Margins
Dealership operations are running at roughly 2.5% EBIT margins, a structural problem made materially worse by National Insurance increases, EV discounting pressure and rising compliance overhead.
SectorsAutomotive
Automotive
Our largest sector, and the one most lenders get wrong.
Dealerships are declined constantly by lenders that do not understand how the trade is financed. The businesses are not weak: they are being read wrongly.
565+ automotive deals recorded.
Stock on the forecourt
The same stock, on the stocking line
What a generic credit model readsDebt at full value, the asset it was raised against discounted
Why the balance sheet looks worse than the business
Stocking finance sits against the forecourt. The stock is a current asset, the facility against it is a current liability, and the two move together every time a car is bought or sold.
Run that through a generic credit model and the business looks overleveraged with thin or negative net assets. It is not. That is what a properly stocked dealership is supposed to look like.
Lenders that fund this sector properly already know that. The rest decline on sight, and a dealer sent to three of them carries three declines for no reason.
Knowing which is which decides whether a case completes.
The pressure right now
Cost per unit
Preparation costs are approaching £700 a unit, paid before the car is sold.
Supply
The missing new car registrations from the Covid era start hitting the five to seven year old bands from 2026, exactly the stock independents rely on.
More capital tied up per unit, more prep cost, and a thinner margin at the end. That is a working capital problem first.
What dealers actually want
Dealers are traders, not borrowers. They deploy capital, turn it, take the margin and go again. A facility is a tool, so the question is how fast it works, not what it costs over five years.
Speed, because a decision made on Tuesday is acted on that week.
Early repayment that reduces the cost, because carrying a facility to term was never the plan.
Facilities that sit alongside stocking finance instead of replacing it. Most dealers already have a stocking line. What they are short of is everything else.
What it gets used for
Stock outside the line
Buying at auction or from a trade source, where the stocking line is drawn or the car does not fit its criteria.
Prep and reconditioning
A serious line of its own now, at close to £700 a unit.
Q4
When working capital pressure is heaviest, which is why the facility is best arranged before it arrives.
Expansion
A second site, an MOT bay, a workshop, a prep centre. Service revenue that is not tied to units sold.
Refinancing
Expensive short-term borrowing built up on cards and revolving facilities, restructured into something with a fixed cost and an end date.
The card pattern
A common sequence: a dealer takes a business credit card, uses it for spending and drawdowns because it is the fastest money available, and builds a balance over months. Then carrying it becomes the problem, and the right move is to restructure the balance into a term facility with a lower cost and a defined end date. It is normal, and usually the second conversation, not the first.
If a dealership case is being read wrong somewhere, that is usually fixable.
What we need
Six months of business bank statements. Five to seven minutes from a banking app.
Not the accounts: in this sector they are the least useful document in the file, for the reason above.
The trade moves faster than most lenders read it. Send the statements and we will tell you where you stand.