Whether a Government or a local car auction, there is money to be made from purchasing cars at a good price, fixing them up and selling them on. This could include ex public service cars, trade-ins that haven’t sold at a dealership or even repossessions. Here’s a quick guide to getting a good deal and the motor trade insurance you’ll need to keep you legally covered.
Buoyant Used Car Market
The sobering news that new UK car registrations fell by 4.4 percent in September from a year earlier has come as a blow to the motor trade sector still reeling from the COVID pandemic. According to the motor industry, it is the worst September this century in terms of car sales.
However, one sector does seem to be bucking the trend. In the used car market prices have risen to an average of £8,000 as demand for second-hand models continues to grow, according to national auctioneers British Car Auctions (BCA). It’s reckoned that approximately 12,000 vehicles are sold at auction every week in the UK.
Physical car auctions, not counting online auction sites such as Ebay, still remain popular the length and breadth of the UK as private buyers and those in the second hand or part time motor trade seek out the best deals on cars and vans. But before you embark upon a career as a second-hand dealer, it’s worth knowing some valuable tips to make sure your deal is bang on the money, rather than an old banger.
Around the country there are local auctions happening every week including those for classic cars or police sell offs. If you’re wondering whether vehicle auctions are right for you, it’s worth visiting the auction site for a couple of dummy runs to see how the auctions are conducted, the types of vehicles on offer and the average prices paid. Watch the action closely and look out for regular ‘bidders’ who may just be trying to inflate the prices.
Before you attend it’s always good to look at the online catalogue to gauge used car pricing. You can then compare them to other online sites, local garages or online magazine classified listings. They’ll provide a ballpark figure of how much you’re likely to pay and provide a description of the car, detail its history and grade its condition.
Once you’re comfortable visiting the auctions you can now focus on inspecting your chosen cars on the day. Arrive early and spend your time looking around. Simple checks of the engine, bodywork, electrical systems, interior trim and tyres will give you a general idea of the car’s condition. Look for tell-tale signs of repairs such as paint touch ups, metal fatigue and rust, oil puddles under the vehicle and worn brake discs.
It’s also at this point you may want to assess what level of technical ability and tools you possess, especially if you have to conduct any work on the car at a later stage. Set your bidding limit and be prepared to walk away even if it is just one pound over your limit. If possible, select a few substitutes in case the bidding goes beyond your budget for your first choice of car.
During the auction pay very close attention to what the auctioneer says, as their description is a legally binding selling statement and trumps any of the other previous descriptions in the catalogue. Beware of descriptions such as ‘sold as seen’, ‘specified faults’ and ‘no major mechanical faults’. If you have doubts about the vehicles age and mileage listen out for ‘sold with a warranted mileage’ – meaning the mileage has been verified by an independent inspection report.
Transporting Your Vehicles
Whether you are a full-time or part-time motor trader, you will need the appropriate motor trade insurance both to transport your vehicles and for working on them. If you only flip the occasional car, you may prefer to opt for a part-time motor trade insurance policy to save some money until you decide whether to expand your business at a later date.
Like all cars on the road, those you buy at auction will need the appropriate road tax and insurance, together with its MOT. If your vehicle doesn’t have MOT, it will need to be transported back from auction, unless you are driving it straight to the MOT centre. Most auction houses will offer transport themselves, and some also provide short-term insurance for the day.
If you have a motor trade insurance policy in place, you simply need to register it with your insurer and they can then place it on the MID as a stock vehicle. It may also be worthwhile investigating the use of trade plates to enable you to move cars more easily and within the law.
Combined Insurance Cover
Together with road risk cover, a motor trade insurance policy can include a variety of options focussed on your business. If you are storing vehicles whilst working on them, you will need some form of premises cover to protect the building against the cost of any damage. Contents cover is useful for tools and equipment, whilst storage cover will protect cars against accidental damage or theft.
If you are going to let customers test drive the vehicles once restored, you will also need demonstration cover and you will probably want to look at liability insurance to make sure you are personally protected from claims.