Costs and requirements for starting a car Dealers business in Nigeria

If you’ve always wanted to own your own business, then starting a car dealership business could be a great opportunity for you. Since consumers are always in need of new and used cars, owning an established car retail shop can provide you with a great job outlook and allow you to grow your career.

Before you start working in the business, it’s important to understand the various costs and requirements of running a car retail operation.

Best Car condition to start: Brand New or used?

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.

Before you start the car retail business, you must decide which type of vehicle condition you’re planning on selling. This will determine the framework for your future operations. If you’re planning on opening a new car dealership, it’s important to consider the various factors that affect the investment in the business. One of these is financial backing from a bank. 

• New

Selling new cars will give you more income as it always comes at a high rate, the profit of selling new cars is always above selling used cars, making sometimes ₦500k per car worth over ₦20 million sold.

• Used

Selling already used cars whether foreign used or Nigeria used has less profit as most buyers already know the actual cost price.

Create a business plan

Before you start a brand new or used car dealership, you must have a business plan that includes the necessary details to establish a successful operation. This can be done by determining which brand or multiple vehicles you want to sell. Having a solid business plan also helps ensure that the financing for the operation is available.

Some of the factors that you should consider when creating a business plan include the cost of equipment, researching car prices, determining employee salaries, and analyzing the advertising budget. These factors can help you create a plan that’s anchored in reality.

Choose the Right Location

 There are a couple of 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 allows them 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.

Licensing and insurance

Before you can start selling cars, you have to first get the necessary licenses. One of these is the dealer’s license, which will allow you to sell vehicles for an unlimited number of years. This is also necessary if you want to operate a business that follows safety and consumer laws.

Regardless of the kind of car dealership you operate, you need to have comprehensive insurance coverage. This typically includes liability, lot coverage, and inventory loss protection.

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.

Secure A SCUML Certificate

The Special Control Unit on Money Laundering (SCUML) was established by the Federal Government in September 2005 in compliance with the provisions of the Money Laundering (Prohibition) Act, 2004 which was subsequently repealed and amended to the Money Laundering (Prohibition) Act 2011(as amended).

The Designated Non-Financial Organizations require a certificate from the Special Control Unit on Money Laundering. These organizations handle a lot of cash and are typically under scrutiny by AML/CFT regimes because they are easy prey for money laundering and terrorism financing activities.

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 a lower rate than retail-rate prices.

Employ automobile repairer

It is a well-known fact that most cars are 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 refurbish them and present them as used vehicles for resale. So when you employ these automobile repairs, they will help you recondition damaged cars for resale.

Costs of starting a car Dealership business in Nigeria

This business depends on your capital and space available at that moment. 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 of prices of the essential things you must get to start your car retail business in Nigeria.

• An N1.2 million Naira saloon car could be bought at around N650,000.
• An N10 million Naira SUV car could be bought at around N6-7 million 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