How to become a car trader
Learn how to make money buying and selling cars for profit
Useful links to help you start:
– Register your car trading company name with our preferred company formation agent
(external site, opens in new tab)
– See if you can get a Start Up Loan to help you start a car trading business idea
(external site, opens in new tab)
Car trading couldn’t sound more straightforward: buy cars cheap and sell for profit. The trick to make money when you buy and sell cars is often to sell quickly – with car traders typically fetching anything from £400 depending on the car. You do not have to be a car expert to be successful selling cars. What is more you can buy and sell cars on a part-time or full-time basis – perfect for an entrepreneur looking for a simple business idea. Follow this checklist to find out more…
How to become a car trader:
1. Research the market
Find out what types of cars are selling, and for how much, before you buy your first car. When thinking about the best cars to buy and sell, think also about who your audience is, then decide how you might best cater to that audience (do you want to specialise in selling a particular car make or model you know a lot about, for example). Where do they buy cars from? How long does it take to sell a car? Don’t forget there are different ways to price your vehicle; you could look at existing car adverts or car price evaluation sites to gauge how much you should charge.
2. Write a business plan
Work out your costs compared to how much you might sell the car for. Once you have done some market research and have an idea of what kind of cars you want to sell you should then create a business plan. This might not seem necessary, at least for your first car, but it is important to assess the viability of buying and selling cars as a business and not simply a hobby. Keep in mind that you will have to repair any issues the car may have, so you will want to have a budget for that, as well as for any aesthetic improvements you might want to make. There will also be a few legal regulations and marketing considerations you will want to be aware of (see below) which are useful to add in to your plan from the outset. You may want to look at a simplified version of our business plan template to help you. Once you know your costs, you will know how much you can afford to purchase a car for, and can assess if you need to raise any finance.
3. Notify your local council
Selling cars from home is a great way to save money when you’re starting out as a car trader. If this is the route you decide to go down, you’ll need to notify your local council in order to ascertain how many cars you can have parked on the road at one time.
4. Get Motor Trade Insurance
Once you have the go ahead from the council you need to get yourself some Motor Trade Insurance which covers you when driving cars without having to insure them individually. Motor Trade Insurance is a great option as unlike private insurance it allows you to add and remove as many cars as like without having to pay additional costs. There are three types which cover you for different things and vary in price.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
5. Apply for trade plates
Next you need to apply for trade plates which are essentially mobile tax discs that save you having to tax and register every car that is temporarily in your possession.
6. Buy a car to sell
There are a few different avenues you can go down when purchasing a used car. The most convenient is online on auction and listing websites such as eBay, Copart UK and Gumtree and car selling sites such as Auto Trader UK, carwow and Carspring. Alternatively, you can find cars at auction houses, which tends to be a very cheap option; if you’re not an auction aficionado go a few times before actually purchasing.
7. Start selling!
After you’ve purchased your first car you need to make sure it is ready for resale. Firstly, making sure the car has passed its MOT will save a lot of hassle when selling on, and of course make sure it’s clean; you could also give it a spray job to make it more appealing.
If you are selling from home, you are not allowed to have any signage on your house, price boards on the cars or to make any alterations to the premises. There are a plethora of car listing websites that allow you to create an advertisement quickly and easily, or you could advertise in your local newspaper or car dealer magazines. The best way to get your car noticed is using some good quality images that give a clear indication of what you are selling, and ensuring you have listed all information in your advert.
8. Register as a sole trader
Once you’ve sold your first car, you should register as a sole trader (read more in our guide on how to register as a sole trader). It is important that you inform HMRC once you start trading so that you are registered for self assessment tax. You could be fined if you don’t do this!
As you start buying and selling cars more, you may decide to form a company rather than operate as a sole trader (read more in our guide on sole trader vs limited company differences). Even if you don’t set up a company, you may want to set up a separate bank account for your car trading activities to be able to track them more clearly.
Some tips on buying cars
Be sure to check the condition of the car you are buying. Check the car’s history online using the free government site and make sure there are no outstanding hire purchase or conditional sale agreements as you cannot sell cars that have either of these. Once you go and see the car you should take it for a test drive to get a feel for how it drives and any repairs you may have to make should you decide to purchase.
Finally, make sure the car has a V5C registration document, this can be used as proof of ownership and as a way to keep track of registered keepers. If the person you are buying from does not have this it could mean that the vehicle is stolen. You should check the vehicles history to be sure.
Some tips on selling cars
You must observe the Consumer Rights Act that stipulates that the car must be in a satisfactory condition before sale. The consumer has more rights than you so it is very important that you tell prospective buyers everything you know about the car as if there is anything wrong once purchased you as the seller will be liable.
Once you have a prospective buyer and they want to come and see the car, remember that you don’t know who you are selling to so it might be an idea to have a friend or family member present to ensure that you feel safe when meeting the customer.
Take the buyer for a test drive and make sure you let them know everything about the car, have all the documents, such as MOT certificates and service records and V5C to hand. Both you and the buyer will have to fill out the relevant parts of the V5C and then send it to the DVLA who will then send to the new owner with updated details. Do not let buyers make copies or take photographs of vehicle documents, but make sure you hand them over once you’ve reached an agreement. You can set your own warranty or not have one if you wish, and remember to provide the buyer with a receipt.
Once you’ve sold your first car you can go out and do it all over again, and call yourself a car trader.