Advise - Motor Trader from Home

Gurj247

Hello all,

Hoping that there is someone here that may be able to help/guide me with the above.
The reason for doing this is that my father is currently retired and as such has a lot of free time and often goes to the auctions for the fun of it. I am also looking to increase my income, so we thought we would look into the whole buying and selling of cars from home.

In principle we have agreed the below:
· My father would buy the cars (particular models and prices would be discussed prior to him going to auction)
· We would both then be responsible for cleaning them up and carrying out any work that we feel is required.
· I would then be responsible for the advertising of the cars (Autotrader, Pistonheads, etc etc)
· Jointly responsible for carry out viewings and selling the cars.

So does anyone know what we need to have as a minimum to be able to do this properly. We aim to keep our costs low to begin with, to see how things go, so probably only buy a car at a time and if it goes well then we shall see.

From some research I have done i have the following plan in my head.

1) Arrange "Motor Trade Insurance" - This I believe is a MUST (any companies recommended?)
2) Arrange trade accounts with Auctions to allow us to buy cars easily enough.
3) Get GLASSES guides possibly (trade car prices guide book)
4) If this does ok then register a company - i believe i would have a year to do this?
5) become VAT Registered if business turnover exceeds a specific amount (apologies can't remember the amount that HMRC states)

Anything else?

All help appreciated.

EdGasket

I think you will struggle with this because of:
1) Costs - buyers premium at auctions are high for individuals
2) Insurance - temporary cover is expensive and will eat into profit margin
3) Cars are easy to buy and difficult to sell especially at a profit
4) If you are only doing this as a business then you should declare yourselves traders and pay tax and NI on any profit. Otherwise you are breaking the law and misrepresenting cars to your potential buyers.

Gurj247

EdGasket wrote: »

I think you will struggle with this because of:
1) Costs - buyers premium at auctions are high for individuals
2) Insurance - temporary cover is expensive and will eat into profit margin
3) Cars are easy to buy and difficult to sell especially at a profit
4) If you are only doing this as a business then you should declare yourselves traders and pay tax and NI on any profit. Otherwise you are breaking the law and misrepresenting cars to your potential buyers.

Thanks Ed,
In response
1) would register as traders, hence lower premiums at auctions
2) insurance would be trade insurance not temp
3) yeah i know, but worth a shot.
4) I'm doing this to earn some extra cash yes, so would be setting up a business, most probbaly ltd company tbh, but when does this need to be done? from your response i would assume this would need to be at the start.

EdGasket

4) I'm not sure but I would imagine strictly speaking from day 1 and probably definitely needed for trade insurance. Have you any idea how much trade insurance is going to cost you? I think you will get a shock.
I have an idea of the cost as I have some family with trade insurance but would be interested to know what you are quoted starting from scratch.

EdGasket

Update - seems you can get trade cover as a Sole proprieter or Partnership if you want. Probably best to save the costs of forming a company then, at least at first.

lincroft1710

Your neighbours and the local council may not like you selling cars from home. Some properties have a restrictive covenant which prevents using them for business purposes. You may also be contravening the house's planning permission and planners may object.

Also as a trader what sort of guarantee/warranty will you be able to offer.

EdGasket

The warranty issue is a good point. As a private individual, once you have sold a car, that is generally the end of it. As a trader, you are subject to SOGA and a buyer could come back after 6 months with a blown head gasket and have a reasonable chance of claiming against you.
You have to put these contingency costs into your plan along with getting the odd dud from the auction.
TBH I have considered doing exactly what you propose but decided against it as there are so many rules and regs about cars and so much hassle with tax, MoT, and insurance. Hence I think I would choose some other commodity than cars to trade but good luck if you give it a go.

khiller1988

I work for a company that specialized as a broker in motor trade, and the insurance side of it is relatively easy to work on. if the cars are in your fathers name he would need to be listed as a business partner so depending on his age will depend on the premium (without being referred your usually looking at 25- 65 years old). Most companies are now asking for proof of trading so that's something to consider when your keeping a record of what your taking in and out.
Also most motor trade policies allow you to add a private car, so you could lose your personal policies for this, usually available as long as you don't require your private car for your other occupation, if you do make sure you request additional business use, again this can be limited if you are involved in certain occupations. Usually they don't like self employed builders, plumbers , or anyone involved in the fast food or retail industry as a rough overview of what could cause the premium to be high)
You can also sometimes transfer NCB for an intro discount at least.
The company I work for is Quote Me Today, who deal with a large number of insurers, two of the best being Chaucer and Service. There is also a company called Tradewise if intend to be involved in high performance vehicles or have a high performance personal vehicles (Ferrari, Porsche, Subaru as an example)

Hope this helps in some way when your making your decision, and good luck!

khiller1988

khiller1988 wrote: »

I work for a company that specialized as a broker in motor trade, and the insurance side of it is relatively easy to work on. if the cars are in your fathers name he would need to be listed as a business partner so depending on his age will depend on the premium (without being referred your usually looking at 25- 65 years old). Most companies are now asking for proof of trading so that's something to consider when your keeping a record of what your taking in and out.
Also most motor trade policies allow you to add a private car, so you could lose your personal policies for this, usually available as long as you don't require your private car for your other occupation, if you do make sure you request additional business use, again this can be limited if you are involved in certain occupations. Usually they don't like self employed builders, plumbers , or anyone involved in the fast food or retail industry as a rough overview of what could cause the premium to be high)
You can also sometimes transfer NCB for an intro discount at least.
The company I work for is Quote Me Today, who deal with a large number of insurers, two of the best being Chaucer and Service. There is also a company called Tradewise if intend to be involved in high performance vehicles or have a high performance personal vehicles (Ferrari, Porsche, Subaru as an example)

Hope this helps in some way when your making your decision, and good luck!

Oh and from the customers we deal with most are sole traders especially part time so aren't a registered company

Gurj247

EdGasket wrote: »

The warranty issue is a good point. As a private individual, once you have sold a car, that is generally the end of it. As a trader, you are subject to SOGA and a buyer could come back after 6 months with a blown head gasket and have a reasonable chance of claiming against you.
You have to put these contingency costs into your plan along with getting the odd dud from the auction.

I am sure that by law I would not need to provide 6 months warrenty, but that would be an optional extra that i think i would offer, via a 3rd party company.
With regard to the issue of a person coming back, i would assume that this would be covered by my insurance policy (although i could be completely wrong here)

khiller1988 wrote: »

I work for a company that specialized as a broker in motor trade, and the insurance side of it is relatively easy to work on. if the cars are in your fathers name he would need to be listed as a business partner so depending on his age will depend on the premium (without being referred your usually looking at 25- 65 years old). Most companies are now asking for proof of trading so that's something to consider when your keeping a record of what your taking in and out.
Also most motor trade policies allow you to add a private car, so you could lose your personal policies for this, usually available as long as you don't require your private car for your other occupation, if you do make sure you request additional business use, again this can be limited if you are involved in certain occupations. Usually they don't like self employed builders, plumbers , or anyone involved in the fast food or retail industry as a rough overview of what could cause the premium to be high)
You can also sometimes transfer NCB for an intro discount at least.
The company I work for is Quote Me Today, who deal with a large number of insurers, two of the best being Chaucer and Service. There is also a company called Tradewise if intend to be involved in high performance vehicles or have a high performance personal vehicles (Ferrari, Porsche, Subaru as an example)

Hope this helps in some way when your making your decision, and good luck!

Thanks for the information Khiller1988,
I think my father and i would be starting with something cheap and cheerful to begin with no car being purchased for more than £4k. Would stick with ex fleet/company cars, things like vectra's, mondeo's, astra's, focus's, which usually although have heavy miles have a lot of paperwork to back them up too.

Ages wise we should be fine, i'm 31 and father is 56. I'm full time employed, while father is pretty much retired.

Could you possibly give an indication of insurance costs for above assuming, no claims, no points, no convictions, both with licences over 12 years and i personally have 6 years ncb.

Becles

lincroft1710 wrote: »

Your neighbours and the local council may not like you selling cars from home. Some properties have a restrictive covenant which prevents using them for business purposes. You may also be contravening the house's planning permission and planners may object.

Also as a trader what sort of guarantee/warranty will you be able to offer.

Definitely this!

My home has a restrictive covenant, but the work I do from home is clerical. The council are fine about this as I'm just sitting in my house on a PC, so I'm not bothering anyone.

If I was doing anything that would affect the neighbours such as being noisy or having people call at the house, the council would object.