A car dealership is not a turnkey business. Lenders structure the loan around the property, the inventory line, the franchise agreement if one exists, and your operating history or industry experience.
Most operators in Cobbity and the broader Camden area looking to acquire a dealership underestimate the cash required to bridge the gap between settlement and first sale. Stock finance, lease guarantees, property deposits and working capital all need separate funding lines, and lenders assess each component differently.
Why dealership loans are structured in multiple parts
A dealership loan typically splits into three components: property finance, stock finance, and working capital. The property component behaves like a standard commercial property loan, usually requiring 30 to 40 per cent deposit and secured against the land and buildings. Stock finance operates as a revolving line of credit, secured against the vehicle inventory itself, and funded only when specific vehicles are purchased for resale. Working capital covers wages, marketing, insurance and operating costs until cash flow stabilises, and may be secured or unsecured depending on your financial position.
Consider a buyer acquiring a used-car dealership on the northern edge of Cobbity. The property is valued at $2.2 million, the existing stock is worth $800,000, and the seller has projected three months of operating costs at $180,000. The buyer arranges $880,000 in cash and pre-approved finance for the property at 70 per cent loan-to-value ratio, a stock finance facility to $1 million with monthly interest-only payments, and a $200,000 working capital line secured against commercial property they already own. That structure allows settlement without liquidating the buyer's entire cash position, and ensures stock can be turned over without waiting for property equity to be released.
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What lenders assess beyond the property valuation
Lenders assess your operating experience in automotive retail or wholesale, the franchise agreement if the dealership is franchised, the location's demographics and traffic flow, and your balance sheet outside the dealership itself. A buyer with ten years in fleet management will be assessed differently to a buyer entering the industry for the first time, even if both have identical deposits. Franchise agreements are scrutinised for termination clauses, territory restrictions, and the franchisor's financial health. If the agreement can be terminated on 90 days' notice, the lender treats that as a material risk and may reduce loan-to-value ratio or require a larger working capital buffer.
Cash flow projections matter more than property value in this segment. Lenders want to see monthly profit and loss statements for the past two years if you are buying a going concern, or a detailed business plan with realistic sale volumes, margin per vehicle, and cost assumptions if you are starting new. Commercial loans for dealerships are assessed as business acquisitions first, property transactions second.
How stock finance works and why it is not included in the property loan
Stock finance is also called floorplan finance. You draw down funds each time you acquire a vehicle for resale, and repay the drawn amount when that vehicle sells. Interest accrues daily on the outstanding balance. Most floorplan lenders charge a higher interest rate than property finance, typically 2 to 4 percentage points above the property loan rate, because the collateral depreciates and can be damaged or stolen.
Floorplan finance is structured as a revolving line of credit with a maximum limit, not a fixed loan amount. That limit is determined by your projected stock turn, the lender's appetite for motor vehicle security, and your demonstrated ability to sell inventory within 60 to 90 days. If your stock sits unsold for longer than 90 days, many floorplan agreements require you to pay down a portion of the facility or move the vehicle off the floorplan onto your own balance sheet. Buyers who underestimate stock turn find themselves forced to sell at a loss or inject personal cash to meet floorplan repayment terms.
Cobbity-specific considerations and why location still matters
Cobbity sits outside the urban core but within reasonable drive time of Camden, Narellan and the Campbelltown employment corridor. A dealership located on the northern edge near Greendale Road benefits from pass-through traffic to and from the M31 Hume Motorway and visibility to Camden growth-area buyers. Dealerships on rural-zoned land south of Cobbity Road may face lower traffic volume, which lenders factor into projected sales and therefore loan serviceability.
The suburb's semi-rural character and larger lot sizes mean commercial property prices per square metre are lower than Narellan or Oran Park, but zoning must allow vehicle sales, repairs and display. Buyers should confirm the site's existing use rights or development consent before exchange, because retrofitting a rural property for dealership use can add $200,000 or more in civil works, fencing, hardstand and signage. Lenders will not fund those works under a standard commercial property loan without a separate construction or fit-out facility.
For context, Camden LGA recorded significant price growth across residential property over the 12 months to mid-2026, with surrounding suburbs such as Oran Park and Cobbitty experiencing strong buyer demand. That growth has lifted local household incomes and purchasing power, which supports dealership revenue projections if your business plan is targeting local buyers rather than wholesale or export.
Pre-settlement finance and how to avoid a cash squeeze at settlement
Pre-settlement finance bridges the gap between when you need to pay the deposit or complete due diligence costs and when your main facility settles. Dealership transactions often require company searches, franchise due diligence, environmental assessments, stock audits and lease reviews, all of which cost money before settlement. If your deposit is held in offset accounts or term deposits that cannot be broken without penalty, pre-settlement finance keeps those funds working while you meet transaction costs.
Some buyers use business loans or a redraw facility on existing commercial property to fund the deposit, then refinance the whole position once the dealership settles. That approach works if your current lender will allow a second-ranking security or if you have sufficient equity in another asset. It does not work if your existing facility has a negative pledge or if you are already at your borrowing limit.
Fixed versus variable rates and why most dealership buyers choose variable
Variable interest rates give you the flexibility to make larger repayments during strong sales periods without penalty, and to redraw if cash flow tightens. Dealership revenue is cyclical, and the ability to pay down principal when stock turns quickly, then redraw for working capital during a slow quarter, is worth more than the rate certainty a fixed term provides. Most commercial lenders offer a partial fix, where you fix 40 to 60 per cent of the property loan and leave the rest variable. That structure provides some rate protection without eliminating flexibility.
Fixed interest rate terms for commercial property typically run one to five years. If you fix for five years and want to sell the dealership or refinance in year three, break costs can run into tens of thousands of dollars depending on rate movements. Variable rates avoid that problem but expose you to rate rises. At the current cash rate settings, many brokers recommend a partial fix or a two-year fixed term that aligns with your business plan review period.
How to structure the loan if you are buying the business but leasing the property
If the dealership property is owned separately and you are leasing, the loan structure simplifies to stock finance, working capital and fit-out only. You will not need a commercial property loan, but the lender will want to see a lease with a term long enough to recover the fit-out cost and build goodwill. A lease with three years remaining and no option is difficult to finance unless the landlord agrees to extend or you can demonstrate the dealership is easily relocatable.
Lenders treat leasehold businesses as higher risk because you do not control the property. If the landlord sells or refuses to renew, you lose the location and any goodwill tied to it. That risk is priced into the interest rate and loan-to-value ratio. Expect to contribute a larger deposit and accept a higher rate than you would if you were buying the freehold. Some lenders will not finance leasehold dealerships at all unless the lease is held with a related party or the landlord provides a guarantee.
What happens if you already own commercial property in the area
If you own commercial or residential investment property in Cobbity, Camden or nearby suburbs, that equity can be used as additional security to reduce the deposit required on the dealership purchase or to secure the working capital line. Cross-collateralisation means the lender takes a mortgage over both the dealership property and your existing property, which increases your total borrowing capacity but also increases your risk. If the dealership fails, the lender can recover from both properties.
An alternative is to keep the securities separate and use your existing property as a guarantee only, rather than a mortgaged asset. That structure is cleaner if you later want to sell the existing property or refinance it independently, but not all lenders will accept a guarantee without a registered mortgage. The decision depends on your appetite for risk and your exit strategy. Buyers who plan to hold the dealership long term and build value often accept cross-collateralisation to minimise the upfront cash required. Buyers who want the option to exit within three to five years prefer separate securities even if it means a higher deposit.
KM Financial Services works with operators across Cobbity and the wider Camden region to structure dealership acquisitions that match your cash flow, risk profile and growth plans. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
How much deposit do I need to buy a car dealership?
Most lenders require 30 to 40 per cent deposit for the property component of a dealership purchase. Stock finance and working capital are assessed separately, and you will need additional cash to cover settlement costs, initial operating expenses, and any fit-out or signage works.
What is floorplan finance and how does it differ from a property loan?
Floorplan finance is a revolving line of credit that funds vehicle inventory. You draw down when you buy a car for resale and repay when it sells. It carries a higher interest rate than property finance because the collateral depreciates and is more easily damaged or stolen.
Can I use equity in my home to fund the dealership deposit?
Yes, if you have sufficient equity in residential or commercial property, it can be used as security to reduce the cash deposit required or to fund working capital. This is called cross-collateralisation and increases your total borrowing capacity but also your risk if the dealership does not perform.
Do lenders finance leasehold dealerships?
Some lenders will finance a leasehold dealership if the lease term is long enough to recover fit-out costs and build goodwill, typically five years or more with options. Leasehold businesses are considered higher risk, so expect a higher interest rate and larger deposit than a freehold purchase.
Should I fix or keep my dealership loan variable?
Most dealership buyers choose variable or a partial fix because dealership cash flow is cyclical. A variable rate lets you pay down principal during strong sales periods and redraw for working capital when needed, without penalty or break costs.
