Car Dealership Business Plan: Complete Guide

Whether you’re looking to raise funding from private investors or to get a loan from a bank (like a SBA loan) for your car dealership, you will need to prepare a solid business plan.

In this article we go through, step-by-step, all the different sections you need in your car dealership business plan. Use this template to create a complete, clear and solid business plan that get you funded.

For more information on car dealerships and how to open yours, read our complete guide below:
How to Open a Car Dealership in 10 Steps: Complete Guide

1. Executive Summary

The executive summary of a business plan gives a sneak peek of the information about your business plan to lenders and/or investors.

If the information you provide here is not concise, informative, and scannable, potential lenders and investors may lose interest.

Though the executive summary is the first and the most important section, it should normally be the last section you write because it will have the summary of different sections included in the entire business plan below.

Why do you need a business plan for your car dealership?

The purpose of a business plan is to secure funding through one of the following channels:

• Obtain bank financing or secure a loan from other lenders (such as a SBA loan)
• Obtain private investments from investment funds, angel investors, etc.
• Obtain a public or a private grant

How to write an executive summary for your car dealership?

Provide a precise and high-level summary of every section that you have included in the business plan. The information and the data you include in this segment should grab the attention of potential investors and lenders immediately. Also make sure that the executive summary doesn’t exceed 2 pages.

The executive summary usually consists of the 5 main paragraphs:

• Business overview: introduce your car dealership: what is your business model (franchise vs. independent business ; new vs. used car dealership), how many cars will you have in inventory? Are you partnering with any car manufacturer(s)? Where would your store be located? Etc.

• Market overview: briefly analyze the car dealership industry in your area (market size and growth), your competitors and target customers: average income of your target audience, demographic distribution, customer preferences etc.

• Management & people: introduce the management team and their industry experience. Mention your business partner(s), if any. Also give here an overview of the different teams, roles and their reporting lines

• Financial plan: how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? Also include here a small chart with your key financials (revenue, net profit)

• Funding ask: what loan/investment/grant are you seeking? How much do you need? How long will this last? How will you spend the money?

2. Business Overview

In the business overview section of your car dealership business plan, you should expand on what your company sells, to whom, and how it is structured. A few examples of questions you must answer here are:

• The history behind the project: why did you choose to open a car dealership today?
• Your business model: Are you franchising or is this an independent store? Are you selling new or used vehicles?
• Products & services: What vehicles / brands do you plan to sell? Are you planning to add any additional services (e.g. car repair & checkups, etc.)
• What is the legal structure of your company? Who are the directors / shareholders?

a) History of the Project

Briefly explain how did you come up with the plan to start a car dealership business. What motivated you to get into this business venture? 

Also try to demonstrate to investors your interest and passion for the car industry and car dealership in general.

For example, you might have worked in a car dealership and/or at a car manufacturer sales department in the past, and found immense growth potential for this type of business in your area.

b) Business Model

Explain in this section what business model you chose for your car dealership. Here are a few questions you must answer:

• Will you start an independent dealership, franchise model, chain store, etc.?
• Will you open a brand-specific dealership?
• Would your car dealership deal in new cars, used cars, or both?
• Do you plan to open an online dealership?
• Would you offer service and repairs in your car dealership?

c) Products & Services

Now that we have briefly introduced what your business model is, you must explain in detail what exactly you intend to sell. There are 2 things here:

• Products (cars): what vehicles and brands do you intend to sell? Why did you choose these vehicles / brands?
• Services: if you offer additional services (e.g. car repairs, checkups), explain what they are

In addition to the products and services, you should also include a list of prices for each. Of course, this doesn’t need to be exact. Car prices fluctuate based on various factors. Yet, you must be able to provide a range of prices for each category (e.g. sedan, luxury cars, vans, etc.).

If you specialize in a specific brand, you can provide a list of prices per model in appendix as well.

The prices are important as they will allow investors to tie your product offering with your financial projections later on.

d) Legal Structure

Explain the legal structure of your nursing home in this section. Are you starting a corporation, a limited liability company, or a partnership? Who are the investors? How much equity do they actually own? Is there a board of directors? Do they have prior industry experience?

3. Car Dealership Market Overview

A complete understanding of the car dealership industry is important for the success of your business.

Therefore, you must cover here 3 important areas:

• Status quo: how big is the car dealership industry in your area? How fast is the market growing? What are the trends fuelling this growth (or decline)?
• Competition overview: how many car dealership competitors are there? How do they compare vs. your business? How can you differentiate yourself from them?
• Customer analysis: what are your target customers? What are their customer preferences?

a) Status quo

When looking at the car dealership industry, try to start at the national level (US) and narrow it down to your service area (a city for example). You should answer 2 important questions here:

• How big is the car dealership industry in your area?
• How fast is the car dealership industry growing in your area?

How big is the car dealership industry in the US?

The auto parts and car dealership industry in the US is huge: it was worth $1.18 trillion in 2021 as per the National Automobile Dealers Association. As per the same report, there were 16,676 light vehicles car dealerships in the US in 2021 which generate an average revenue of $71 million.

Sales are divided between new (52%) and used vehicles (37%) as well as services and parts (11%).

How big is the car dealership industry in your area?

After the US, assess the size of the car wash industry in your city or area. Focus on the zone where you plan to offer your services.

Naturally, you might not be able to get the data for your specific city or region. Instead, you can estimate the size of your market, for more information on how to do it, read our article on how to estimate TAM, SAM and SOM for your startup.

Luckily, NADA publishes statistics per state so you can narrow it down easily. For your city instead, you will need to do work out some estimates. To give you an example, let’s assume you plan to operate in an area where there are already 30 car dealership businesses (in a 25 miles radius for example).

Assuming our business is based in Connecticut, we can use the state’s average annual turnover of $49,661: we can reasonably assume that the car dealership industry is worth $1.5 million in your area. In other words, there are over 35,100 light vehicles (new and used) being sold in your area each year (assuming the average retail price of $43,000).

How fast is the car dealership industry growing in your area?

Now that we know your area’s market size, let’s look at growth instead.

Fortunately, you can use NADA’s number again as they publish annual reports. Just use your state’s market size growth, and explain the growth (or decline). This can be due to average car prices, or volume.

b) Competition overview

You should discuss both your direct and indirect competition in your business plan. Other car dealerships in the region will be your immediate competitors. Internet auctions, individual dealers, etc., will be your indirect competitors. 

In this section, you should also discuss the essential components of the business models of your main competitors. Your research should be focused on their clientele, the kinds of cars they offer, and their strengths and weaknesses.

A thorough competitive analysis is crucial as it may allow you to discover and address a customer need or preference that none of your rivals is addressing today.

Here are some of the questions that you must answer in this section:

• How many competitors are there in the area where you want to open your car dealership?
• Are they franchises or independent stores?
• Do they partner with specific car manufacturers?
• What type of cars do they offer (luxury, economy, used, new, etc.)?
• What is the average price range of the cars they sell?
• How many employees do they have?
• Do they offer services and repairs?
• Do your competitors offer buyback on the cars sold by them previously to the client?
• What type of offers and discounts do they offer to attract customers?
• How many cars / vehicles do they sell on average per month?

c) Customer analysis

Now that we have a good idea of the car dealership industry in your area as well as competition, now is time to focus on your target audience: customers.

Knowing your customer is extremely important before you get into any business. This is all the more relevant for car dealership where customer preferences and tastes are very different.

For example, if you are planning to get into a luxury car dealership business, you should look into:

• The estimated population of high-income people in your area
• Types of luxury cars that are in demand (hatchback, sedan, SUV, etc.)
• Shopping preference of your target customers (online or offline)
• How frequently do they buy (or exchange) new cars?
• Is their buying decision influenced by offers or discounts?
• What features do your target customers want in their new luxury cars?
• What type of additional services do they expect from their dealers?

4. Sales & Marketing Strategy

This is the section of your business plan where you outline your customer acquisition strategy. Try to answer the following questions:

• What are the different marketing strategies you will use?
• What are your Unique Selling Points (USPs)? In other words, how do you differentiate from your competitors?
• How do you intend to track the success of your marketing strategy?
• What is your CAC or customer acquisition cost?
• What is your marketing budget?

What marketing channels do car dealerships use?

A few marketing channels that car dealership businesses typically use are:

• Signage, billboards
• PPC ads, Facebook ads, etc.
• Print media
• Radio ads
• Loyalty programs
• Online local listing (Google Business)
• Content marketing (share content like vehicle maintenance tips, safe driving tips, etc.) on platforms like blogs, social media, etc.
• Word of mouth, recommendations

You must have a fair and nearly accurate estimate of your marketing budget. Therefore, make sure to budget for marketing accordingly in your financial projections.

What are your Unique Selling Propositions (USPs)?

In other words, how do you differentiate yourself vs. competitors? This is very important as you might need to win customers from competitors.

A few examples of USPs are:

• Products: you may be the exclusive distributor or a car make in your area for example
• Services: you may offer repairs and regular checkups for your customers
• Location: you store is closer to a busy road and/or to where your customers live

Your USPs will depend on your business model, competitor analysis, and target audience. Whatever your USPs are, it should appeal to your potential customers and attract them.

5. Management & People

You must address 2 things here:

• The management team and their experience/track record
• The organizational structure: the different team members and who reports to whom

Management

Small businesses often fail because of managerial weaknesses. Thus, having a strong management team is vital. Highlight the experience and education of senior managers that you intend to hire to oversee your car dealership.

Describe their duties, responsibilities, and roles. Also, highlight their previous experience and explain how they succeeded in their previous roles.

Organization Structure

Even if you haven’t already hired a VP of sales, sales managers, support staff and any other relevant staff members, you must provide a chart of the organizational structure outlining the different teams, roles and their reporting lines.

6. Financial Plan

The financial plan is perhaps, with the executive summary, the most important section of any business plan.

Indeed, a solid financial plan tells lenders that your business is viable and can repay the loan you need from them. If you’re looking to raise equity from private investors, a solid financial plan will prove them your car dealership is an attractive investment.

There should be 3 sections to your financial plan section:

• Your historical financials (only if you already operate the business and have financial accounts to show)
• The startup costs of your project (if you plan to start a new car dealership, or purchase new inventory, expand your store, etc.)
• The 5-year financial projections

a) Historical Financials (if any)

In the scenario where you already have some historical financials (a few quarters or a few years), include them. A summary of your financial statements in the form of charts e.g. revenue, gross profit and net profit is enough, save the rest for the appendix.

If you don’t have any, don’t worry, most new businesses don’t have any historical financials and that’s ok. If so, jump to Startup Costs instead.

b) Startup Costs

Before we expand on 5-year financial projections in the following section, it’s always best practice to start with listing the startup costs of your project. For a car dealership, startup costs are all the expenses you incur before you open your shop and starting making sales. These expenses typically are:

• The lease deposit for the commercial space you rent (if you don’t buy it)
• The design and renovation of the existing facilities
• The inventory costs (the initial stock of vehicles you must buy to sell them at opening)

For example, let’s assume you want to buy 30 light vehicles as a start for inventory, and you take on a loan where you need to put down 15% upfront. Now, assuming these vehicles each cost $50,000 on average, this means you must put down $300,000 yourself. This comes in addition with any other startup cost mentioned above (lease deposit, renovation costs, etc.).

c) 5-Year Financial Projections

In addition to startup costs, you will now need to build a solid 5-year financial model as part of your business plan for your car dealership.

Your financial projections should be built using a spreadsheet (e.g. Excel or Google Sheets) and presented in the form of tables and charts in your business plan.

As usual, keep it concise here and save details (for example detailed financial statements, financial metrics, key assumptions used for the projections) for the appendix instead.

Your financial projections should answer at least the following questions:

• How much revenue do you expect to generate over the next 5 years?
• When do you expect to break even?
• How much cash will you burn until you get there?
• What’s the impact of a change in pricing (say 20%) on your margins?
• What is your average customer acquisition cost?

You should include here your 3 financial statements (income statement, balance sheet and cash flow statement). This means you must forecast:

• The number of vehicles you sell over time ;
• Your expected revenue ;
• Operating costs to run the business ;
• Any other cash flow items (e.g. capex, debt repayment, etc.).

When projecting your revenue, make sure to sensitize pricing and the number of customers as a small change in these assumptions will have a big impact on your revenues.

7. Funding Ask

This is the last section of the business plan of your car dealership. Now that we have explained what type of vehicles your company sells to whom and at what price, but also what’s your marketing strategy, where you go and how you get there, this section must answer the following questions:

• How much funding do you need?
• What financial instrument(s) do you need: is this equity or debt, or even a free-money public grant?
• How long will this funding last?
• Where else does the money come from? If you apply for a SBA loan for example, where does the other part of the investment come from (your own capital, private investors?)

If you raise debt:

• What percentage of the total funding the loan represents?
• What is the corresponding Debt Service Coverage Ratio?

If you raise equity

• What percentage ownership are you selling as part of this funding round?
• What is the corresponding valuation of your business?

Use of Funds

Any business plan should include a clear use of funds section. This is where you explain how the money will be spent.

Will you spend most of the loan / investment to acquire the cost for the inventory (the vehicles)? Or will it cover mostly the cost of buying the land and building the store?

Those are very important questions you should be able to answer in the blink of an eye. Don’t worry, this should come straight from your financial projections. If you’ve built solid projections like in our car dealership financial model template, you won’t have any issues answering these questions.

For the use of funds, we recommend using a pie chart like the one we have in our financial model template where we outline the main expenses categories as shown below.