor Plan Works: The easiest way to explain Dealer Floor Plan Financing is when a lender provides a line of credit to a used car dealership that they can use to buy cars. The dealership then needs to pay off the remaining balance when the vehicle sells.
What are the Advantages of Dealer Floor Plan Financing:
- Dealer Floor Plans keep cash flow available for other business needs.
- Floor Plans often include favourable terms like extended repayment terms until the vehicle sells.
What are the Disadvantages of Dealer Floor Plan Financing:
- Interest rates can be high if inventory does not sell quickly.
- Requires diligent management of inventory and sales cycles.
3. Small Business Loans and Grants
One of the biggest advantages of starting a used car dealership in Australia is the Australian Government offers several Small Business Loans and Grants.
Australian Government Small Business Grants: There are many different Australian Government Small Business Grants available that are aimed at supporting small businesses. The different grants available can be found on the Australian Government Website.
Small Business Loans: Another enticing option is Government-backed loans. The biggest benefit of Government-backed loans is they offer flexible terms and traditionally lower interest rates.
What are the advantages of Government Small Business Loans and Grants:
- Australian Government Grants do not need to be repaid.
- Government-backed loans offer flexible terms and conditions.
What are the disadvantages of Government Small Business Loans and Grants:
- Extremely competitive application process.
- Grants and Loans often have a very specific eligibility requirements.
4. Private Investors
Another funding option available for all business in Australia that many family owned used-car dealerships currently take advantage of is Private Investors. Private investor funds is when you engage with an individual to lend funds to the business with specific tailored terms and conditions, often equity in the business as opposed to repayments.
What are the advantages of Private Investors:
- Your Used Car Dealership can raise large amounts of funding.
- Investors can often provide valuable business expertise and networking opportunities.
What are the disadvantages of Private Investors:
- Dilution of ownership.
- High expectations for rapid growth and profitability.
5. Personal Savings
The traditional and often the first course of funding for many entrepreneurs wanting to start a used car dealership is using personal savings. Using personal savings completely removes the need of external funding and keeps you in full control.
What are the advantages of using personal savings to start a used car dealership in Australia:
- You will have full control over the business.
- The business will have no external debt or interest repayments to make.
What are the disadvantages of using personal savings to start a used car dealership in Australia:
- Limited amount of funding.
Final Word,
Securing funding is an essential part of starting and growing a used car dealership in Australia. The best thing about starting a business in Australia is there are a multitude of different financing options available to you. Each funding option has their own advantages and disadvantages and should be thoroughly examined before choosing an option.
We hope you enjoyed reading this article. To read more articles like this, please visit the EasyCars latest news page here.
About EasyCars,
EasyCars by Jeal is an Australian, web-based, dealer management system that automates the buying and selling of motor vehicles. Using the latest technologies, EasyCars removes frustrations experienced at the dealership and opens your doors for greater growth.
EasyCars features include Simple Stock Management, Automated Advertising, Integrated Accounting, Government Compliance, Business Reporting, Facebook Automotive Inventory Ads, Reviews Management, Dealership Websites and more.
To learn more about EasyCars Dealer Management System or to arrange a no-obligation free demo, contact us today on 1300 473 744 or submit the form below.