Car Dealership Business Plan
If you want to start a new car dealership or expand your current dealership, you need a business plan.
The following car dealership business plan template gives you the key elements to include in a winning business plan. In addition to this template, a successful business plan will include market research to support your business concept, help you better understand the car dealership industry, market trends, car prices and your target customers. It will also help you craft a smart marketing plan and a strong financial plan.
Sample Business Plan For New Car Dealerships
I. Executive Summary
Business Overview
[Company Name], located at [insert location here] is a brand new GMC dealership that sells, leases, and services new and used vehicles to customers in the surrounding community. Our dealership will feature a range of vehicles, from budget cars to vehicles that fit nicely with the aspirational tastes and preferences of the local area – young, middle class suburbanites want attractive, high quality vehicles, but do not want to pay high prices for them.
Products and Services
[Company Name] will maintain an inventory of new and used GMC vehicles. Services will include routine maintenance, as well as parts and repairs.
In addition, [Company name] will also offer financing and insurance options for customers with all credit scores. Customers will find financing options at [Company name] that they will not find at other area dealerships.
Customer Focus
[Company Name] will primarily serve the residents within a 30-mile radius of our location. The demographics of these customers are as follows:
- 27,827 residents
- Average income of $74,700
- 58.9% with higher education
- 49.6% in Management/Professional occupations
- Median age: 35 years
This bodes well for [Company Name], as the prime demographic for dealerships are consumers with prime and super prime credit ratings, which is typically correlated to income. In addition, there is growing demand for maintenance and repair services, as consumers have recently opted to maintain rather than upgrade their vehicles. Individuals of all ages will be sure to patronize [Company Name] for both vehicle purchasing and vehicle maintenance/repair.
Management Team
[Company Name]is led by [Founder’s Name] who has been in sales for 20 years. While [Founder] has never run a dealership himself, he has worked in the industry since age 30. As such [Founder] has an in-depth knowledge of the dealerships industry, including the operations side (e.g., running day-to-day operations) and the business management side (e.g., staffing, marketing, etc.).
Success Factors
[Company Name] is uniquely qualified to succeed due to the following reasons:
- The Company will fill a specific market niche in the growing community we are entering. In addition, we have surveyed the local population and received extremely positive feedback saying that they explicitly want to frequent our business when it is launched.
- Our location is in a high-volume area with easy access from multiple residential and commercial district zones.
- The management team has a track record of success in the dealerships industry.
- Auto dealerships are a proven business and have succeeded in communities throughout the United States.
- Local competitors leave a large gap in the market—there are dealerships offering used cars and maintenance services, and a dealership that exclusively sells electric vehicles, but nothing that encompasses both new and used autos (internal combustion, hybrid, and fully electric), as well as a service department.
Financial Highlights
[Company Name] is currently seeking $10 million to launch. Specifically, these funds will be used as follows:
- Lot design/build: $100,000
- Franchise fee: $400,000
- Inventory: $9 million
- Working capital: $500,000 to pay for Marketing, salaries, and lease costs until [Company Name] reaches break-even
Topline projections over the next five years are as follows:
| Financial Summary | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Revenue | $400,000 | $466,067 | $524,563 | $590,400 | $664,500 |
| Total Expenses | $345,594 | $385,172 | $419,434 | $475,894 | $507,480 |
| EBITDA | $54,406 | $80,895 | $105,129 | $114,506 | $157,020 |
| Depreciation | $20,840 | $20,840 | $20,840 | $20,840 | $20,840 |
| EBIT | $33,566 | $60,055 | $84,289 | $93,666 | $136,180 |
| Interest | $16,822 | $14,719 | $12,617 | $10,514 | $8,411 |
| Pre-Tax Income | $16,744 | $45,336 | $71,673 | $83,153 | $127,769 |
| Income Tax Expense | $0 | $0 | $17,104 | $29,103 | $44,719 |
| Net Income | $16,744 | $45,336 | $54,569 | $54,049 | $83,050 |
| Net Profit Margin | - | 10% | 10% | 9% | 12% |
II. Company Overview
Who is [Company Name]?
[Company Name], located at [insert location here] is a brand new GMC dealership that sells, leases, and services new and used vehicles to customers in the surrounding community. Our dealership will feature a range of vehicles, from budget cars to vehicles that fit nicely with the aspirational tastes and preferences of the local area – young, middle class suburbanites want attractive, high quality vehicles, but do not want to pay high prices for them.
[Company Name] was founded by [Founder’s Name]. While [Founder’s Name] has been in the auto sales business for some time, it was in [month, year] that he decided to launch [Company Name]. Specifically, during this time, [Founder] took a trip to Fort Lauderdale, FL. During his trip, [Founder’s Name] visited a dealership that enjoyed tremendous success. After discussing the business at length with the owner of the dealership, [Founder’s Name] clearly understood that a similar business would enjoy significant success in his hometown.
Specifically, the customer demographics and competitive situations in the Fort Lauderdale location and in his hometown were so similar that he knew it would work. After surveying the local population, [Founder’s name] went ahead and founded [company name].
[Company Name]’s History
Upon returning from Fort Lauderdale, surveying the local customer base, and finding a potential lot location, [Founder’s Name] incorporated [Company Name] as an S-Corporation on [date of incorporation].
The business is currently being run out of [Founder’s Name] private offices, but once the build-out on [Company Name]’s commercial location is finalized, all operations will be run from there.
Since incorporation, the Company has achieved the following milestones:
- Found commercial space and signed Letter of Intent to purchase it
- Developed the company’s name, logo and website located at [website]
- Hired an architect to design the showroom
- Determined equipment and inventory requirements
- Begun recruiting key employees with previous wellness services experience
[Company Name]’s Products & Services
Below are [Company Name]’s products and services:
- New vehicles
- Used vehicles
- Parts and repair services
- Finance and insurance
Sales professionals will be available to determine the customer’s needs, budget, and preferences, and recommend options.
[Company Name] will also offer financing and insurance options for customers with a range of credit scores.
[Company Name] will feature the latest models of GMC vehicles. It will continue to update its inventory in order to provide the newest cars to its customers.
Furthermore, the waiting area will feature a relaxing, welcoming atmosphere, and a coffee bar will be available for waiting clients.
Showroom Design
[Company Name] will develop a 4,000 square foot facility whose key elements will include the following:
- Showroom with room for 4 cars
- Office area
- Reception Desk
- Coffee bar
- A waiting area
- Restrooms
[Company Name] plans to be open 6 days a week, from 7AM to 9PM. As demand dictates, we may extend or reduce our hours.
III. Industry Analysis
[Company Name] competes against other new and used car dealerships, as well as online-only auto dealers and private consumer sales.
According to a report by National Automobile Dealers Association, the car dealership industry is a fragmented one, as the majority of operators are single-location businesses and employ fewer than 20 people. The market is estimated to grow to over $1 trillion in five years. Since there are no truly dominant competitors, barriers to entry are not as high as many other industries, and a start-up can expect to have success in this growing market, [Company Name] is well-positioned for success. There is plenty of room in the industry particularly for conveniently located dealerships that cater to specific demographic trends and demands. In this industry, size does not necessarily mean an advantage, which bodes well for [Company Name].
Market Trends
The market in which [Company Name] will compete is experiencing a number of different trends.
Market-level trends:
- Flat growth. This market is expected to remain consistent, with a slight contraction of 0.1% annually.
- Success drivers. Customer satisfaction is what ultimately makes one dealership triumph while another fails. The experience a dealership’s customer has will ultimately determine whether or not they return and whether or not they refer others to the dealer.
- Electric Vehicle Adoption. There is a worldwide shift to electric vehicles, and consumers tend to make decisions on such a purchase quickly.
Firm-level trends:
- Inventory and Price. Dealers primarily compete on inventory diversity and vehicle prices, but also compete through warranty, credit offerings and sales experience.
- Customer service. Quality of customer service in the parts and repair business is a significant point of competition.
Customer-level trends:
- Decreasing customer loyalty. Only 8% of consumers are strictly loyal to a specific car brand and 57% of consumers are loyal to whatever brand that offers the best customer experience.
- Purchasing preferences. Customers are increasingly shopping online, including shopping for vehicles. While not all customers complete an automobile purchase online, many do use the internet to research and compare before making the final purchase decision.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will serve the residents of [company location] and the immediately surrounding areas as well as those who work in [company location].
The area we serve is populated mostly by middle class Millennials; as a result, they have the means to pay for higher quality vehicles. Further, many are looking to transition to hybrid or electric vehicles, and middle class earners are the primary demographic for these types of vehicle.
The precise demographics of the town in which our retail location resides is as follows:
| Wilmette | Winnetka | |
|---|---|---|
| Total Population | 26,097 | 10,725 |
| Square Miles | 6.89 | 3.96 |
| Population Density | 3,789.20 | 2,710.80 |
| Population Male | 48.04% | 48.84% |
| Population Female | 51.96% | 51.16% |
| Target Population by Age Group | ||
| Age 18-24 | 3.68% | 3.52% |
| Age 25-34 | 5.22% | 4.50% |
| Age 35-44 | 13.80% | 13.91% |
| Age 45-54 | 18.09% | 18.22% |
| Target Population by Income | ||
| Income $50,000 to $74,999 | 11.16% | 6.00% |
| Income $75,000 to $99,999 | 10.91% | 4.41% |
| Income $100,000 to $124,999 | 9.07% | 6.40% |
| Income $125,000 to $149,999 | 9.95% | 8.02% |
| Income $150,000 to $199,999 | 12.20% | 11.11% |
| Income $200,000 and Over | 32.48% | 54.99% |
Customer Segmentation
The Company will primarily target the following three customer segments:
V. Competitive Analysis
Direct & Indirect Competitors
The following dealerships are located within a 20-mile radius of [Company Name], thus providing either direct or indirect competition for customers:
Gibson GMC
Gibson GMC’s goal is to give its customers the best possible experience online and at its physical store. The professional and fun-loving sales team is committed to its customers’ complete satisfaction. Gibson GMC prides itself on building relationships with its customers throughout all phases of the automotive journey whether it’s sales, service, or parts. Gibson GMC provides auto sales and services for both New GMCs and used cars.
While we expect that Gibson GMC will continue to thrive. But since is located in the next city, we expect more and more customers will frequent [Company Name] based on proximity and competitively prices we offer.
Johnson Auto
Johnson Auto is an independent used car dealership specializing in certified pre-owned vehicles. The team believes that the car buying process should be as hassle-free as possible. The team takes pride in serving its customers to the fullest. The service center is one of the best in the area, and the team strives to get its customers back on the road as soon as possible. Johnson Auto maintains a convenient online parts inventory, and if a customer can’t find what they want there, the team will help them find what they are looking for. At Johnson Auto, the team is willing to answer each and every question a customer might have during the car buying process.
[Company Name] has several advantages over Johnson Auto, in that it specializes in selling and servicing one make of vehicle. [Company Name] will provide these specialized services at an affordable price point.
Foster’s Chrysler, Jeep, Dodge, Ram
Foster’s Chrysler, Jeep, Dodge, Ram offers both new and used inventory, as well as providing service for these makes. The dealership also retails auto parts and accessories. This location also participates in Toyota Rent a Car, in which new Toyotas are rented by the day. Camrys rent for $48.50 per day; Corollas rent for $37.80 per day.
Foster’s Chrysler, Jeep, Dodge, Ram offers some services which are unique to the area, and thus we expect it will continue to draw a large clientele. However, because many of its services are geared to a rental clientele, we expect to draw buyers who seek the same level of support.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. These advantages include:
- Location: [Company Name]’s location is near the center of town, giving us access to commuters going to and leaving the train station, local office workers, and passersby shopping in the city.
- Great service at an affordable price: The complete array of auto services offered by [Company Name] is comprehensive, and [Company Name] will offer these services at a much more affordable price.
- Management: Our management team has years of business and marketing experience that allows us to market to and serve customers in a much more sophisticated manner than our competitors.
- Relationships: Having lived in the community for 25 years, [Founder’s Name] knows all the local leaders, newspapers and other influencers. As such, it will be relatively easy for [Company Name] to build brand awareness and an initial customer base.
VI. Marketing Plan
[Company name] seeks to position itself as a respectable, upper-middle-market competitor in the auto industry. Customers can expect to receive personal attention and automotive services from licensed and certified professionals for a price somewhere between national chains and custom shops.
The [Company Name] Brand
The [Company Name] brand will focus on the Company’s unique value proposition:
- Convenient location
- Highly trained specialists
- Significant personal attention
- Moderate price point
- Comfortable, customer-focused environment
Promotions Strategy
[Company Name] expects its target market to be individuals working and/or living within a 10-mile radius of its location. [The Company’s] promotions strategy to reach these individuals includes:
Local Publications
[Company name] will announce its opening several weeks in advance through publicity pieces in multiple local newspapers and publications. Regular advertisements will run to maintain exposure to relevant markets. Community newspapers, school publications, youth sports programs, and similar channels will be a major promotion effort.
Major Publications
We will make careful use of advertising in selected larger publications. [Publication or newspaper name] has a circulation of xyz, and we can expect to reach a wider geographic region of customers on a limited basis. Advertisements with major publications will be used selectively, based on cost-effectiveness. These ads will include discount coupons so that response to the ads can be tracked.
Community Events/Organizations
[Company name] will promote itself by distributing marketing materials and participating in local community events, such as school fairs, local festivals, or homeowner associations.
Commute Advertising
We will drive attention toward [Company name] by leasing a billboard alongside [route or highway]. Advertising on heavily traveled commute routes is an opportunity to alert large numbers of working individuals with disposable income of our opening.
Customer Loyalty Programs
[Company name] will create a winning customer loyalty program to keep its best clients coming back again and again. In addition, we will send periodic, regular emails and text messages to customers. These communications will (a) ensure that customers are satisfied with their purchases, and (b) remind customers after a certain period of time has passed that they might want to shop for a new car. Long-term customers will have the opportunity to participate in the loyalty program, and referrals will be rewarded as well.
Direct Mail
[Company Name] will blanket neighborhoods surrounding its locations with direct mail pieces. These pieces will provide general information on [Company Name], offer discounts and/or provide other inducements for people to visit the center.
Ongoing Customer Communications
[Company Name] will maintain a website and publish a monthly email newsletter to tell customers about new events, inventories and more.
Pre-Opening Events
Before opening the dealership, [Company Name] will organize pre-opening events designed for prospective customers, local merchants and press contacts. These events will create buzz and awareness for [Company Name] in the area.
Pricing Strategy
[Company Name]’s pricing will be competitive, so customers feel they receive great value when shopping for a new car. The customer can expect to receive quality services and personalized attention when patronizing the dealership.
VII. Operations Plan
Functional Roles
[Company name] will carry out its day-to-day operations on a walk-in basis. Walk-in clients for the service department will be accommodated when possible. However, parts and accessories may be purchased on a walk-in basis.
In order to execute on [Company Name]’s business model, the Company needs to perform several functions. The majority of employees will assist in upselling customers in addition to the primary functions as auto sales professionals. [Company name] anticipates using the services of X employees, divided into the following roles.
Service Functions
- Auto sales
- Financing and insurance processing
- Auto maintenance and service
- Parts sales
- Appraisals
Administrative Functions
- General & administrative functions including legal, marketing, bookkeeping, etc.
- Sourcing and storing products and inventory
- Hiring and training staff
- Appointment making
- Customer service/cash register functions
Miscellaneous
- Maintenance personnel
- Porters
Milestones
The following are a series of steps that lead to our vision of long-term success. [Company Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Launch [Company Name] |
| [Date 6] | Reach break-even |
VIII. Management Team
Management Team Members
[Company Name]is led by [Founder’s Name] who has been in auto sales for 20 years.
While [Founder] has never run a dealership himself, he has worked in the auto industry since age 30. He began his career after he graduated from [University Name] in [19xx].
[Other person’s name] will serve as the customer service manager. [He/she] has extensive experience in the auto industry.
[Founder] will serve as the office manager. In order to launch our dealership, we need to hire the following personnel:
- Sales staff (3 to start)
- Finance and insurance processors (2 to start)
- Service personnel (2 to start)
- Porter (1 to start)
- Appraiser (1 to start)
- Assistants (1 to start)
- Receptionist (1 to start)
As dictated by demand and operational maturity, [Founder] will consider hiring the following personnel:
- Sales Manager [Number]
- Assistant Office Manager
IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenues will come primarily from the sale of vehicles and secondarily from the sales of parts/accessories and auto services.
Labor expenses are a major cost driver for dealerships with service departments. Service technicians are salaried; therefore, attractive compensation packages are necessary to maintain a qualified staff.
The major cost drivers for the company’s operation will consist of:
- Inventory and parts
- Salaries
- Lease
Moreover, ongoing marketing expenditures and cost of goods sold expenses are also notable cost drivers for [Company Name].
Capital Requirements and Use of Funds
[Company Name] is seeking total funding of $10 million to launch. Specifically, these funds will be used as follows:
- Lot design/build: $100,000
- Franchise fee: $400,000
- Inventory: $9 million
- Working capital: $500,000 to pay for Marketing, salaries, and lease costs until [Company Name] reaches break-even
Key Assumptions & Forecasts
The following table reflects the key revenue and cost assumptions made in the financial model.
| Number of cars sold per month | |
|---|---|
| FY 1 | 20 |
| FY 2 | 25 |
| FY 3 | 30 |
| FY 4 | 40 |
| FY 5 | 50 |
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
