If you aspire to operate your own car dealership in Australia, there are two main options you can choose. You can either start a new car dealership from scratch or you can buy an existing car dealership. Both options have their own advantages and disadvantages and need to be considered before making a choice.
EasyCars has put together a complete guide that outlines the pros and cons of both options to help you determine what option is best for you.
Let’s get into it!
Starting a New Car Dealership: Pros and Cons
Starting a car dealership from scratch is an exciting and potentially rewarding experience. However, starting a brand-new car dealership in Australia does present many challenges and does require careful planning, significant upfront investment and most importantly the ability to adapt to an ever-changing market.
Pros of Starting a New Car Dealership in Australia
Complete Control Over Operations
When you start a new car dealership in Australia, you have complete control over everything. Everything from marketing to the sales process to choosing the cars you want to sell it all rests on your shoulders. The biggest benefit is you can build a dealership that meets your goals and vision.
Opportunity to Set Your Own Terms
With starting a new dealership, you're in charge of setting your own terms. For example, you will need to choose the location, build your dealership layout, buy the cars that you are looking to sell, identify your dealerships pricing and so on.
Flexibility in Financing and Relations
Another huge benefit of starting a car dealership from scratch is you can choose your own financing options and build your own relationships with specific car manufacturers or suppliers in Australia. With setting a dealership up from scratch you’re not tied to pre-existing contracts, which means you can work with the best partners to offer competitive prices.
Fresh Start in a New Market
With a new car dealership, you have the freedom to target emerging markets or under-served niches. Whether your dealership wants to focus on selling electric cars, high performance or luxury cars, you can cater to the specific needs of your community and set the foundation for long-term success.
Cons of Starting a New Car Dealership
High Initial Investment
It is expensive to start a car dealership in Australia. Think about it, you will need to pay for the initial rent of a location, purchase cars to sell, hire staff, pay for marketing and legal feels and so much more before you even make one sale. Many dealerships fail in their first few years, and having a strong financial plan is paramount.
Time-Consuming Setup Process
When it comes to starting a car dealership from scratch there is a lot of initial administrative work. For example, you will need to register your business, obtain all the relevant licenses, sign contracts with manufacturers or wholesales and meet local zoning regulations. This process can be time-consuming and may delay your opening.
Lack of Established Customer Base
The most important part of running a car dealership in Australia is acquiring customers. Unlike buying an existing dealership, starting a new dealership means you don’t have an established customer base. You will need to invest in a strong marketing strategy to build trust and attract potential car buyers to your dealership.
Inexperienced Staff and Operations
Since you’re building everything from scratch, it is possible that your team may lack the initial experience and familiarity with running a car dealership. You’ll need to invest time into education and training to ensure both you and your staff operate the dealership effectively and efficiently.
Buying an Existing Car Dealership: Pros and Cons
Buying an existing car dealership in Australia can seem like the quicker route to business ownership but, it does come with a unique set of benefits and challenges.
Pros of Buying an Existing Car Dealership
Established Brand and Customer Base
One of the biggest advantages of buying an existing dealership is that it comes with an established customer base and a recognisable brand. An existing and successful dealership will already have loyal customers who trust its services, which will give you a head start and potentially limit your marketing spend compared to starting a dealership from scratch.
Immediate Cash Flow
Unlike when starting a car dealership from scratch, which may take months to start generating income, an existing dealership can provide an immediate cash flow. This can be a major advantage, especially if the business is already profitable and has a steady stream of sales.
Proven Systems and Processes
An existing dealership already has a set of established systems and processes in place. They will have a DMS setup which automates tasks like inventory management and advertising to sales and marketing strategies. A DMS can save you a lot of time, money, and effort as you don’t have to reinvent the wheel when it comes to operations.
Existing Relationships with Suppliers and Manufacturers
When you buy an existing dealership, you will inherit existing relationships with car manufacturers, wholesalers, and service providers. These relationships are valuable and can help you maintain continuity and streamline the inventory ordering process.
Cons of Buying an Existing Car Dealership
High Purchase Price
One of the biggest disadvantages of buying an existing and successful car dealership is the cost is typically higher than starting one from scratch. This comes down to the fact the existing car dealership has an established customer base, established brand and drives strong cashflow.
Inherited Problems
Whilst this should be checked in due diligence, buying an existing dealership does raise the risk of inheriting any underlying problems that the dealership may have had before. For example, they may have had poor financial performance, dissatisfied customers and or outdated processes, fixing which could require significant investment.
Limited Control Over Branding and Operations
If you buy an established dealership, you have limited control over the brands identity and operations. If the dealership is working, you would not want to tamper with it. Changing the dealership’s branding or operations may take time and could alienate current customers who are attached to the old brand.
Staffing Challenges
While an established team can be a benefit since you don’t need to go through the hiring and training process again, it may also be a challenge if the existing employees are set in their ways. If they are not aligned with your vision for the dealership, you may have to spend time restructuring the team or even replacing key personnel.
Final Word
Ultimately, whether you choose to start a new car dealership or buy an existing one depends on your resources, risk tolerance, and long-term goals. Both options provide many advantages and disadvantages and need to be thoroughly understood before making a choice.
DISCLAIMER – The content within this blog does not constitute professional advice and is intended to be general in nature. Please consult with all relevant parties prior to making any decision.
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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.