Below is an overview of the strengths, weaknesses, opportunities, and threats that are commonly faced by classic car dealers
Strengths
These businesses, once they establish an ongoing client base of wealthy car enthusiasts, are able to generate highly predictable income from the ongoing sale of classic vehicles. Additionally, given the specialty nature of these automotive firms, they are able to generate substantial gross margins from each sale. It is imperative that these companies maintain ongoing relationships with collectors so that vehicles can be effectively sourced on an ongoing basis. Additionally, one the major strengths of these businesses is that they are able to maintain highly controllable operating and overhead costs. This further contributes to the stability of a classic car dealer’s profits.
In regards to sourcing capital, these entities are typically able to receive a line of credit that is secured by the inventories of classic cars that will eventually be sold to collectors. Banks and financial institutions are willing to extend ongoing capital support given the tangible and easily divestible nature of these inventories coupled with the reasonably high gross margins that are achieved from each sale. These businesses can also receive mortgages in the event that the business owner wants to establish a large-scale physical facility to showcase classic cars to the general public. Generally, down payments of 20% are required when seeking this type of funding for a classic car dealer.
Weaknesses
This is a highly specialized business, and classic car dealers need to continually find highly specific models and makes of vehicles for their clients. The barriers to entry for this type of business are relatively high. Unlike traditional vehicle dealers that provide new vehicles sourced from manufacturers, classic car dealers need to maintain close personal relationships with automotive collectors on a national basis. These companies do not have nearly the same level of deal flow as a traditional car dealer.
Opportunities
There are numerous ways for classic car dealers to expand their operations. These entities typically grow through increasing the scale and scope of their marketing campaigns. This not only increases inventory turnover, but it also introduces new collectors to the Company. These businesses can also acquire large inventories of classic cars through estate sales and liquidations. Most importantly, classic car dealers can expand their operations by listing their vehicles for sale among numerous online platforms. This facilitates a more rapid turnover for vehicle sales while concurrently establishing a respected and reputable brand name.
Threats
The principal threat that is faced by classic car dealers are matters related to the economy. During very challenging economic climates, these businesses may face revenue pressure as fewer people can afford a classic car. However, these risks are typically abated by targeting wealthier people that are far less swayed by negative changes in the economy. Also, by listing inventories of classic vehicles among numerous online platforms – these risks are further abated as national level visibility can be achieved. There are currently no regulations pending that would impact the way that these businesses conduct their operations.