How to become a car dealer

how to become a car dealer

Just about anyone can sell their car with Motorway, but it takes time and experience to become a successful car dealer. It takes a lot of skill to become a successful car trader, and a lot of talent and dedication to become one that customers and other businesses trust. Motorway works with over 3,000 verified dealers across the UK.

If you’re interested in becoming a car dealer, or – if you are already an established car dealer – joining our nationwide dealer network, here’s everything you need to know.

How to become a registered car trader in the UK

Car dealers don’t necessarily need to be passionate about cars. As contrary as that sounds, the most important thing is that you have a head for business and a keen eye for a great deal.

Getting started as a car dealer can be one of the less costly options for entrepreneurs as well, as you can start from home, without needing to find a business premises, and operate as a sole trader. As you grow, you can look into acquiring your own forecourt, becoming a limited business, and employing staff, if you want. In short, becoming a car dealer might be a great option for anyone who thinks they have what it takes to find a bargain and make a great sale off of it.

1. Know the market

We may have said that you don’t need to be a total petrol head, and that’s true, but you do need to know the market. A property developer, for example, doesn’t need to know how to run the perfect home, but they do need to know precisely what type of homes are going to get them the best return.

Make sure you’re clued up on the current car market, keeping in mind all the impending changes that may impact sales. The 2030 electric switchover, for example, may be some time away, but London’s ULEZ is already here, so car dealerships need to be making changes to their stock to accommodate the demand for zero or low emission cars.

You’ll need to keep on top of changes, and changes are happening all the time. Right now, in 2021, for example, used cars are at record highs because new car output just isn’t keeping up. If you were to somehow miss that key piece of news, you’ll soon find out when your customers start going to far more competitively priced dealers who have reacted with the market.

2. Know how to sell a car

And we don’t just mean knowing how to charm a customer. Cars sell for a range of reasons, but the basic motivations are fairly eternal, and these include:

These all impact the final price, so you should know how to make a sensible car valuation. There is more to consider than just the factors listed above, though. While you may have landed on a price that you think perfectly fits these five points, there are other things that can require you to rework your figures, including:

  • The time of year
  • The local market
  • Any local developments

For example, a convertible will sell far better in the summer than in the winter. Locally, you may live in a student town, the demand for a car naturally increases when students arrive for the start of a new academic year in September. Another thing to consider about your area is any developments such as clean air zones. These can make low emission and electric cars an essential for local drivers. So, whatever pricing model you have devised, it needs to be one that can adapt to changes and take on competitors, too.

becoming a car dealer in the UK
Car dealerships need to stay on top of car market trends.

3. Write a business plan

Most businesses need to spend money to make money, and that is doubly true for car dealerships. Without stock, you have nothing to sell, and that means you’ll have to sink some cash into getting some cars. This is something you should not play by ear. Car dealerships benefit from low outlays from the start, but any business needs to carefully balance the books to keep it in the black.

When you write your business plan, be specific to your business i.e. selling cars. That comes with a few extra things you need to bear in mind compared to, say, running a local café. These include:

  • Cost of repairs for cars you purchase
  • Any costs for improving the overall condition of cars
  • Costs for legal fees, admin, and marketing

These are things you will need to consider from day one, even if your car dealership business is no more than you selling cars from home and your stock consists of a single used car.

Another key part of your business plan is to pick a business model. At first, operating as a sole trader might be the most suitable. This means you can operate under your name, and all your business income goes through HMRC as a self-assessment tax return. As you grow, you can consider becoming a limited company, which can give you more control as it clearly separates your business finances from your personal finances. However, a limited company also requires more admin and annual finance updates to be forwarded to Companies House.

4. Get permission from the council

Selling cars from home is an easy way to get started as a car dealer. But you also need to consider where your vehicle is going to be located. If there is room on your drive, then that’s fine, but if you need to park it on the street while you wait to sell the car, you’ll need to contact the council to see if there is a limit to how many cars you can park. There’s also no harm in checking with your neighbours, and if you live on a private estate, there might be rules about how many cars you can have, or what you can do to them (i.e. no carrying out large repair works in communal areas).

motor trade insurance for car dealers
Car dealers require proper business insurance and the right documentation.

5. Get accredited

Car tradesmen don’t always have the best reputation, so if you want to be seen as a trusted professional, you’ll need the paperwork to back it up. The Motor Ombudsman is where customers go to have any wrongs put right when it comes to buying and selling cars. By proving you are accredited with them, you’re showing that your business aims to provide a fair and trustworthy service. You’ll also have access to assistance should disputes arise, and a profile page to increase awareness of your business and its ethos for honest service.

6. Get insured

Car insurance for the car you drive is one thing, but if you’re going to be buying up a collection of vehicles then you’ll need to make sure they’re all covered, as well. Motor trade insurance comes in several different types that cover different things:

  • Comprehensive: Covers damage from another vehicle, fire, and theft, as well as any car you are driving, whether that is a customer’s car, or your own company car
  • Third party: Covers damage dealt by other drivers
  • Third party, fire, and theft: Covers damage done by other drivers as well as car theft and damage by fire

You should bear in mind that motor trade insurance will not cover your personal vehicle unless you specifically add this to your cover.

As well as general car motor insurance, you should also look into liability insurance which protects you against claims a customer or anyone else can make against you and your business. There are also other sorts of liability cover you may want to consider:

  • Employers liability: Required for any staff you employ and covers them for any injury they may sustain while at work.
  • Product liability: Covers you if a customer tries to sue you over a faulty product.
  • Public liability: Covers the cost of any claims a member of the public may make against you, for example, if they slip on your business premises

You will need motor trade insurance no matter how small your company is, though you can also find ‘part-time insurance’ that covers only your working hours if you are not a car dealer full time.

7. Get trade licence plates

Obviously, it isn’t reasonable to expect a car dealership to register and tax every single car that comes into their possession, and that’s where trade licence plates are essential. You must have motor trade insurance in order to apply for trade plates.

Depending on when you apply, your licence will be valid for different durations. You can renew for 12 months or 6 months, but this does not mean 12 months or 6 months from the date of your application, only until the closest expiry month. So, if you apply in March for 12 months, your licence will only be valid for 10 months as the expiry date is December.

Month you applyWhen the licence expiresHow long it’s valid for
January (6 month licence)June6 months
January (12 month licence)December12 months
FebruaryDecember11 months
MarchDecember10 months
AprilDecember9 months
MayDecember8 months
JuneDecember7 months
JulyDecember6 months
AugustJune11 months
SeptemberJune10 months
OctoberJune9 months
NovemberJune8 months
DecemberJune7 months
Even if you only have one car you plan to sell sitting on your drive, you still need the necessary insurance.

8. Become familiar with car buying options

You’ll not be much of a car dealer without a car to be dealing with! You can find cars to buy much like you would when looking for a personal car. This includes looking at online listings and approaching private sellers. As a car dealer, though, you may prefer to go the route of car auctions, which is where only professionals will be looking for cars and where you can expect more business-savvy pricing than from a car owner looking to sell high.

It’s well worth visiting an auction a few times before you dive in. There is a lot a background research to be done on precisely how car auctions work and how to protect yourself against purchasing a vehicle that isn’t quite as good as it may seem. Of course, you could also just come to Motorway, but we’ll get onto that in a bit…

9. Buy a car

Buying a car is easily done, but buying a quality car is a bit harder. There are a few general checks you should always do before parting with your cash, including:

  • Checking a cars previous MOT history
  • Ask for a V5C logbook and check the service history
  • Make sure the car hasn’t been bought on finance and has outstanding payments
  • Do a test drive to make sure the vehicle drives well
  • Make sure the car fits your business and location — if you’re in the countryside, a Smart car probably isn’t a profit-generating choice

10. Sell the car

Now you have a car, you have to get it sold. It’s always a good idea to show it a bit of TLC to really catch the eyes of sellers, even if that’s just a quick wax and polish. Make sure your car profile is clear and honest, if there are any issues with the car, be sure to mention them. Any small issues like scratches might be worth getting fixed before you list the vehicle, as it may help you sell for a better price. Ensure all your photos are clear and show the car in its best light. You can sell a car in a number of ways, including online listings, local papers, and even a good old fashioned “for sale” sign in the passenger window.

Remember, when you sell a car and accept payment, cash comes with some risk. Money laundering and counterfeiting may seem like something that only happens in movies, but it’s perfectly possible to have this happen to you. And it could easily ruin whatever small business you’re looking to start. Make sure you have ways to accept secure payment, which may mean you have to pay monthly service and processing fees for a card reader.

car dealers selling a car
Car dealers are just as at risk of fraudulent cash deals as private sellers.

How to become a car dealer with Motorway

So, you’ve done it, you’ve become a successful car dealer, and now, you want to join our network. The good news is that it’s not that hard to do, but we do need to approve your business beforehand and may require a number of years of successful trading history and an understanding of your purchasing power. To get started, all you need to do is:

Sign up to become a dealer

Motorway for dealers is our professional web portal where dealers can log in and buy cars in our daily online sales. Signing up is easy and can be done in a few minutes.

Provide the required details

In order to join our network, we require that you have the following:

  • A fully functioning website
  • A trading premises, either a forecourt or a trading unit
  • Companies House and VAT numbers

VAT and Companies House numbers are something you should have received when you became a limited company. Sole traders do not have to register with Companies House, so if this is your current business model, you will have to become a limited company in order to work with Motorway.

More Motorway guides

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How to keep your car looking new
How to transfer car ownership
The future of manual cars
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What is car remapping?
Car engine size – the ultimate guide
How to look after & maintain a car
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