Starting a successful car dealership in Kenya has never been more promising despite the growing competition. The local demand for both new and pre-owned vehicles is rising steadily, making this a perfect time to tap into this market if you have an interest in entrepreneurship.
I’ve created this comprehensive guide to provide everything you need to know about starting this lucrative business from scratch and running a thriving car lot in Kenya. Whether you’re curious about the car resale industry or determined to start your dealership, keep reading.
Evaluating the Rising Opportunities in Kenya’s Car Resale Industry
Kenya’s automotive scene has rapidly evolved over the past decade, with more quality brands available today than ever before.
- The sustained economic growth in recent years has led to a burgeoning middle class with increased purchasing power and appetite for personal vehicles
- Improved financing options are also enabling more Kenyans to upgrade and buy second-hand or new cars
- Second-hand car imports increased by over 43% from 2016 to 2021 as demand outpaced supply
- Additionally, local assembly plants for global car manufacturers have made new vehicles more accessible
These favorable market forces combined with a growing culture of personal car ownership among young urban professionals and families make now an opportune time to tap into Kenya’s car resale potential from Nairobi to rural towns.
Getting Started: Vital Steps Before Selling Your First Car
Jumping right into car sales in the Kenyan market as a startup can be tempting – but risky without proper planning!
Here is a step-by-step checklist of must-do tasks before displaying your first vehicle for sale:
Selecting a Suitable Location
This decision can make or break your dealership’s success from day one. Prime spots in Nairobi near busy highways or crowded neighbourhoods are ideal but very expensive.
If funds are limited at the start, consider towns just outside the city centre or along major transit routes where rent is cheaper. This expands your reach to capture drive-by traffic.
Pro Tip: Invest in large banners and signage along main access roads to attract attention if setting up in remote areas or smaller towns.
Vehicle Sourcing
Your car lot will only sell if it has stocks! Explore all options to source quality second-hand and/or new cars at wholesale prices:
- Local Classifieds & Auctions: Scour classifieds and auction websites like Cheki, CarAndGeneral, Carfax or the local dailies regularly. Attend live auctions in person.
- Regional Vehicle Import: Importing from overseas opens access to unique, cost-effective inventory but requires more paperwork. Consult an experienced broker.
- New cars: Partner with authorized local dealers for reputable brands to display and sell new cars on commission.
Pro Tip: Perform thorough inspections of each vehicle personally rather than trusting third-party reports before purchasing cars for resale.
Also, here is a small car listing website we started. Check it out.
Operational Licensing
The following official licenses or permits are required in Kenya to operate a car dealership legally before sales can begin:
- Business Permit: Obtain a Single Business Permit from the county government to formally register your dealership. Renew annually.
- KRA PIN Certificate: Apply for a Personal Identification Number (PIN) tax certificate from the Kenya Revenue Authority (KRA).
- Import Declaration: When importing cars, timely Customs clearance and import declaration are crucial. Hire an experienced customs agent if needed.
- Other Automotive Association Memberships (Optional): Join the Kenya Motor Industry Association to establish credibility.
Get more information about this here.
Setup Basics
Having the right setup on premises will ensure smooth daily operations:
- Display/Parking Area: Ample, well-lit space to showcase vehicles properly. Tarmac the entire lot and erect shade shelters.
- Test Drive Zone: Designate a safe test route for customers to check cars. Invest in dealer plates.
- Signage: Large branded boards and banners at the storefront increase visibility.
- Office Space: Comfortable reception plus a secure back office for paperwork and cash transactions.
- After-Sales Service: Provide expert mechanics on call for minor repairs, wheel balancing, oil changes, etc. This builds credibility and loyalty.
Building a Robust Inventory of Vehicles to Sell
With licenses and workplace infrastructure in place, the core of operations begins – acquiring the right mix of quality vehicles to meet customer demand.
Aim to stock a diverse selection across budgets while maintaining the integrity of offerings. Here are effective tips:
Choosing Brands/Models Strategically
Carefully assess vehicle preferences and purchase trends in your target locations before spending on inventory.
- Toyota, Nissan and Mitsubishi dominate second-hand sales in Kenya currently.
- Hatchbacks, station wagons, SUVs and pickups tend to sell faster than sedans or minivans.
- Both petrol and diesel engine cars have demand so stock both.
- Display prices clearly on all vehicles or price lists.
Balancing New and Used Cars
Blending stocks allows you to cater to buyers across both spectrums:
- Used cars – Source rigorously inspected second-hand models not older than 8 years for best resale value. Stock popular body styles and engine capacities that are preferred locally. Offer extended warranty plans to assure buyers.
- New cars – Partner with authorized dealers for reputable brands like Toyota, Subaru, Volkswagen, etc. Sell these new cars on commission on your lot.
Promote launch offers.
Quality Checks are Critical
Do not compromise on quality – it protects your reputation long term even if profits initially seem lower.
- Test drive vehicles extensively yourself checking pickup, brakes suspension, gears, etc.
- Have trusted in-house mechanics inspect each car thoroughly before adding to your inventory
- Obtain and verify detailed vehicle history reports before any purchase
- Revamp ageing parts like batteries, tires, and gears and ensure thorough service
- Disclose defects upfront in listings; price vehicles accordingly
With these inventory best practices, you can build an exciting selection within budget to attract customers.
Promoting Your Dealership: Offline and Online Marketing Essentials
The quality of vehicles on offer must be matched by the rigor of your promotions to drive sustainable revenues. Employ both online and traditional channels:
Offline Marketing Ideas
- Print attractive brochures with inventory highlights plus lead capture forms. Mail/distribute in your area. Offer promotions.
- Sponsor community events like car shows and set up tent displays with the best cars. Interact to make sales.
- Run newspaper/radio ads especially when launching new model arrivals
- Distinct signage and decor at your dealership’s entrance or on-premises to pique interest
Digital Marketing Must-Dos
An optimized website plus engaging social media are crucial to promote your inventory to mass audiences.
- Professional website displaying available stocks plus lead capture
- Search engine optimizations for local searches like “buy cars Kenya”
- Active social media pages – Facebook, Instagram, YouTube – with inventory images/videos
- Paid web ads via Google, and Facebook to drive traffic to your site
- Email marketing to subscribers informing new arrivals, price drops, etc.
Measuring conversions and fine-tuning campaigns is key to maximizing ROI on advertising spends. With both offline and online channels employed effectively, your marketing is bound to deliver sales-ready buyers consistently.
Mastering Operational Logistics for a Smooth-Running Dealership
Getting the day-to-day management right is crucial for achieving growth while delivering quality service to patrons. Follow these best practices:
Staffing Considerations
Hire competent professionals suited to these key roles:
- Sales agents: Well-spoken, ethical staff to engage customers. Offer commission-based pay to incentivize sales.
- Business manager: Oversee accounts, cash flow, licensing and sourcing – your second-in-command.
- Mechanics: 1-2 in-house experts for test drives plus repair and maintenance services.
- Valet/helpers: Assist mechanics and maintain parking area, clean cars, and manage customer vehicles during servicing.
Pro Tip: Background screening while hiring plus training for optimal skills sharpens productivity.
Managing Inventories & Logistics
- Catalog all vehicles on digitized spreadsheets tracking specifics like pricing, features, acquisition dates. Update availability status when sold.
- Set a target number for minimum cars to stock based on sales rates to prevent stock-outs or stagnant inventory.
- List newly acquired vehicles for sale within 1-2 weeks before costs accumulate. Turnover is key.
- Use dealer management software to stay on top of scheduling servicing, procurement status etc.
Building Rapport with Customers
The way you make car buyers feel shapes your brand image and sales culture over the long term.
- Warm greetings, transparent dealings, and perseverant follow-ups is key.
- Earn trust by admitting defects upfront rather than letting buyers discover issues later.
- Offer test drives promptly so customers gauge cars on real ride comfort, handling etc.
- Be open to negotiation within reason – find a middle ground on pricing disputes.
Pro Tip: Respond to queries same day. Follow up with buyers even after they purchase to foster goodwill and repeat clients.
Getting these operational details right may seem overwhelming initially but will soon become second nature!
Conclusion
With dedication and the right strategic foundation, your entrepreneurial Automotive retailing venture can transform into a very lucrative asset within a few years!
Remember – sourcing trendy models at wholesale prices is the profit driver. Sharp marketing delivers foot traffic. Integrity and personalized service convert browsers into lifelong customers to build sustainable revenues!
Stay patient through initial setbacks, persistently enhance operations based on customer feedback, keep chasing innovation in your inventory as well as technologies to stay ahead and you are destined for success!
I wish you the very best as you embark on this entrepreneurial journey empowering vehicle ownership dreams in Kenya!
