How to Become a Motor Seller
Car dealerships can be a profitable sector of the UK motor trade industry, particularly the current second-hand vehicle market, be it cars or vans. Knowing the correct rules and regulations of becoming a motor seller can help you to run your business smoothly and make for a rewarding return on your investment and hard work.
At Tradex, we have helped thousands of motor traders to get started in dealerships, offering support and assistance in providing the necessary motor trade insurance cover whether from your own home or at a premises.
Car Dealer Insurance
Depending on the location of your new motor selling business, you will need either car dealer at premises insurance or car dealer at home insurance. Both are similar in that they cover you and your vehicles but obviously vary in scope depending on the size of your business, the type of vehicles you are buying and selling, and whether you need cover for property either for storage or operating from a car dealership premises.
So, whether you are starting small from home, operating a medium-size business from premises or looking to expand an established dealership, the most important aspect of a motor trade insurance policy is to have flexibility of cover as you grow your company.
You may need cover for your premises where you are located, your vehicle stock and any equipment you use during your daily activities, particularly if you are repairing vehicles on site. You will also be dealing directly with customers and may find liability insurance a necessary addition to protect you against claims, even if you work from home.
As part of your commercial vehicle insurance, you will also need to be covered by road risks insurance to cover cars that may be taken out for a test drive prior to purchase, the movement of your own vehicles as well as that of customers, and the ability to register vehicles with the MID.
What Car Dealer Insurance Will I Need?
When operating a dealership, you will need road risk insurance to cover you and your employees when collecting and driving cars on the public road, thereby avoiding having to insure the vehicles individually. Potential customers can also be covered to test drive vehicles they are looking to buy whilst under your supervision, with demonstration cover.
Third party road risk car dealer insurance is the legal minimum and will cover you against damage to third party vehicles, but not your own. Fully comprehensive will give yourself and your vehicle protection against damages arising from road accidents, theft of vehicle, malicious damage and fire.
Most car dealership insurance will not include demonstration cover as standard so you will likely need this added to your motor trade insurance policy.
When operating from home and just starting out, it may be that third party is sufficient. As your business grows and expands, a fully comprehensive policy may give you further protection for the vehicles.
Trade Plates and Your Business
A valid car dealer insurance policy will be necessary to apply for trade plates. All vehicles that you are selling need to be covered by insurance and have a valid MOT certificate in place if being moved on the public road. Trade plates will prevent you having to tax each vehicle within your possession.
Trade plates must be applied for through the DVLA and will save you considerable expense in the long run.
Registering Vehicles with the MID
Vehicle dealership insurance also allows you to add all of your vehicles to the Motor Insurance Database (MID).
The MID is a central record of all insured vehicles in the UK and is used by both the DVLA and the police to reduce the number of uninsured vehicles on the road. As the owner of the dealership, it will be your responsibility to make sure a vehicle or trade plate is registered on the MID.
The vehicles you will need to add to the MID include any permanently owned vehicles related to your business, any stock vehicle you are moving on the public road without trade plates, or using for the purpose of social, domestic and pleasure and any trade plates. You must also make sure you make any deletions and additions of vehicles as you buy and sell. You will not need to disclose vehicles which you purchase for resale or demonstration purposes if under trade plates, but these need to be regularly updated.
Do I Need Liability Insurance?
When initially venturing out in your business, liability insurance often gets overlooked when financial resources are tight. This, however, could be the one main reason your business stays afloat, especially in the early years if someone were to make a claim.
Types of liability insurance that could be added to a policy include:
Public liability insurance: this will protect you against claims should someone be injured or suffer damage to their property whilst on your premises. It also covers any legal costs should a case go to court.
Employers’ liability insurance: This type of liability insurance is needed legally if you employ any staff, including casual or part-time employees. You will need at least £5 million of cover and this will protect you should an employee be injured at work. As part of its car dealership insurance, Tradex is able to offer public and employers’ liability up to £10 million indemnity limit.
Product liability insurance: (sometimes called sales and service indemnity insurance). This will help to cover your business should a claim be made for faulty workmanship or defective parts.
Business Premises Protection
If you are operating from a showroom, workshop or even a barn, getting a combined motor trade insurance policy will help to insure your premises against all the risks associated with commercial buildings.
Whilst you are providing protection for the external elements of the premises, buildings and contents insurance will also make sure any equipment, fittings and fixtures are protected from fire or flooding.
In addition, the combined policy will insure all vehicles kept on the premises as well as office equipment from theft or damage. It’s worthwhile to remember that even after you have sold a car, it is your responsibility until the customer takes it away.
Information for Buying and Selling Vehicles Out Of Trade
Once you have your business planned and location established, it’s time to begin the buying and selling of cars. Here is some useful information for car dealers.
1. Finding vehicles to purchase: Online auction sites such as eBay, Gumtree or Copart UK can be used to find discounted prices for cars. In addition, local newspapers sometimes contain classified ads or websites including Auto Trader or Exchange & Mart.
2. Getting the best deal: If you are not experienced with cars yourself, you can take someone with you who is, such as a mechanic, and make sure you both test drive the vehicle. You can also check out the vehicle’s history online before purchase (www.gov.uk/check-mot-history). Also, it can be important to make sure there are no outstanding hire purchase agreements as you will not be able to sell these vehicles, and make sure the V5C registration certificate is available. The car will be more difficult to sell without one, and it could even imply it has been stolen.
3. Preparing you vehicle to sell: A vehicle will need to have passed its MOT before selling on. It can be important to fix any scratches or small dents before selling and giving the vehicle a thorough deep clean or valet. It could make it easier to reach your asking price.
4. Leave some ‘wriggle room’ on price: When deciding on how much you are going to ask for your vehicle, demanding a price that allows for some negotiation can often help secure a better final offer. Keep your lowest price in mind and stick to it.
5. Consumer Rights Act and selling: You will need to be fully aware of the Consumer Rights Act before selling a vehicle. Make sure that it is of satisfactory quality, fit for purpose and as described. You will be liable if you are not honest and upfront about the condition of the vehicle.