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Car Yard Commercial Loan

This page is for people who need a car yard commercial loan to buy a car dealership.

With interest in smaller, cheaper motor vehicles growing as fuel prices continue to edge higher, there is a great deal of opportunity in the car yard industry for the right buyer.

Discover if the bank will approve your car yard commercial loan application.

How does a car yard commercial loan work?

Qualifying for a car yard commercial loan comes down to the strength of your financial situation and your industry experience if you’re planning to run the dealership.

Secondly, it depends on the nature of the freehold you’re looking to buy and whether the land and property are purpose-built.

This can have a major impact on your borrowing power.

How much can I borrow?

All car yard commercial loan applications are assessed on a case by case but, as a general rule:

  • Freehold: Borrow up to 50-70% of the purchase price depending on the nature of the property.
  • Leasehold: Borrow up to 50% of going concern valuation.
  • Maximum loan term: 10 years.
  • Maximum interest only term: 3 years (subject to review).
  • Loans over $5,000,000 are assessed on a case by case basis.
  • A business plan and at least 3 years experience in a managerial position of a dealership.
  • Low doc options not available for purpose-built car yards.
  • Interest rate discounts will vary from lender to lender and the strength of your application.

Speak with a car yard commercial loan specialist today to discover if you qualify.

Call us on 1300 889 743 or fill in our free assessment form.

What if I want to develop a site?

If you want to buy a vacant premises that was previously used as a warehouse or factory, than this would be considered standard commercial property purchase.

This means the site can be used for multiple purposes including operating as a car park or even a car dealership.

If a car yard development is what you have planned, we can help you qualify for a commercial development loan.

We know lenders that will allow you to borrow up to 50-60% of the land and construction costs.

You’ll need to provide a business plan showing the costs of the construction, development application (DA) approval and rental revenue forecasts.

Even if you get the DA approval, you’ll have to consider whether the location is right, from a business perspective, to run a viable car dealership.

The bank may require that you have a tenant signed on to at least a 5 year lease agreement (and perhaps lease renewal options) before considering your commercial development loan application.

There are also particular environmental requirements that need to be built into the property such as proper drainage for car washing as well as oil, petrol and grease traps for workshops.

Soil testing may be required and you also have to consider whether the concrete ground is hardstand, a paving specifically designed for parking vehicles.

What do banks assess?

How banks consider your car yard commercial loan application and value the property comes down to whether you’re buying the freehold and leasing it out to a tenant or if you’re simply buying the business.

Freehold car yard

Banks generally want to see that the car yard is on a main road with little competition, at least for the type of vehicles your tenants are selling.

If it can easily be converted back to warehouse or another type of industrial property, again, it’s more likely to be accepted.

However, in order to operate as a licensed dealership, car yards are purpose-built for selling and repairing motor vehicles and cars.

If the property is not leased out or the valuation suggests that there isn’t a market for the property, the bank will likely see it as a development site or simply unacceptable.

Having an existing tenant is much better but the bank will want to know how much is longer on the lease with at least 5 years being a good benchmark.

The bank may also ask for the profit and loss statements and other financials of the business to make sure they’re profitable and will continue to make their rent well into the future.

Leasehold car yard

If you’re simply buying a business, banks will generally restrict the LVR to around 50% of the going concern value.

This means you’ll need equity in an existing property or cash savings to make up for the shortfall of the purchase.

Banks are very restrictive when it comes to car yard commercial loans because of the high risk nature of the industry and the overheads required to operate.

How will the bank look at my situation?

Lenders see car yards as ‘specialised’ commercial properties which means they treat them a little differently to office buildings and warehouses.

Businesses operating within the car yard industry are quicker to be affected by poor management making them riskier ventures.

It’s this reason that most commercial lenders will require you to have at least 1.5 to 2 times the amount of income to proposed interest expenses. This is known as the ‘serviceability ratio’.

You don’t necessarily need a clean credit history. If you can provide detailed explanations of how you resolved such credit issues as defaults, there are lenders who will consider your case.

Apart from assessing your ability to pay back the loan, you’ll need to prove to the banks that you can run a successful business.

The best way to highlight this is with significant experience in an operation equivalent to the car yard you’re planning to purchase.

The requirements for this will vary from case to case but it helps to submit a resume along with your loan application that shows this work experience as well as:

  • Completed courses or certificates.
  • A business plan that details cash flow forecasts, market competition and business model.
  • Your last 3 years business financials.
  • Any other material that supports your business acumen.

How can we help you?

We’re experts in commercial property loans and know how to find the right lender for your situation.

We do this by assessing your financial situation and your business needs and which lenders best suit your requirements.

We collect this information, package it and present it as a strong application to the right lender.

In doing so, you have a much better chance of getting approved for a car yard commercial loan the first time around and we can even negotiate reduced commercial interest rates and higher Loan to Value Ratios (LVRs) on your behalf.

Complete our free assessment form or call us on 1300 889 743 today.

Tips for buying a car yard

With motorists preferring cheaper, more fuel-efficient automobiles over large, expensive cars, per-unit revenue has actually been declining over the past few years.

High fuel prices and the strong Australian dollar hasn’t helped with this, however, car yard industry revenue has actually grown by 1.5% over the 5 years to 2016 to $64 billion.

It’s fair to say that there’s still opportunity in the commercial space if you can find the right car yard.

How does a car yard operate?

A car dealership essentially sells new or used cars at the retail level, which is based on a contract you sign with the car manufacturer.

There isn’t really that much wriggle room in terms of what you can charge, particularly because you’ll likely be competing against other card yards on a long strip of highway.

This is partly the reason why a number of car yards diversify into providing maintenance services and repairs, stocking and selling parts and processing warranty claims.

You’ll notice that many are purpose-built with mechanical workshops for this reason and are even authorised inspection stations through the Roads and Maritime Services (RMS).

Some car yards may even have a cafe, a small restaurant or even a takeaway shop on site but these businesses will be subleased and not owned by the car dealership owner themselves.

In saying that, if you own the car yard as a freehold investment, you have the potential to generate rental revenue from multiple tenants!

Why does location matter?

Most car dealerships are located on main highways and are in close proximity to each other.

Some even form part of business parks which means competition is fierce.

You’ll have to really understand the demographics of the location.

If you’re business is located near a luxury car dealership, you’re likely to attract similar types of customers shopping around the area.

On the other hand, you’re going to have a hard time selling luxury cars in a postcode characterised by working class families.

These considerations should form part of your own business due diligence.

For example, there may actually be a reason why there’s little competition for the car yard you want to purchase and why the vendor is selling a dealership in a seemingly “big exposure” location.

There may be a change to zoning laws on the horizon, information that a vendor will likely withhold to get a sale.

Why is zoning important?

Although car yards typically fall under Commercial Zone 2 or the equivalent for your local council, there are specific requirements for a car yard including:

  • No more than 2 driveways may service the site from a road and must be no wider than 9.2 metres.
  • There must be a kerb or barrier built along the road alignment to prevent the passage of vehicles and to prevent vehicles protruding beyond the site boundary.
  • No buildings on the lot other than a small office and a toilet facility.
  • No vehicle for sale or hire may be displayed on an adjacent road.
  • The number of cars for sale or hire must not exceed 1 to each 30 square metres of site area.

How do I find a great car yard?

The first thing to do is to enlist the help of a business broker who can source car yards that meet your rental return goals.

Start your search online at sites like and then get in touch with the agent involved.

Once you’ve narrowed your search, you should organise for a private valuation before even approaching a bank for a car yard commercial loan.

Better yet, because of the relationships that we have with the commercial arms of a number of major banks and lenders, we may be able to organise a free valuation on your behalf.

In this way, you can go into negotiations with the vendor with a report that highlights the specific strengths and weaknesses of the car dealership.

Knowledge is power when it comes to negotiations!

What should I look for when buying?

As you get to the purchase stage, you should consider enlisting the help of solicitor that specialises in commercial properties to go over the lease agreement.

Vendors aren’t going to keep your best interests at heart and may even stretch the truth about their property just to get a quick sale.

If the car yard you’re buying has an existing tenant, it’s important to firstly find out how long is left on the lease.

In the worst case scenarios, you may find that your purchase a dealership only to be left without a tenant 6 months down the track.

Even if there is 3-5 years left on the lease, it pays to ask for the last two years business financials of the current tenants including business banking and profit and loss statements.

The lender may very well go through the same due diligence when assessing your car yard commercial loan application.

Be wary of a vendor that refuses to provide this important information!

Whether they’re also the owner of the business or just the landlord, it’s a sign that not only is the business struggling but it might be a wider problem with the local market (a downturn).

No matter whether you’re buying the business alone or taking over the freehold, you should negotiate the terms of the lease in terms of who is responsible for repairs and maintenance of the site.

Usually this is the responsibility of the landlord but you may make it a requirement for the vendor to make minor restorations or replace certain equipment before making the sale final.

Again, you should negotiate this with the help of your solicitor.

Are there any other particular property requirements?

Like buying a service station, there are environmental safeguards that must be in place in order to operate a car, motorcycle or boat yard such as:

  • As per the Environmental Protection Act 1970, the site must contain a concrete bay for washing vehicles and waste from the bay must drain into a public sewer or a settlement and oil separation system.
  • Water from the site must be discharged by an underground pipe to an outlet approved by the local council or other state authority.

Do I need a licence to operate a dealership?

Yes, you’ll require a motor dealer licence which you can ask about from the Australian Automotive Dealer Association.

Although it isn’t a requirement to be a member of an industry association, it may be worth becoming a member of your state’s motor trader association because it adds credibility when trying to build your brand.

Apply for a loan today

Do you have a car dealership you have your eye on?

Call us on 1300 889 743 or complete our free assessment form and we can tell if you qualify for a car yard commercial loan.

Discover how much you can borrow and what kind of loan term you qualify for!