Used car dealers funding plans not up to scratch, research finds

The vast majority of used car dealers are funding their business in a manner that is not fit for purpose, new research has suggested.

Harris International interviewed 400 dealers on behalf of NextGear Capital UK and found that 96 per cent were not running their business in a financially stable way. Of those asked, around 20 per cent said they were using overdrafts, 35 per cent revealed they relied on cash flow funding and 41 per cent used their personal money to keep the business running – only four per cent used product-specific funding routes to purchase stock or expand their operations.

Forward planning is a vital part of enabling a business to grow and a key part of this is sourcing the best motor trade insurance policy to meet a company’s needs. Whether it is a road risks insurance policy or a more comprehensive combined traders’ policy, finding the right deal for the business will provide a solid foundation to help expand the company; it will go a long way to removing the threat of large costs associated with theft or damage to stock, tools, staff or the business premises.

NextGear Capital’s research indicated that used car dealers primarily use the sale of their current stock to fund further purchases. This means they are not able to scale the business up to respond to increasing demand for high quality used vehicles.

When it came to stocking levels, 55 per cent said they stock between 20 and 49 used cars, 12 per cent between 50 and 99 cars, and 23 per cent between 10-19 used vehicles. On average, 45 per cent of the used car dealers surveyed claimed to sell more than 200 vehicles annually.