How to Write a Used Car Lot Business Plan

How to Write a Used Car Lot Business Plan and Template

There are numerous reasons why the used car lot industry is growing at an impressive rate, spurring the demand for used car business plans and used car business plan templates. 

One driving factor behind the growth in demand is that the prices of used cars have gradually risen over the past few years. As these prices increase, revenues increase, encouraging new business-minded individuals to join the industry. Furthermore, new car manufacturers have faced challenges in satisfying customer needs. As a result, many consumers see used cars as a suitable alternative to buying brand-new vehicles. Regardless of the reasons prompting used car dealers to seek out business plans and templates for their ventures, possessing a well-structured plan is a wise decision. To assist in this endeavor, our used car business expert has provided valuable insights and suggestions for crafting your own used car business plan, financial forecasts, or a business plan template (10/23).


Executive Summary for a Used Car Lot Business Plan.

The executive summary of a used car lot business plan should offer a concise overview of the entire plan, highlighting sections like the funding request, financial forecasts, and the leadership and ownership structures of the organization. Moreover, it is essential to address one or two key success elements common to most used car lots, such as the strategic location or the expertise of the owner. Delving into these topics within the executive summary allows the person crafting the plan to quickly highlight the requirements and qualifications of the car lot, elements crucial when pursuing financing.

Company Information and Location.

For the company information and location segment in the business plan of a used car lot, a substantial focus should be directed toward the location of the car lot. It's a simple truth: a used car lot situated in a remote area will face more challenges than one situated at a bustling intersection. Given the paramount importance of location, our expert in used car lot business planning suggests incorporating maps or images of the intended used car lot site, discussing the strategic significance of this location, and pinpointing major roads or landmarks in proximity to the establishment. By diving deep into the topic of location, a used car lot owner can both illustrate the necessity for a car lot in the selected area and highlight potential advantages tied to the chosen location.

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Service Description and Competitive Advantages

The service description portion for a used car lot business plan should be clear and direct. From our observations, this section should describe the kinds of cars or trucks offered at your establishment. Some used car lot proprietors might concentrate on either domestic or foreign vehicles. Some may opt to offer vehicles at a lower price range. Moreover, some may select vehicles that promise the highest profit margins. No matter your strategy, it is essential to discuss the vehicles you aim to offer in depth.

Target Market for a Used Car Lot Business Plan

In the target market section of your used car lot business plan, the emphasis should be on your ideal customer. Some proprietors of used car lots aim their services at younger individuals aged 17 to 24 searching for their first vehicle. Some lots specialize in assisting those facing credit issues. Additionally, establishments like Carmax aim at individuals who are in pursuit of top-quality vehicles at reasonable prices. It becomes clear that a target market extends beyond simple demographics; it can also include specific buyer traits. Therefore, in defining your target market, broaden your scope beyond mere demographics and conceptualize the exact customer type you aim to serve. Subsequently, formulate strategies to cater to this specific group.

Industry Research for a Used Car Lot Business Plan and Template

The industry research segment of your used car lot business plan should commence with a comprehensive examination of the national landscape of the used car lot industry, encompassing its growth trajectories and evolving customer preferences. For example, a brief online search regarding used car lot industry data revealed some noteworthy insights. Specifically, over the previous 12 months, the light-used car industry accumulated revenues of approximately $153 billion. The revenue growth rate over the past five years averaged around 3.2% per year. Yet, industry professionals project this rate to decrease slightly to around 2.6% annually shortly. It's vital to note, however, that these figures do not factor in potential disruptions in new car productions due to microchip shortages, which might substantially boost revenues for the used car industry. These insights are just a few examples of information that might prove valuable when drafting the industry research section of your plan.

Owner and Management Section

In the owner and management section of a used car lot business plan or template, the starting point should be the declaration of the intended legal structure of the organization. Common structures chosen by used car lot businesses include limited liability companies or limited liability partnerships. After establishing this, delve into the profiles of the owner or owners. Within these profiles, it is essential to highlight work and educational backgrounds linked to the used car industry. Any history related to sales or managerial roles should also be presented. With this base, elaborate on the various job roles within the used car lot, such as receptionist, salesperson for used cars, manager, and finance officer. Additionally, incorporating a visual representation, perhaps a diagram, that illustrates the hierarchy within the organization can aid readers in understanding the company's structure more clearly.

An essential addition at the end of this section should be an indication directing readers to your resume, which can be found in an appendix. We have developed a used car lot business plan template that often serves our clients, and this template consistently features a note pointing readers to the client's resume within the appendix. Having your resume accessible in this manner not only substantiates the claims you've made within the section but also satisfies the curiosity of many investors or lenders interested in reviewing your qualifications. This approach effectively serves dual purposes.

Funding Request for a Used Car Lot Business Plan

For a used car lot business plan, the funding request segment should begin with clearly declaring the financial amount required to launch the business. Following this, it's crucial to distribute this funding amount among specific needs, such as working capital, the acquisition of inventory, improvements to the lot, and the purchase of the used car lot itself. An essential consideration for funding in this industry revolves around inventory procurement. While some businesses might lean on credit lines to finance inventory, based on our experience with used car lot business plans, purchasing inventory outright using cash can bolster profit margins. After detailing the allocation for each funding category, provide a comprehensive total at the end, ensuring that it aligns with your original funding request. By utilizing this method, proprietors of used car lots can transparently present their funding requirements while allowing for some flexibility by allocating funds to specific goals.

Financials and Financial Projections for a Used Car Lot Business Plan or Template

Concluding with the financials and projections section of a used car lot business plan, it's imperative, from what we've seen, to begin by specifying the number of vehicles expected to be sold in the inaugural month. Following this, project the average sales price and ascertain the variable expenses related to these vehicle sales. Once this is achieved, subtracting variable costs from the sales revenue gives the gross profit for the month. The subsequent step entails deducting fixed expenses, such as lease payments for the lot, employee wages, commissions, and operational costs from the gross profit, resulting in the net profit for the month. Initiating your financial planning with this fundamental method lays the foundation for a robust business model. This model not only aids in drafting your business plan but also in forecasting sales trends for upcoming months and even years.

Hopefully, these insightful tips and tricks for writing a business plan were helpful. As always, if you need help with a business plan or financial projections, send us an email or give us a call. 

Author: Paul Borosky, Doctoral Candidate, MBA., Author

Owner of: Quality Business Plan and Quality Business Consultant.

Date: 10/13/2023