How to Start a Car Dealership Business in Kenya
Recently, there has been a significant increase in the number of cars on the Kenyan roads. Many people prefer to use personal cars as opposed to the public service vehicles to commute. This has led to an increase in the demand for personal cars. Therefore, starting a car yard business is a profitable venture. You need to invest a lot of capital in the business. You can start with a few cars and grow your business as your customer base increases. This is how to start a car selling business in Kenya.
Do a Market Research
To start a car selling business, you need to fist understand the market and also get to know about cars. Get to know which car models and make are in demand. Then get to know how to price a car. You can get such information from mechanics and drivers. Also, you can check online which cars are searched frequently.
Write a Car Dealership Business Plan
Once you have facts on the table through the market research, you need to write a business plan. A business plan will help you manage capital, launch and market your business effectively.
You need to include the following in your business plan:
- Startup costs
- Sales and marketing strategies
- Number of employees
- Sources of capital
- Business location
- Type and brand of cars to sell
- Target market
- Revenue projections
Read more: How to write a business plan.
Identify a Good Business Location
Business location is a key factor in its success. A car yard business is best suited for urban areas. Some of the towns where you can set up your business include Mombasa, Nairobi, Kisumu, Eldoret and Nakuru. The demand for cars is usually high in these towns and their environs. Make sure that your car yard is along the road, secure and is visible by passersby.
Know Where to Buy Cars
The other thing that you need to do is know where you will be buying cars from. The brand and nature of your business will determine where you can source cars.
For instance, if you will be selling new or second hand imported cars, you can opt to import them from countries like Japan and Germany. If you want to sell second hand locally used cars, you can buy them locally. You need to consider the following factors when buying locally used second hand cars in Kenya.
- Year or manufacture
- Mileage of the car
- Brand of the car
- Accident history
- Pre-purchase inspection
If your business will be dealing with locally used cars, then you need to get a mechanic to help you inspect if the car has mechanical problems before buying. This way, you can avoid losses of buying cars at higher prices and selling them at lower prices.
Get Business Licenses and Insurance
You need to have business licenses to operate any business in Kenya. You can obtain business licenses and permits from the county offices. If you are operating a large business, you may also need to register your business name. You can register it a sole proprietorship, partnership or a company. It will cost you Ksh 1,000 to register a business name through eCitizen.
You also need to insure the vehicles from fires, theft and other accidental damages. You can buy a Third party only cover, Third party, fire and theft cover or a comprehensive cover. You sell a car together with the insurance policy.
You can include the cost of insurance in the price of the car when selling it. This will cover you against losses due to theft, fires and other accidents.
Cost of Starting a Car Dealership Business in Kenya
The cost of starting a car dealership depends on the size of your business and the type of cars you are selling. If you are selling new cars, then you need higher startup capital compared to that of second hand cars. The startup capital will go into buying cars, acquiring business licenses and car insurance. You can start small with a few cars and grow your business with time.
Read also: How to start a car hire business.
Sales and Marketing Strategies
One of the factors that determine the success of your business is the sales and marketing strategies that you will adopt. Some of the ways you can reach customers is through social media.
You can join car sales groups on social media like Facebook where you can be posting images of the cars you are selling. Indicate their prices, location and contact details. Potential customers will reach out to you and visit your car yard for viewing.
The best way to excel in this business is by being honest to your customers. For instance, let the customer know the history of the car before buying it. If it has had an accident, make sure to open up.
Also, avoid selling cars with mechanical problems to customers. If you must, then let them know about the mechanical issue. This way, customers can trust you and refer their friends to your business.
Read also: How to start a car wash business.
Is Car Sales Business Profitable in Kenya?
Car sales business is a profitable venture since many people prefer to buy personal cars. However, the business location and quality of the cars you are selling will determine its success. Refrain from selling cars with mechanical issues to customers. You can have the car repaired before selling it. Also, make sure you are honest to customers about the history of the car.