What approvals do I need to buy a car dealership?

Dealership transactions have more moving parts than most small-business purchases, and the two approvals run on different timetables with different criteria. A buyer who satisfies one has not advanced on the other.

The provincial regulator registers people, not businesses

Each province administers dealer registration through its own body, with requirements covering the dealership, its premises and the individuals who will run and sell. Registration is not transferable with the assets — the buyer applies in its own right, and the assessment looks at the applicant’s background and financial position rather than at the dealership’s history.

The manufacturer decides who sells its brand

For a new-vehicle dealership the franchise agreement with the manufacturer is the business. Manufacturers set their own criteria on capital, experience, facility standards and succession, and commonly hold a right of first refusal on a proposed sale. A buyer the manufacturer declines cannot complete, and the manufacturer can also require facility upgrades as a condition of approving a transfer.

The facility is often the real cost

Brand image requirements can mean a substantial capital programme on a building the buyer has only just acquired. Establish what the manufacturer has already asked for, what is outstanding, and what a transfer will trigger — this is frequently larger than anything negotiated over the price of the goodwill.

Used-vehicle and independent dealers

An independent used-vehicle dealership has no manufacturer to satisfy, which removes the harder approval and leaves the provincial registration, the premises requirements and the consumer-protection obligations that come with selling to the public. Simpler, and not unregulated.