SME Advisory

How to start a Car Resale Business in Nigeria


Car resale business as the name implies deals with selling used cars to those that are willing to buy. In dealing with a car resale business which can also be called used car sales, one will need to having working knowledge, marketing, expertise in different models and the prices relating to cars. Buying and selling used cars can be a very profitable venture in Nigeria as buying a new car is more expensive than acquiring a used one. Most people go for the latter.

An extremely important aspect of this business is buying from previous owners at a low price that would enable the reseller make profit. Before starting this business you also need to have a sound understanding of business finances, licensing and legal requirements in terms of permits and taxes.

Although it is not a requirement, when you have the right tools and guidelines, you will be better prepared to successfully take on the used car sales business. These procedures include

  • Make research on the import market

Buying used cars and importing from other countries where they are sold cheap such as United Kingdom, USA, Japan and other European countries.  Some individuals can also purchase online through the medium of auction sites or shops, after purchasing through the auction site, you will be linked to shipping companies. The need for the Car Dealer to know how much the Duty on Used Car is, 35% Official and 35% Levy, the various other Charges that will give him/her the full cost of landing a Car.

  • Make research on the model and vehicle types

Different cars have different models and specifications that come along with their manufacturing.  Different vehicle types include:

  1. Sport utility vehicle
  2. Pick up
  3. Mini van
  4. Convertible
  5. Hatch back
  6. Station wagon
  7. Sports car
  8. Sedan
  • Decide on the car resale services you want to offer

There are lot of niche ideas within the car resale industry. Before starting the business you need to ensure that you make a decision on the services you want to offer. You could decide on the brands you want to sell to buyers or the specifics/functions of cars you want to sell. You could apply any or all of the following niche ideas

  1. Bricks and Mortars Used Cars Dealership Shop
  2. Online Used Cars Dealership Shop
  3. Used Luxury Cars Dealership Business
  4. Multi – brand and multi – maker car dealers
  • Create a business plan

A business plan is very crucial for any business and it should be formulated before the owner of the business proceeds to make any financial or legal commitments. The business plan will allow you to carry out a detailed research on the car resale and motor vehicle industry as well as your competitors. It will also aid in forecasting the budget and cost that will be incurred in the course of the business. A well detailed business plan will include

  1. Executive summary (This will be done after the plan is written)
  • Business Overview
  • Market Overview: The Opportunity & Solution
  • Competition
  • Financial Highlights
  • Our Ask
  1. The company overview

This is the introduction and description of your company. It covers the following details

  • Mission and vision
  • Overview of company history/capabilities
  • Product description and present stage of development
  • Competitive advantage (what’s different or better than competition)
  • Past customers and performance (if applicable)
  • Legal entity, hours of operation, location description and attributes
  • Structure & Ownership
  • Management Team
  • Intellectual property status (if applicable)
  • Commercialization strategies (if applicable – timeframe and actions to move from idea to marketplace
  1. Product and services

This covers the following:

  • Definition of Products or Services to be Sold
  • Product Viability
  • Technology
  1. Industry analysis, market analysis and marketing strategy
  2. Swot analysis
  3. Market analysis
  • Market size(Estimate of the total market size for the product or service and trends
  • Quantification of the size of each market segment in terms of (Naira spent, units used, number of people, percent of income etc.)
  • Competition to the business
  • Market Segmentation and Demographics
  • Customer Profile(Actual and potential purchasers of product or services by market segments)
  • Barriers to Entry
  1. Marketing/sales plan
  2. Management and operations
  3. Summary of risks involved
  4. Professional and advisors
  5. Financials
  • Cash flow projection and/or existing (3 years) with breakeven analysis
  • Income/Expense projection and/or existing (3 years with ratios and benchmarks to industry)
  • Sources and uses of funds (funds needed, owner equity, how funds will be used/start-up cost analysis
  1. Funding
  • Amount of Money Sought
  • Use of Proceeds
  1. Project implementation schedule if any
  • Finance your business

Capital is very important especially when starting a business, it will be used to run things in the business. When a business owner does not have all the required money to start a new business, he or she will need to source out funds or financing. Financing can be gotten through

  1. Self-financing: This has to do with the capital provided by the owner of the business
  2. Grants from government agencies: Various grants can also be gotten from the programs run by the state government or federal government
  3. Loans from banks: Having a detailed business plan and registering your business name will enable you access various bank loans
  4. Investors: Investors who have gone through your business plan and are assured that your furniture making business is profitable can invest millions of naira in your business
  5. Family and friends: Finance can also be gotten from families and friends that are willing to support your business
  • Register your business

Another important step to take is registering your business name with Corporate Affairs Commission in Nigeria. One of the best options is to register your company as a limited liability company. This will ensure that your business is different from the owners and the personal liability of the owners are not at risk

The following are the requirements for registering your company as a limited liability company

  1. The first step required by the applicant is to choose two suitable proposed names for the company. Where this is done, an availability check will be conducted on the CAC online portal to find out if the name is available and not already in use.
  2. Choosing the type of company to be registered whether a private limited company or private unlimited company or company limited by guarantee.
  3. The objectives and business of the company must be provided.
  4. The registered principal address of the company.
  5. The share capital and shareholding formula among shareholders will be required.
  6. The particulars of a minimum of two (2) Directors will be required. A copy of their means of identification such as voter’s card, national ID, drivers’ license or international passport.
  7. Particulars of the company secretary (one of the directors may also act as the Secretary of the company)
  8. The applicant will be required to furnish details of the shareholders of the company. Details such as names, occupation, residential address, email address, mobile phone number and means of identification such as driver’s license, international passport or national identity card. It should be noted that the directors listed can also hold the capacity of shareholders in the company if desired.
  9. The memorandum and Articles of association of the company to be registered which is advisable to be drafted professionally by a Legal Practitioner. However, the CAC has provided a generic MEMART, which any new company can be adopted.

After which a consultant will prepare the following incorporation documents. They include

  • Duly verified particulars of the director and statement of share capital known as CAC Form 1.1
  • Duly stamped Memorandum and Articles of Association
  • The individual completes all the incorporation documents with the input of an accredited lawyer to duly attest to the incorporation documents.
  • The payment of the prescribed fees will now be duly made online and the incorporation documents immediately stamped online.
  • The stamped incorporation documents will now be duly uploaded into the CAC online portal again for the final review of the commission
  • If all the incorporation documents are well completed and executed, the commission will incorporate the company and issue an incorporation number immediately online.
  • Certificate of Incorporation and the Certified True Copies of the other documents will be issued by CAC and received by the consultant or lawyer, usually in less than 48 hours after the company is duly incorporated by CAC
  • Acquire your Tax Identification Number(TIN) and register for VAT

After registering your business, the next relevant you are meant to take is to register for Value Added Tax (VAT). Value Added Tax (VAT) must be collected on all vehicles you sell and you must remit the tax to the relevant tax authority which is the Federal Inland Revenue Service (FIRS). This will ensure the business is not penalized by the government

  • Choose a location for your business

In choosing a location for your car resale business, there are certain key factors that one must consider. One is that it must be a visible location with easy access from main roads and there must be plenty of parking space for your vehicle inventory as well as that of your customers. These are some of the factors that you should consider before choosing a location for your used car dealership shop;

  1. The demography of the location
  2. The purchasing power of the residence of the location
  3. Accessibility of the location
  4. The numbers of used car dealership shops in the location
  5. The local laws and regulations in the community or the state where your business is located
  6. Traffic, parking and security
  • Build an inventory

When starting a car resale business you will need to find vehicles that you will sell. You will need to source them out and this can be done by

  1. Advertising in trade publications, online trade websites or local papers
  2. Placing signage or a billboard outside your dealership that you’re looking to purchase vehicles
  3. Proactively approach people who may wish to sell
  4. Contacts and colleagues willing to sell their vehicles recommended by families and friends
  5. Responding to private adverts
  6. Attending vehicle auctions where you can buy vehicles in good condition.
  • Develop buying policies

When building your inventory you will need to ensure that in the process of keeping your lot stocked, you are not draining your resources. You will need to set a minimum or a limit of the amount of vehicles that will be in your company at a particular time when stocking up. This is very important

  • Acquire Licensing

You need to acquire a dealer’s license before you start selling and buying cars. Without this customers won’t patronize your business, they will think you are a scam nor fraud. A dealer’s license will also enable your buying and selling of cars to fall within the Consumer Rights Safety Laws.  To become a car dealer in Nigeria, you will need to apply for a car dealership license

  • Acquire insurance

Dealing with car resales means that any unexpected event can happen to the cars that you are selling. It could be theft, damage or fire. In order not to make losses, it is advisable for the owner of the business to acquire insurance protection for the business. You might consider the following insurance policy for your car resale business

  1. General insurance
  2. Health insurance
  3. Liability insurance
  4. Workers compensation
  5. Payment protection insurance
  6. Overhead expense disability insurance
  7. Business owner’s policy group insurance
  8. Risk Insurance
  9. Credit insurance
  10. Deposit insurance
  • Select and hire staffs

When dealing with hiring employees for a car resale business, you need to consider those who are experienced and will be in charge of handling many types of customers that come to patronize your business and many other personnel that are also very important to the business. The following employees will be needed when starting a car resale business

  1. Salesperson
  2. Marketing manager
  3. Customer relations
  4. Security guards
  5. Receptionist/Cashier
  6. Maintenance worker
  7. Auto mechanic

. Personnel can be gotten through

  1. Posting about the vacancy on your website and across any social media or email marketing channels
  2. Asking your business network, as well as friends and family if they know anyone suitable
  3. Adding the vacancy to general recruitment websites
  4. Advertising the vacancy in industry trade media or local newspapers
  • Develop an online presence

Before any individual buys a particular vehicle from a car resale business, he or she must have carried out different research on the car of their choice before heading out to purchase the vehicle. This is why it is very important for a car resale business to have enough information about the business, kind of products they sell, reviews from previous customers on relevant online platforms in order to boost the sales of the business

  • Consider having a service department

Having a service department in your car resale business will enable you to have another source of income. Used cars require more service and repairs than the new cars. In order to have the service department, you will need to build a garage and employ mechanics

  • Consider offering a warranty

Offering a warranty to your customers could give you the edge over your competitors and will also ensure that people patronize your business well.  Offering a warranty also boosts the buyer’s confidence in your product

  • Market and promote your business

When running a car resale business you must ensure that you employ certain measures in order to promote your business and attract customers. These are some of the marketing ideas and strategies that you can adopt for your used car dealership business

  1. Direct Marketing
  2. Sponsor TV and Radio Programs
  3. Erect your Billboards in Strategic locations around the city
  4. Making use of sales Agents and sales reps
  5. Online Marketing
  6. Referral Marketing
  7. Ensure that all your employees wear your branded shirts during work hours
  8. Engage in road show within the community where your used car dealership is located.
  9. List your used car dealership business in local directory
  10. Sponsor relevant community programs
  • Organize a launch celebration

One of the ways to kick start a car resale business is by organizing a launch celebration. It will attract customers and clients. You have to ensure that there is provision of free food, drinks, live music and prizes branded with the company’s logo


Before venturing into this business there are some factors you should put into consideration. These include what cars to deal, the location of your business, insurance, licensing and many other factors that are discussed above. This business is very lucrative especially in Nigeria where we have just few car manufacturing company and most of the cars used in Nigeria are manufactured in Western countries and then imported to Nigeria.

For more information on how to start a Car resale business in Nigeria, you can contact us on  08023200801, 08075765799, Email:

About the author

Onamakinde Dare Daniel is a highly motivated accountant with knowledge in Accounting, Taxation, Management, Audit, Costing and Research. He is keen on tax matters due to its ever dynamic nature.

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