Investing in the car yard industry presents a lucrative opportunity, especially with the growing interest in smaller, more fuel-efficient vehicles. If you’re considering a car yard commercial loan, understanding the dynamics of the industry, loan parameters, and the approval process is crucial. Here’s a detailed overview: 

How Car Yard Commercial Loans Work: 

Qualification Criteria: 

• Depends on the strength of your financial situation. 
• Industry experience is essential if you plan to run the dealership. 
• Nature of the freehold property and whether it’s purpose-built affects borrowing power. 

Loan Amounts: 

• Freehold: Borrow up to 50-70% of the purchase price (depending on property nature). 
• 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 assessed case by case. 
• Business plan and at least 3 years of managerial experience required. 

Development Considerations: 

• If developing a site, potential for a commercial development loan. 
• Borrow up to 50-60% of land and construction costs. 
• Requires a business plan with construction costs, DA approval, and rental revenue forecasts. 
• Consideration of location viability and environmental requirements. 

Bank Assessment of Car Yard Commercial Loans: 

Freehold Car Yard: 

• Banks prefer locations on main roads with little competition. 
• Purpose-built car yards are favored. 
• Existing tenant strengthens the application. 
• Long-term lease (at least 5 years) is a positive factor. 

Leasehold Car Yard: 

• Banks restrict Loan-to-Value Ratio (LVR) to around 50% of the going concern value. 
• Equity or cash savings required to cover the purchase shortfall. 
• Banks are cautious due to the high-risk nature of the industry. 

Bank Evaluation of Your Situation: 

Specialized Nature: 

• Car yards are considered specialized commercial properties. 
• Lenders require 1.5 to 2 times the income to proposed interest expenses (serviceability ratio). 

Credit History: 

• Detailed explanations for credit issues may be considered. 
• Business acumen, experience, and a proven track record are vital. 

How We Can Help: 

Expertise in Commercial Property Loans: 

• Assessment of financial situation and business needs. 
• Identification of lenders suitable for specific requirements. 
• Packaging a strong application for improved approval chances. 
• Negotiation for reduced interest rates and higher Loan to Value Ratios (LVRs). 

Tips for Buying a Car Yard: 

Understanding Market Trends: 

• Growing interest in smaller, fuel-efficient vehicles. 
• Declining per-unit revenue but overall industry revenue growth. 

Operational Aspects: 

• Car dealerships sell new or used cars at the retail level. 
• Diversification into maintenance services, repairs, and parts sales common. 

Location Matters: 

• Proximity to luxury car dealerships or working-class neighborhoods influences customer base. 
• Detailed understanding of demographics and competition essential. 

Zoning Requirements: 

• Specific zoning requirements for car yards. 
• Compliance with regulations, including driveway specifications and building limitations. 

Finding a Suitable Car Yard: 

• Enlist the help of a business broker. 
• Conduct online searches and engage with relevant agents. 
• Consider private valuations before approaching banks. 

Due Diligence: 

• Solicitor’s assistance in reviewing lease agreements. 
• Inspection of existing tenant lease duration and financials. 
• Negotiation of lease terms and responsibilities for repairs and maintenance. 

Environmental Safeguards: 

• Compliance with environmental requirements for car yards. 
• Consideration of drainage, oil, petrol, and grease traps. 

Licensing: 

• Obtain a motor dealer license from the Australian Automotive Dealer Association. 
• Membership in state motor trader associations for added credibility. 

Investing in a car yard requires careful consideration of industry dynamics, property specifics, and regulatory requirements. With a thorough understanding and the right financial support, a car yard commercial loan can pave the way for a successful venture in the growing automotive market.