How To Start A Car Dealership In South Africa
What is Car Dealership?
A car dealership, or vehicle local distribution, is a business that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary. It can also carry a variety of Certified Pre-Owned vehicles. It employs automobile salespeople to sell their automotive vehicles.
How To Start A Car Dealership In South Africa
Choose the right location
The right location can make or break your business; the right location is where there is demand. Demand plays a very important role in where you choose to locate your car dealership. This means that you have to do a lot of market research to determine whether there is demand or not.
Your market research should start by studying the demographics of your location and the actual demand for cars. Not forgetting the competition that may already exist, most people don’t set up car dealerships in very low-income neighbourhoods. Assess the demand for the types of cars you want to sell, are you planning to sell new or used cars and a specific brand? All this will help you determine the right location.
Decide on what type of dealership you are going to open
You can open a car dealership that sells all car brands or you can open a franchise. I would not encourage you to open a franchise, the process to being approved is very rigorous and yet you have very little freedom with what you can do with the business. The main benefit of opening a franchise is that you will have credibility in the marketplace. This credibility might help to generate more sales.
You should also decide on whether you are going to sell new or used cars or both. Selling both new and used cars can be very expensive, it will require a lot of money in start-up costs. Second hand cars are easier to sell and will make you a lot more money in the long run because they will need to be repaired a lot more. Which might kickstart your car repair/service business.
Opening a repair/service business is a great way to get business continuously from people who initially bought a car from your dealership. Profit margins on the actual sale of the vehicle might be low.
Register your business
You should register your business with the CIPC, it will be registered as a private company and will be responsible for its own liabilities amongst other benefits. In South Africa, you need a dealer’s license, which allows you to buy and sell cars. You will also need to have an authorised financial services provider if you want to provide in-house financing advice. This is something that you should be looking to do as it is a good source of additional revenue.
Buying second-hand cars
The best place to find second hand cars is an auction, you will get to see a lot of different cars that are priced to sell. You will also be able to check out the condition of these cars, this will make it much easier for you to choose the best ones for your dealership at a decent price. Some of these cars might need repairs, you can do repairs and add the cost as part of the selling price.
Occasionally, there are people who will walk up straight to your dealership and tell you that they are selling their car. These people are usually desperate to get rid of it, which makes it easier to negotiate a fair price for the car. A lot of car owners value their car more than it’s actually worth.
Marketing your car dealership
Marketing cars is not as difficult as marketing other products, with less competition and a high demand for cars; you will have it easier than most businesses. The best way to go about marketing your car dealership is by hiring sales agents and paying them a commission on sales. This will reduce your overhead costs while simultaneously increasing the reach of your business and getting you more customers.
Frequently Asked Questions (FAQs)
How much does it cost to start a car company in South Africa?
Establishment costs include: Initial joining fee – R200,000 (ex VAT) per dealership. Dealership conversion costs – R800,000 to R1,050,000. Dealership launch – Up to R50,000.
How many cars can I sell in a year in SA?
If you buy, sell, or offer for sale four or more vehicles in a 12 month period, you are considered a second-hand vehicle dealer. You must be licensed and follow the legal requirements for this type of business.
How many car dealerships are in South Africa?
According to the National Automobile . Dealers’ Association (Nada), there are about 1 600 franchise vehicle dealers in South Africa, employing 60 000 people directly, and nearly one million in the automotive value chain with the multiplier effect
How much do car dealership owners make in South Africa?
How much does a Dealer principal make in South Africa? The average dealer principal salary in South Africa is R 630 000 per year or R 323 per hour. Entry-level positions start at R 505 500 per year, while most experienced workers make up to R 1 047 000 per year.
Can you build your own car in South Africa?
South Africa has the capacity to build a car from scratch. Indeed, it has already built an electric car.
How do car dealership owners make money?
In addition to profit generated from financing or leasing a car, dealers make money from selling different insurance packages or warranties: extended warranties, tire and wheel protection, so on and so forth. With each sale of an additional item, the dealer is making some profit.
Do you need a roadworthy to sell a car in SA?
Unlike other states in Australia there is no requirement in SA for a seller to have a roadworthy inspection done on the used car they are selling.
Do you need RWC in SA?
A roadworthy inspection is required if the vehicle: has been fitted with a non-standard engine – phone vehicle standards on 1300 882 248 to ask about your vehicle or email vehiclestandards@sa.gov.au.