You may have bought and sold a car for yourself; but starting a profitable car sales trade will need more planning. Its smart to buy cheap and sell for profit. But how to avoid the pitfalls and become a successful start-up. We at The Accountancy Solutions have put together this document as an introduction what you may encounter while on your journey to start the business of selling cars. It’s not comprehensive and we would advise to talk to us before you embark on joining your countless competitors in the market and discuss your business plan.
You need to be a salesman before you start selling. You need to have an eye on the need of your customer before you offer a service or goods you sell. You need not to be an expert in cars or selling cars. You can start selling cars from home as a part time business and grow it into a profitable venture. Trick is to sell cars quickly and have quick cash flow turnaround to buy new stock.
To start with the business plan, its important to seek advice and have market research about suppliers and customers. Where you will buy cars from? What type of Cars sell quickly? How much it would cost to buy a Car and sell it in a particular time frame?
All above questions and many more should be well researched before purchasing any car. This would have an impact on your start up budget. You can buy low value car and sell for the same profit compared to high value cars. Purchasing will be one of the most influential Key Performance Index in your business.
Pricing your car is the next step and can be done by looking at similar cars sold within the targeted area. You can start by looking at previous adverts or car valuation price sites.
Selling cars come next and will be base on your market research when you purchased the car and given everything goes according to business plan you should be able to sell your first car within stipulated time and ready to buy your next stock.
You would also need to research about your customers. What age group you will target/ What kind of population area you are targeting? Whats the income group of your targeted population area? Does online advertisement bring customers from outside your targeted area?
An excellent source of all things automotive is the Society of Motor Manufacturers and Traders (SMMT). As well as representing the interests of the industry, it provides a wealth of car data and research valuable to someone new to the market, including used car sales data, car registrations, sustainability etc.
You would need to do some maths with the numbers. Start with how much money you must invest. This will include purchase price of car, any travelling expenses, auction fees if you are buying from an auction, any car repair issues or any aesthetic improvements you may ant to make.
You must account for legal fees and compliance costs. If the cost of legal fees is not included, it may upset your budget and will have direct impact on your business plan. You should be aware of advertisement costs. As a small trader it may not be cheap to advertise online. You must look for other free options available.
Your business plan should detail about the purchase and sales cycle of every unit. This will help you to do quantity analysis and you can set yourself target of selling cars in a quarter or in one year.
You can register as a sole trader, if you are starting business part time and your total taxable income including from business is not more than basic rate threshold. This would save you expenses of compliance costs. If you are starting it as full-time business and have planned for a turnover more than £60,000 or taxable income for more than basic rate threshold, its advisable to form limited company.
We form company for our clients free of cost who sign up with us for at least one year. You can register yourself as sole trader on HMRC website or form a limited company on Companies House. You can also use agents who can form your company online for a minimum cost.
Business Bank Account
You would need to open business bank account either as a sole trader or for limited company. Limited Company is separate entity and you can only withdraw profits through salary or dividends. It will also help you separate your personal finances from business expenses. It’s a smart way of keeping accounts clean and efficient.
You may need to notify council if you are selling cars from home. Selling cars from home is a great way to save money and maximise profits. But you must notify council how many cars will be parked on a road at one time. You can find your local council contact here.
Motor Trade Insurance
You must apply for a motor trade insurance as you may register multiple cars and drive them without paying for private insurance individually. This can be a major expense, but it should be accounted for in your budget and cost spread over period. Unlike private insurance you will have an option to add and remove cars as you like and without paying any additional premium.
You can also add additional drivers subject to policy conditions. You can have an option to choose in between four types of insurance covers. Minimum cover to satisfy legal requirement is Road Risk cover. You can also have option to choose Third Party, Fire and Theft or Comprehensive Insurance.
Next you need to apply for trade plates and register with DVLA. You will make an application to DVLA for a trade licence in order to use trade plates. Trade Pates are mobile tax discs and will save you tax and time to register every car that is temporarily in your possession. Trade Plates can be for six or twelve months and expire on 30th June or 31st December.
Start Buying and Selling
After you have setup your business, it’s time for action. Your business plan should detail all the possible purchase tips and timeline. Once you have made your first purchase, you need to check all documents are in place. Get car checked by an independent Mechanic for peace of mind. Get MOT done and clean the car for possible viewings.
You can advertise your car by placing a ‘To Sell’ sticker on windshield or on window with price and description. To get right customer, you would need to put detailed description and mileage on your advert. You can use eBay, Gumtree and local paper free advertisement to start with. If you are starting business full time, then you can apply for a quote from auto trader co-part or car spring.
Records to be Maintained
You must keep proper records of cars bought including persons or organisations you are buying from. Keep all purchase invoices including any expense invoices. If you can’t get an invoice, make sure you have a diary to keep record of all expenses for which you haven’t been able to get an invoice. Most of time these are cash expenses like cleaning of car etc.
Sales invoices should be issued electronically or manually in numeric orders and should contain full information including mode of payment. If selling a car for cash more than £1,000.00 you should ask for ID, proof of address and bank statement of your customer. Beside you wold need to keep copy of driving licence and proof of address for every customer. We would advise to take any payments above £500.00 through bank transfer or apply for a card machine in order to take payments from debit or credit cards.
Accounting and Bookkeeping
Accounts and bookkeeping can be done online. You can maintain your accounts in excel if you are trading part time. If you are selling cars full time, you can subscribe to online soft wares for receipt capturing and bookkeeping.
Talk to us more about accounting and tax compliance. Our team at The Accountancy Solutions know about your trade and are specialist in this sector. We can set up a cost-effective way to keep records and minimum hassle.
We can help you with business registration, company formation, book keeping, annual accounting, VAT Returns, corporation tax return and self-assessment tax returns. Call us today for free and no obligation advice.