Wholesale stock funding – is it a good fit for your business?
Dealers need vehicles. Customers need to see them on your forecourt. That’s a fact as true as the day is long.
But where you source the funds to fill your “shop window”, that’s not so clear. Capital can come from different sources and each has its own benefits. One option is stock funding – an increasingly popular choice for independent and franchise dealers in the UK and Ireland.
It’s simple really:
- Purchase a vehicle from an auction, trade, or wholesale source
- Fund the vehicle with a Stocking Plan (typically the full vehicle price and any associated fees)
- Make capital repayments at set times or pay the value back in full once the vehicle is sold.
With this approach, you’ll get additional funds to buy more stock, and what’s more, you’ll free up capital to invest elsewhere. But is it the right fit for you? Here are a few things to think about:
1) Assess your business goals
Reviewing your business strategy is an important step in deciding whether wholesale stock funding is right for you. Do you want to increase the number of vehicles you’re stocking to boost sales? Maybe you need funds to grow your business in other ways?
In most cases it’s wise not to rely solely on your own capital to maintain good foundations and stay agile.
Stock funding helps you quickly add to your inventory, meet demand or increase the number of vehicles you can stock at once. It also means your own capital is not locked up in ‘metal’ on your forecourt so it can be invested in other ways, such as your people, marketing, or on improving your facilities. Regardless, a Stocking Plan can be transformational.
2) Decide what your stocking needs are
Are you looking to stock a wide range of vehicles? Perhaps you want to stock higher value vehicles than you currently offer?
Either way, you need to go where the right stock is and have the ability to buy when the opportunity arises. Non-captive wholesale stock funding means you aren’t tied to one source, enabling you to fund vehicles from essentially anywhere you choose.
If you want to start stocking higher-value vehicles, stock funding is a great option as it allows you to invest more in the vehicles on your forecourt than you may have available, with the benefit of then seeing higher returns on the more valuable stock.
In today’s market, dealers are increasingly likely to purchase stock from private sources to supplement their wholesale sources. With a Stocking Plan, you can load privately purchased vehicles as trade vehicles to get the capital you need, without dipping into your own funds.
3) How does it fit into your overall funding mix?
There are many other ways to fund stock on your forecourt, such as using your own capital generated from sales or investments, bank loans, or credit lines. Wholesale stock funding is simply another type of funding that can form part of your overall funding mix.
A huge benefit of wholesale stock funding is that you get instant access to funds, without the weighty expectation of how and when you spend that funding. That’s often the case with other funding products from banks and other providers that lack the specific knowledge of the automotive industry that NextGear Capital has.
If you’re considering wholesale stock funding, you should consider what percentage of vehicles you buy that you are comfortable with using stock funding for, and how much you want to use your own capital investment. In our experience with dealers across the UK and Ireland, it's advantageous to use a good mix of funding options.
One size doesn’t fit all, but in most cases, you will find blending stock funding and your own capital can be the right road to go down.
NextGear Capital – trusted by 1,700+ dealers
We are proud to have supported the growth of more than 1,700 dealers since 2014. NextGear Capital Stocking Plans are tailored to the specific needs of dealers operating in the wholesale market, providing 100% funding at more than 70 auction and trade sources. We take this responsibility very seriously and have an experienced team who’ll work with you to understand your needs and ambition to determine an appropriate facility. Plus, our dedicated account managers will continue to partner with you and adjust your plan as needed.