starting a car dealership

[longshot]

n_const said:

daemon said:

So jump on the new guy and make him look like a dick?

Thats the best way to treat new members is it?

So what have I said that's upset you pair ? Im very sorry for upsetting someone who's first post was on a thread that was 3 years old and will probably never post on PH again.

Now gentleman , I cant be bothered to argue with you and I'm very busy selling motor cars in a very successful dealership..

Please tell us what dealership it is.
You must have a hoot when customers come in and ask questions with answers that to you are obvious or does answering via a keyboard change things somehow?

[singlecoil]

CR11ENA said:

I know this topic was started 3 years ago.

But this has been really helpful.

My plan is to buy 1 car, and sell that for a profit, save the profit.. turn it into 2 cars, or a car of a higher value, and so on and so on (obviously not that easily)

is that a good plan?

Thanks

x

In the context of the thread, it doesn't strike me as a particularly clever question.

[weeverfish87]

Hi there, if you are just starting out, and am looking to sell a few cars for say 2k, would you offer a customer a warranty? and would you still advertise under trade?

[POORCARDEALER]

weeverfish87 said:

Hi there, if you are just starting out, and am looking to sell a few cars for say 2k, would you offer a customer a warranty? and would you still advertise under trade?

Depends if you are willing to break the law or not?

[tswindells]

Hello all, I'm a long time reader and first time poster but I wanted to reply to this thread as I've been part-time trading for around 3 years and have quite enjoyed it.

Due to a number of reasons, I am considering going full-time at this and my main sticking point is premises. With a view to keeping overheads as low as possible I don't want to over-reach myself.

I am completely in 2 minds in what to go for. I currently trade from my house but I wouldn't want to do it as a full-time business from there as I would be looking to increase from selling 1-2 cars a week to 5-10.

Obviously, there is the normal route of renting a car lot/ex petrol station or some land with a portacabin etc. I was thinking that as I currently sell via Gumtree (£1k - £2k cars for quick sales) this is essentially an appointment based selling system. What does anyone think about selling in the same vein but from a business centre? Same idea but with a decent website. Advertise, arrange appointment and person(s) come to the office to view the car and take a test drive etc. The downside being that I wouldn't have a forecourt for people to drive past and come in and view. I don't know if any business centre would be happy about giving up 10-15 car parking spaces for me to use as a forecourt lol.

Anyway, any feedback whether positive or negative is appreciated.

Cheers

[tswindells]

...Another question I had was regarding warranties. I'm sure that I want to be offering my warranties in-house and doing as someone else had done by putting the warranty money in a separate account.

If this is the case, what kind of documentation do I give the customer detailing what is covered? I looked at a company online called Lawgistics which do this kind of thing for you. What should a warranty cover and what shouldn't it? Also, why would someone take out a warranty when they have the SoGA to fall back on anyway?

[POORCARDEALER]

tswindells said:

Hello all, I'm a long time reader and first time poster but I wanted to reply to this thread as I've been part-time trading for around 3 years and have quite enjoyed it.

Due to a number of reasons, I am considering going full-time at this and my main sticking point is premises. With a view to keeping overheads as low as possible I don't want to over-reach myself.

I am completely in 2 minds in what to go for. I currently trade from my house but I wouldn't want to do it as a full-time business from there as I would be looking to increase from selling 1-2 cars a week to 5-10.

Obviously, there is the normal route of renting a car lot/ex petrol station or some land with a portacabin etc. I was thinking that as I currently sell via Gumtree (£1k - £2k cars for quick sales) this is essentially an appointment based selling system. What does anyone think about selling in the same vein but from a business centre? Same idea but with a decent website. Advertise, arrange appointment and person(s) come to the office to view the car and take a test drive etc. The downside being that I wouldn't have a forecourt for people to drive past and come in and view. I don't know if any business centre would be happy about giving up 10-15 car parking spaces for me to use as a forecourt lol.

Anyway, any feedback whether positive or negative is appreciated.

Cheers

First piece of advice is unless you want to start employing staff dont get a high street showroom that has "opening hours", very tying.

Industrial unit is he norm now...rent a small unit so you can have your cars indoors and operate on a appointment basis.

I would bare in mind you may end up making less money than your current set up even selling more cars...customers expectations are higher when buying from business premsises than from the man selling a few "on the side" from home. The price you charge for cars wont be too different either.

Friend runs a business similar to above, 20 cars from a lock up, up to £5K mostly...he has to clear £3K a month for rent, rates, autotrader, insurance etc...he is averaging 12 cars a month at 500 a unit net, so clearing £3K a month, not a great deal for the hours he puts in and the amount of money he has laid out.

If I was startng out again (I owned a high street garage) I would buy a house without neighbours I could put a unit on and work from there, has its pitalls, but thatt is the most cost/time effective way of doing the job.

Any questions, feel free to ask

[tswindells]

POORCARDEALER said:

First piece of advice is unless you want to start employing staff dont get a high street showroom that has "opening hours", very tying.

Industrial unit is he norm now...rent a small unit so you can have your cars indoors and operate on a appointment basis.

I would bare in mind you may end up making less money than your current set up even selling more cars...customers expectations are higher when buying from business premsises than from the man selling a few "on the side" from home. The price you charge for cars wont be too different either.

Friend runs a business similar to above, 20 cars from a lock up, up to £5K mostly...he has to clear £3K a month for rent, rates, autotrader, insurance etc...he is averaging 12 cars a month at 500 a unit net, so clearing £3K a month, not a great deal for the hours he puts in and the amount of money he has laid out.

If I was startng out again (I owned a high street garage) I would buy a house without neighbours I could put a unit on and work from there, has its pitalls, but thatt is the most cost/time effective way of doing the job.

Any questions, feel free to ask

I appreciate the swift reply PCD.

To give a little more info, I have managed to find a business centre which rents out small offices from £250 pcm and believe it or not, that actually includes rates, elec, broadband etc. there would of course be call charges on top as I'm sure the phone would be diverted to my mobile all of the time.

Having said all that, I've yet to speak with someone regarding having X amount of vehicles sitting in the parking spaces. I do know however, that We By Any Car operate from the same building so there may be some kind of leeway although I will find out on Monday.

I have looked at industrial units and to be honest, that was the route which I was eventually wanting to take but my initial thoughts were to go for the absolute cheapest way to do it first which would allow my the freedom to sell as many cars as I could.

I do take your point on board re margins though. Especially when you start to include VAT. Would I be correct in thinking that the margin scheme is taken from the actual gross profit after MOT, valets, repairs etc. have been taken off?

[daemon]

The problem with an office on a business park is that its a bit of a "fair weather" solution. Buyers wont be too pleased about trying to examine a car in the rain or at night. (bearing in mind it gets dark from 16:00 during the winter)

Also i dont think your local business park is going to be too happy if you dump your entire stock into their car park with for sale boards on.

Whenever i was doing this, i hired a yard for £120 a month that held all my cars - usually around 20 - and as PCD has said you then bring the car you want to another location for viewing. I was able to use the yard to the rear of our house and our garages for that, so i had the "most likely to sell" 2 or three there, and swapped one out if it was a different car that someone wanted to view.

My next step would have been an industrial unit that held 2 or three cars and had a small office. I was seeing those coming up at around £350 a month in our area.

The problem with the model is the amount of driving you end up doing. You cant afford to sit in the office all day, so you're out and about, either looking for stock or typically taking a car to mechanics -> bodywork -> valeter -> photograph -> storage. So you've a production line of cars you're juggling.

The other things i'd say to bear in mind are

(a) its a very different game doing it full time when you "have" to sell cars to keep your head above water and take a wage. When you're at it part time you can chose not to buy if the car isnt "right".

(b) the volume of cars and cash that needs. Using PCDs example, if you're selling 12 cars a month, then you're probably going to be doing well to have done that out of 20 cars you have for sale. You'll also have a couple that are paid for, and a couple that are sold but not paid for, so thats maybe 24 cars at £3,000 each = £72,000. In terms of cashflow, autotrader, the mechanics you use (i had three or four different guys i used depending on the job needing done), the valeter and the bodymen (i'd three i would have used) all will want paid at month end, so you're going to need a pot of cash in the bank so that can happen.

(c) Faults with cars sold. As PCD has said, peoples expectations are much higher once you've a website, office, forecourt of sorts, so your warranty claims will increase and because your volume has increased invariably your chances of getting a horror story car with a blown turbo or some difficult to cure intermittent fault increases.

(d) Good quality stock is hard to get. If you fall in with a dealer, they generally end up exploiting you as you wont get to pick and chose the cars you want.

(e) Diesel cars. People want diesels. Diesels become problematic as they get older. Diesel cars under £5K will be problematic. A lot of diesel cars sold at auction / traded in at that price point have an inherent fault. You could end up warranting 10 year old diesels with potential turbo, DPF, DMF, injector and pump failures.

[tswindells]

daemon said:

The problem with an office on a business park is that its a bit of a "fair weather" solution. Buyers wont be too pleased about trying to examine a car in the rain or at night. (bearing in mind it gets dark from 16:00 during the winter)

Also i dont think your local business park is going to be too happy if you dump your entire stock into their car park with for sale boards on.

Whenever i was doing this, i hired a yard for £120 a month that held all my cars - usually around 20 - and as PCD has said you then bring the car you want to another location for viewing. I was able to use the yard to the rear of our house and our garages for that, so i had the "most likely to sell" 2 or three there, and swapped one out if it was a different car that someone wanted to view.

My next step would have been an industrial unit that held 2 or three cars and had a small office. I was seeing those coming up at around £350 a month in our area.

The problem with the model is the amount of driving you end up doing. You cant afford to sit in the office all day, so you're out and about, either looking for stock or typically taking a car to mechanics -> bodywork -> valeter -> photograph -> storage. So you've a production line of cars you're juggling.

The other things i'd say to bear in mind are

(a) its a very different game doing it full time when you "have" to sell cars to keep your head above water and take a wage. When you're at it part time you can chose not to buy if the car isnt "right".

(b) the volume of cars and cash that needs. Using PCDs example, if you're selling 12 cars a month, then you're probably going to be doing well to have done that out of 20 cars you have for sale. You'll also have a couple that are paid for, and a couple that are sold but not paid for, so thats maybe 24 cars at £3,000 each = £72,000. In terms of cashflow, autotrader, the mechanics you use (i had three or four different guys i used depending on the job needing done), the valeter and the bodymen (i'd three i would have used) all will want paid at month end, so you're going to need a pot of cash in the bank so that can happen.

(c) Faults with cars sold. As PCD has said, peoples expectations are much higher once you've a website, office, forecourt of sorts, so your warranty claims will increase and because your volume has increased invariably your chances of getting a horror story car with a blown turbo or some difficult to cure intermittent fault increases.

(d) Good quality stock is hard to get. If you fall in with a dealer, they generally end up exploiting you as you wont get to pick and chose the cars you want.

(e) Diesel cars. People want diesels. Diesels become problematic as they get older. Diesel cars under £5K will be problematic. A lot of diesel cars sold at auction / traded in at that price point have an inherent fault. You could end up warranting 10 year old diesels with potential turbo, DPF, DMF, injector and pump failures.

I appreciate the realist viewpoint you've given me Deamon. When you mention the yard to keep the motors, that was something I had said to my wife just last night because it just wouldn't be practical to have half of the business park taken up with my cars. Also, the 'fair weather' comment is something I never considered or even occurred to me. As you say, maybe a small industrial unit with space for 2-3 cars with inside lighting for night time viewing is the best route.

The warranty thing is something that's been niggling me. If you sold a cheap 'trade in' vehicle (sub £1,500) with around 100k on the clock for example, and you gave them a 3 month 3,000 mile £300 warranty, how would that work with the SoGA if the fault was outside these parameters? Also, what would you cover in the warranty? And, if it wasn't covered in the warranty, would it not be covered in the SoGA anyway?

Sorry for all the questions but I want to make sure I'm taking every precaution I can.

Once again, thanks

[daemon]

tswindells said:

The warranty thing is something that's been niggling me. If you sold a cheap 'trade in' vehicle (sub £1,500) with around 100k on the clock for example, and you gave them a 3 month 3,000 mile £300 warranty, how would that work with the SoGA if the fault was outside these parameters? Also, what would you cover in the warranty? And, if it wasn't covered in the warranty, would it not be covered in the SoGA anyway?

Sorry for all the questions but I want to make sure I'm taking every precaution I can.

Once again, thanks

No, dont give a 3 month warranty on a car like that. Its a recipe for disaster.

In fact dont even retail cars like that. Bump them out to part time traders who'll sell it from tescos carpark, or bung it through auction.

If you "really must", then you need to be making it clear that "on a car like this the best we can do is to try to ensure that the car is as described when it leaves here". Mark any known faults on the invoice. I would have done that by actually getting the customer to tell me the faults they found and then write them on the invoice "slight blow out in exhaust, radio not working..." prompt them then write it down. Then write beneath - "car priced accordingly. Buyer to cover these repairs at their own expense, if required". Also mark "no warranty implied or given due to age / miles on car". Prime them that you cant cover issues on a car this age / this price and that they might not have any issues for six months or it might be six days.

If you are self warranting on cars, then you need to be very clear what you are warranting. Make sure its not wear and tear, but "faults" (ie, stuff you have to cover under SOGA anyway.), so you dont get bogged down in clutches, exhausts, etc. You can always subsequently do something as a "goodwill gesture" or "meet them halfway on price".

[tswindells]

thanks for your help guys. no doubt I'll be asking for advice again though

[rich12]

tswindells said:

I appreciate the swift reply PCD.

To give a little more info, I have managed to find a business centre which rents out small offices from £250 pcm and believe it or not, that actually includes rates, elec, broadband etc. there would of course be call charges on top as I'm sure the phone would be diverted to my mobile all of the time.

Having said all that, I've yet to speak with someone regarding having X amount of vehicles sitting in the parking spaces. I do know however, that We By Any Car operate from the same building so there may be some kind of leeway although I will find out on Monday.

I have looked at industrial units and to be honest, that was the route which I was eventually wanting to take but my initial thoughts were to go for the absolute cheapest way to do it first which would allow my the freedom to sell as many cars as I could.

I do take your point on board re margins though. Especially when you start to include VAT. Would I be correct in thinking that the margin scheme is taken from the actual gross profit after MOT, valets, repairs etc. have been taken off?

The VAT is calculated from the difference between the purchase price and the sale price. If you buy a car for £4000 and sell it for £5000 and spend £500 prepping it, VAT payable will be £166.

[tswindells]

rich12 said:

The VAT is calculated from the difference between the purchase price and the sale price. If you buy a car for £4000 and sell it for £5000 and spend £500 prepping it, VAT payable will be £166.

Ahh right, When I read it on the HMRC website I did think that's what it was saying but I thought I'd gotten it wrong. Basically, you can land unlucky, have a big prep bill and the VAT can put you onto a loss for that particular sale?

[rich12]

Yes.
It does work out cheaper as such as it's not 20% and you still claim VAT back on whatever you can on repairs/prep etc.
VAT's a killer and always will be. I still have no idea why they say 'times by 1 and divide by 6' to work it out tho.

[tswindells]

rich12 said:

Yes.
It does work out cheaper as such as it's not 20% and you still claim VAT back on whatever you can on repairs/prep etc.
VAT's a killer and always will be. I still have no idea why they say 'times by 1 and divide by 6' to work it out tho.

I imagine it'll be so the VAT is part of your gross margin. Or were you meaning the multiply by 1 part? lol

I have another question. If you by a lot of stock from gumtree or consumers in general, what if nobody provides receipts for these purchases? would that affect the VAT & tax?

[rich12]

Just get them to write a receipt or make your own, get them to sign it and job done.

[JimmyConwayNW]

You will struggle to buy 5 a week privately whilst selling 5 a week. Would have to buy out of auctions.

[tswindells]

definitely. I have accounts with a couple of auctions which i've been using for the past 3 years but I do on occasion buy from gumtree

[tswindells]

does anyone know if you have to get a motor trader licence if you are selling motors via the internet? this question may be aimed towards people in Scotland as I think England has a slightly more relaxed view on these matters