How to Become a Car Trader: Detailed Guide

How to become a car trader
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Among many lucrative businesses in the UK is the car trading business. One interesting thing about a car trader is not just the huge profit, you also gain complete knowledge of different UK car brands and their various body parts. This knowledge serves as leverage over your clients when you’re trying to sell cars to them. In return, they are satisfied with the result as regards the car’s performance while you, on the other hand, get a five-star rating.

If you’re looking to become a car trader or thinking of trading in your old car with outstanding finance, then this article is for you. This guide explained everything you need to know to become a car trader in the UK  and the possibility of trading in a car with outstanding finance.

Who is Car Trader?

A car trader is an individual, company or partnership that buys, sells or exchanges cars. Generally, if you sell up to four or more cars in a year,  you need a licence. In some cases, though, you’d need a licence even if you sell fewer than that.

According to the law of motor car trader acts 1986, individuals, partnerships, or companies who carry on a business of trading cars require a licence. To ‘carry on’’  here simply means to engage in buying, selling or exchanging cars.

The law further explained that if you offer to buy, sell or exchange more than four cars in a year, you’re required to get a licence unless you can prove that in that time you neither:

  • Engaged/carried on a business of car trading nor
  • Portrayed yourself as doing so.

Unfortunately, you may face criminal charges if you do not have a car trader’s license and are engaged in the business of trading in cars.

Responsibilities of A Car Trader

Every occupation has an obligation that you automatically inherit the minute you decide on operating on the said field. Here are some of the responsibilities of every car trader 

#1. Approaching customers to find out what they want

Generally, trading involves an agreement between the buyer and the seller. Nevertheless, the seller needs to do more work in trying to discover what the buyer wants and be able to provide accordingly. 

Therefore, it is the task of a car trader to reach out to his potential customers through a reliable channel or platform with the aim of meeting their desired needs.

#2. Describing the qualities and benefits of appropriate cars

The task of a car dealer is not limited to approaching customers. Describing the qualities and benefits and further recommending an appropriate car to them is a major task. 

Of course, you’d agree that most customers who walk into a car shop have not made up their minds on a particular car. It is then your duty as a car trader with experience to ensure that such customers walk out with the best of cars.

#3. Setting up test drives

Arranging a test drive for customers should be one of the important tasks a car trader must be conscious of. Don’t assume they can drive because they’ve come to purchase a vehicle. Even if they say so without a shred of evidence to back it up, set up a driving test still, to check their level of articulation and consciousness while driving.

Furthermore, recommend a known driving school where they can gather more experience if need be.  In this manner, to an extent, you’re reducing the chances of road hazards caused by reckless driving. Also, the main purpose of arranging a test drive for your clients is to assure them of the wellness of the vehicle.

#4. Purchasing, selling, and exchanging vehicle parts

The internal combustion engine is the heart and soul of your vehicle. For example, the timing chain, camshaft, crankshaft, spark plugs, cylinder heads, valves, and pistons are all components of the engine block. Other vehicle parts include the radiator, alternator, front axle, muffler, brakes etc. 

Other than selling a complete car, dealing also on these vital parts of a vehicle is another task of a typical car dealer. 

Further responsibilities of a car dealer include handling paperwork, such as contracts, road tax and car registration. Offering loans and other forms of financing options.

How to Become a Car Trader in the UK

Car sellers do not necessarily need to be car enthusiasts. As strange as that may sound, the most vital thing is that you have a business sense and a keen eye for a good offer. Starting up as a car trader in the UK can also be one of the less expensive options for entrepreneurs, as you can do it from the comfort of your home. 

As you grow, however, you can consider buying your own forecourt, forming a limited company, and hiring employees. In short, becoming a car trader could be a terrific alternative for anyone in the UK  who believes they have what it takes to find a good deal and earn a good profit from it. Join me as I list out the things to keep in mind to become a successful car trader in and outside the UK

#1. Know the market

We may have stated that you do not need to be a total automotive aficionado, and while this is correct, you do need to be familiar with the market. A real estate investor, for example, may not know how to run the ideal home, but they do need to know which kind of properties would yield the most return.

As a car dealer, make sure you’re up to date on the current auto market in the UK, and that you’re aware of any upcoming changes that may have an influence on sales. The Ford Fiesta, for example, may be a little off, but London’s Vauxhall Corsa is already in place. As a result, car dealerships must make changes to their inventory to meet the demand for zero or low emission vehicles.

Additionally, you’d need to stay on top of changes, as they happen all the time. In 2021, for example, used car sales were at an all-time high since new car production just cannot keep up. If you happen to be late on that important piece of information, you’d quickly find out when your consumers start flocking to considerably more competitively priced dealers who have reacted to the market. You don’t want that to happen, I’m sure

#2. Write a business plan

Most businesses must spend money to make money, and auto dealerships are no exception. You have nothing to sell if you don’t have any stock. Hence you’d have to invest some money in purchasing some cars. However, this is not something you should do by instinct.

When writing your business plan, be particular to your industry, such as selling cars. When compared to, perhaps, running a neighbourhood café, this comes with a few more considerations. These are some examples:

  • Repair costs for vehicles purchased
  • Any expenses incurred in order to improve the general condition of vehicles
  • Legal fees, administrative expenses, and marketing expenses

These are things you should think about from the start, even though your car dealership is just you selling vehicles from home and your stock comprises of a single used automobile.

Additionally, choosing a company model is another critical component of your business plan. At first, working as a sole proprietor may be the best option. This implies that you can operate under your own name and that all of your business income is reported to HMRC as a self-assessment tax return. As your firm grows, you may want to consider incorporating as a limited company. This would provide you with more control by explicitly separating your business finances from your personal finances. A limited corporation, on the other hand, necessitates more administration and annual financial updates to be forwarded to Companies House.

#3. Know how to sell a car

We’re not only talking about learning how to persuade a buyer to buy a car from you. As a trader who deals in automobiles, you should also be able to make a reasonable car valuation to your UK customers. Cars sell for a variety of reasons, but the fundamental reasons remain pretty timeless, and these include:

  • Engine type
  • Condition
  • Age
  • Mileage
  • Transmission

All of these factors have an impact on the final pricing. However, there is more to consider than the elements stated above. While you may have arrived at a price that you believe exactly satisfies these five criteria, there are a number of other factors that may need a revision of your estimates, including:

  • The season
  • The community market
  • Any local changes?

A convertible, for example, would sell significantly better in the summer than in the winter. On the other hand, you may reside in a student town, where the demand for a car naturally surges when students come in September for the start of a new academic year. Another item to think about in your neighbourhood is any new developments, such as clean air zones. As a result, low-emission and electric vehicles may become necessary for local drivers. So, whatever pricing model you develop, it must be capable of adapting to changes as well as competing.

#4. Obtain insurance

Getting insurance for your car is one thing, but if you’re going to be a car trader and purchase up a collection of vehicles in the UK, you’d need to make sure they’re all protected as well. Car trade insurance is available in a variety of forms that cover a variety of issues:

Comprehensive insurance for instance protects you against damage caused by another vehicle, fire, and theft, as well as any automobile you drive, whether it is a customer’s car or your work car. Third-party insurance protects you from damage caused by other drivers while

fire and theft insurance covers damage caused by other drivers, as well as automobile theft and fire damage.

As a car dealer, you should keep in mind that motor trade insurance does not cover your personal vehicle unless you specifically add it to your policy.

#5. Get trade license plates

Apparently, it’s unreasonable to expect a car trader in the UK to register and tax every vehicle that enters their possession. This is where trade license plates come in handy. To apply for trade plates, you must have motor trade insurance.

Your license will be valid for a variable period of time depending on when you apply. Moreover, you can renew for a period of 12 months or 6 months, but only until the next expiry month, not from the date of your application. As a result, if you apply in January for a 12-month license, your license will only be valid for 10 months because the expiry date is in October.

#6. Get permission from the council

Selling vehicles from home is a simple method to begin your career as a car dealer. However, you must also consider where your vehicle will be parked. If you have space on your driveway, that’s great. However, if you need to park it on the street while you sell the car, you’d need to check with the council to see if there is a restriction to how many cars you may park. It’s also not a bad idea to check with your neighbours, especially if you live on a private estate, there may be restrictions on how many cars you may have or what you can do with them 

#7. Get familiar with car buying options

You aren’t much of a car salesman if you don’t have an automobile to deal with! Cars for sale can be found in the same way that you would find a personal car. Looking at online listings and approaching private vendors are examples of this. However, as a car trader, you may choose to pursue the car auction route in the UK, where only professionals will be shopping for automobiles and where you can expect more pricing than from a car owner trying to sell high.

It’s a good idea to go to an auction a few times before bidding. There is a lot of background research to be done on how car auctions function and how to protect yourself from buying a vehicle that isn’t as wonderful as it appears.

#8. Buy a Car

Purchasing a car is simple, but purchasing a high-quality vehicle is more difficult. Before you part with your money, there are a few general checks you should always perform, including:

  • Examine a vehicle’s previous MOT history
  • Request a V5C logbook and review the service history.
  • Check to see if the vehicle was purchased on finance and if there are any outstanding payments.
  • Perform a test drive to ensure that the vehicle drives smoothly.
  • Finally, ensure the automobile is appropriate for your business and region. If you live in the country, for example, a Smart car is probably not a profitable option.

#9. Sell a car

Now that you have an automobile, you must sell it. It’s always a good idea to give it some Tender loving care to truly attract the attention of buyers, even if it’s only a fast wax and polish. Make sure your automobile profile is clear and honest; if the vehicle has any flaws, make sure to highlight them. Any minor flaws, such as scratches, may be worth repairing before listing the vehicle, since they may help you sell it for a higher price. 

Furthermore, ensure all of your shots are clear and show the automobile off to its greatest advantage. There are several options to sell an automobile, including online listings, local media, and even a good old-fashioned “for sale” sign in the passenger window.

Trading in a car with outstanding finance UK

A finance agreement is a popular method of financing an automobile purchase. It can provide you access to automobiles that would normally be out of your price range and allows you to spread the cost over several years rather than paying it all at once.

While there are numerous advantages to financing an automobile, there is one huge disadvantage. When you finance a vehicle, you’re normally locked in for the duration of the finance deal, which is typically five years. Many people find themselves in a scenario where, after a few years, they want to move automobiles or obtain a new vehicle.

If you have outstanding finance on your automobile but wish to upgrade to a different model, you’ve come to the correct place. This chapter would teach you all you need to know about trading in a car with outstanding finance in the UK.

How trading in a car with outstanding finance works in the UK

There are some prevalent assumptions in the UK about trading in a car with outstanding finance. Some believe that a car with outstanding finance cannot be traded in until the finance is settled. Others feel that trading in and obtaining a new car wipes off the outstanding finance. Both have some truth to them, but it isn’t always that simple.

If you have a car with outstanding finance that is worth more than the remaining balance on the finance agreement, it’s often possible to trade it back to the dealer and get the finance agreement settled. However, if the trade-in value of your vehicle is less than the outstanding loan, you will be liable for paying the remaining balance when you trade-in.

This is known as negative equity, and it is typical if you want to trade in a car at the beginning of a financing plan.

When you wish to trade in your automobile while having negative equity, your car dealer may be able to roll it over for you. This means that the leftover balance on the existing agreement is combined with the new agreement for the new car and paid off together. This saves you the trouble and complication of having to pay two financial agreements at the same time. Also, it allows you to virtually settle the first original agreement.

Reasons for trading in a car with outstanding finance

There are numerous reasons why car owners in the UK prefer trading in vehicles with outstanding finance agreements. Perhaps you want a newer model, want to minimize your monthly expenses or have different needs from your vehicle than when you first purchased it.

In addition to all of these personal reasons for trading in a car with finance, here are some other aspects to consider:

#1. Research

The first aspect in the list is research on the part of the car owner. Making a decent trade-in bargain with a car dealership is usually easier if you have done your homework. You’re more likely to receive what you want if you know exactly what you want, the model you want, and the amount you’re willing to pay for it. By trading in a car with outstanding finance, you give the dealership an incentive to provide you with a good deal on the new vehicle you want.

#2. Cost-Effective

The next reason one would consider trading in a car with outstanding finance is the cost aspect of it. Cars are frequently highly expensive to run and maintain. You’d have to pay for any repairs and running costs in addition to the monthly finance repayments. If you’re spending more money than necessary on repairs and maintenance, trading in can be a good option.

New models almost generally require fewer repairs and continuous maintenance, which saves you a significant amount of money. They are also typically more fuel-efficient than older models, making them less expensive to operate. If your current vehicle is expensive to operate and maintain, trading it in for a newer model could save you money in the long term.

#3. Dealership Incentives:

Lastly, we have dealership offers. Automobile dealerships are constantly offering new bargains and promotions, particularly on new models. These kinds of deals are primarily oriented toward trade-ins, and they can mean a great discount on a new car.

In addition to these trade-in deals, vehicle dealerships are continuously looking for ways to increase client loyalty. This means they are likely to be open to trade-in discussions in the hopes that you will return every time you need a new vehicle.

In conclusion, timing is everything when it comes to trading in a car with outstanding finance in and outside of the UK. If you have only recently obtained your finance agreement, trading it in will most likely be a negative financial decision. You’d almost certainly be in negative equity with your car because its value would have plummeted as soon as you bought it.

This means that trading in early would cause you to pay a significant amount to satisfy the finance arrangement. In other words, you’d not lose as much money on the deal if you wait for the cost to equal out with your outstanding finance.

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FAQ’s on How to Become a Car Trader

How many cars can I sell without paying tax?

There is no minimum quantity of cars sold to qualify as a trader. It doesn’t matter how many automobiles are sold each year, only traders buy cars to resell at a profit.

Is car-flipping a illegal?

Car flipping for profit is lawful. Flippers are those who buy cheap and then sell them for a profit without registering them. Investigators believe these vehicles are frequently defective and poorly fixed.

How difficult is it to sell cars?

It’s time to confront reality, whether you’re a salesperson or a general manager: there are no “tricks” to selling cars. As you may have gathered from this post, selling cars is not difficult—It just takes effort. Simply put, when they meet someone new, outstanding salespeople react differently than typical salespeople.

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Car flipping for profit is lawful. Flippers are those who buy cheap and then sell them for a profit without registering them. Investigators believe these vehicles are frequently defective and poorly fixed.

" } } , { "@type": "Question", "name": "How difficult is it to sell cars?", "acceptedAnswer": { "@type": "Answer", "text": "

It's time to confront reality, whether you're a salesperson or a general manager: there are no \"tricks\" to selling cars. As you may have gathered from this post, selling cars is not difficult—It just takes effort. Simply put, when they meet someone new, outstanding salespeople react differently than typical salespeople.

" } } ] }
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