A disciplined, inspection-led used-car retailer can earn dealer-standard margins in a growing R165bn market

Centurion Pre-Owned Vehicle Company (Pty) Ltd (“the Company”, trading as Centurion Motor Exchange) is a start-up used-vehicle retailer that will open a 4,200 m² display and reconditioning site on a high-visibility arterial in Centurion, Gauteng, in March 2027, followed by a second site in Midrand in March 2029 if Site 1 meets pre-agreed trading milestones. The Company buys vehicles directly from the public, from trade-in customers, from fleet de-fleets and at auction; inspects and reconditions them to a published 150-point standard; and retails them in the R150,000–R450,000 band with bank finance, value-added products and a seven-day return promise.

The opportunity

South Africa’s used-car market is large, growing and resilient. AutoTrader reports that 195,455 used vehicles changed hands through its dealer network in the first half of 2026, up 8% year on year, with transaction value up 9% to R82.4bn, growth delivered despite a 25 basis-point rate increase in May 2026. Buyers have not left the market; they have become more deliberate, shifting toward compact, efficient vehicles that sell in 27–29 days against a 37-day market average. That behaviour rewards retailers that buy well, price accurately and turn stock quickly.

The problem and the solution

Mid-market buyers face an unattractive choice. Scale traders offer price and speed but little reconditioning or after-sale assurance; franchised approved-used programmes offer assurance but concentrate on newer, pricier stock; and independent yards and private sellers carry real risk of undisclosed damage, finance encumbrances and cloned vehicles. The Company positions squarely in that gap: transparent pricing, a published inspection report on every vehicle, a seven-day return policy and a three-month mechanical warranty, on vehicles priced where most Gauteng households actually buy.

Business model and economics

The Company earns a front-end trading spread on each vehicle, net of reconditioning, of about R27.5k in FY29, plus about R9.3k per unit from finance commission, value-added products and a documentation fee. Total gross profit is R36.4k per retailed unit. After commissions and variable marketing, each vehicle contributes about R30.3k towards fixed costs of R16.5m a year at Site 1 (including central overhead and floor-plan interest). Site 1 therefore breaks even at about 46 retail units a month; the plan assumes 58 in FY29, a 21% margin of safety.

Table 1.1: Summary financial projections, base case (R million unless stated)

Source: Company financial model. FY28 includes the pre-launch period and R2.2m of pre-opening costs; FY29 includes R1.7m of Site 2 pre-opening costs.

Funding requirement and use of funds

The Company requires R30m of equity: R6m from the Founders and R12m from the Investor at financial close (Tranche A), and a further R12m from the Investor in December 2028 (Tranche B) to fund Site 2, released only if Site 1 meets its volume, EBITDA and stock-ageing milestones. Equity is complemented by a R6m development-finance term loan, R3.5m of asset finance and a floor-plan facility that advances 80% of stock cost, rising from R25m to R50m when Site 2 opens. At close, R10.9m funds Site 1 capex, R2.2m funds pre-opening costs, R13.0m buys 60 units of opening stock, and R10.3m is held as ramp-up and working-capital liquidity.

Returns

At an exit at the end of FY32 at 5.0x EBITDA, enterprise value is R77.0m and, with R18.6m of net cash, equity value is R95.6m. The Investor’s 50% stake (40% after Tranche A, rising to 50% on Tranche B) returns R47.8m on R24m invested: 1.99x and an IRR of 18.0%. A discounted cash-flow valuation at an 18.6% WACC gives the project a positive net present value of R16.5m, which supports the 50/50 ownership split as approximately fair value.

Key risks

• Price competition from new entry-level vehicles. Chinese and Indian brands now sell new cars from around R200,000 with warranties and finance deals, compressing used values in the lower band. Mitigation: stock mix weighted to R200k–R400k bakkies, SUVs and late-model hatchbacks, and weekly re-pricing.
• Slower volume ramp. A 10% volume shortfall cuts FY32 EBITDA to R10.9m and investor IRR to 6.1%. Mitigation: a 60-unit launch floor, digital lead generation from day one, and a buying pod that feeds trade-in stock.
• Stock ageing and mispricing. Margin is lost in the second and third month a car sits unsold. Mitigation: a 90-day hard exit rule, data-led pricing and daily aged-stock review.
• Credit supply. Around two-thirds of buyers need bank finance; tighter approval rates reduce conversion. Mitigation: submissions to all major banks and specialist lenders through a single F&I desk.
• Expansion risk. Opening Site 2 into a weak market would be value-destructive (Section 23). Mitigation: Tranche B and Site 2 are contractually gated on Site 1 performance.