Yet another becoming a part time dealer thread.....
Discussion
Bikerjon said:
I've read loads of these threads over the years and not once have I seen a car dealer encourage a newbie to start up! Lots of tales of woe, endless legislation, VAT nightmares etc but encouragement....not a chance! I don't doubt for one minute that it has it's challenges, but then so do most businesses.
Regarding sourcing cars, I've often wondered if buying at auction up north and selling down south might be viable?
Well I gave it my best shot. Would love to be able to have said it worked out.Regarding sourcing cars, I've often wondered if buying at auction up north and selling down south might be viable?
Plus I got to know quite a few other traders, some working from home some with a yard and most of those have closed up. Only the big players and those in it a long time seem to be able to weather it.
Very difficult
Bikerjon said:
I've read loads of these threads over the years and not once have I seen a car dealer encourage a newbie to start up! Lots of tales of woe, endless legislation, VAT nightmares etc but encouragement....not a chance! I don't doubt for one minute that it has it's challenges, but then so do most businesses.
Regarding sourcing cars, I've often wondered if buying at auction up north and selling down south might be viable?
Tens of millions of used cars are sold every year. If there was an easy arbitrage opportunity like that, it would already be exploited.Regarding sourcing cars, I've often wondered if buying at auction up north and selling down south might be viable?
Not saying there isn't a difference, but if it was a meaningfully large one, it'd get closed up pretty quickly.
Its not easy but it can be done. I have a bit of a niche specialty (check profile) we sell cars as a compliment to our parts business. Its not high volume but there are reasonable margins to be made.
On the VAT/turnover I think theres a bit of a general misunderstanding how this works. If you buy a car at 10k and sell it for 11k your turnover there is £1k not £11k. Vat registration is a must as you'll be paying VAT on the margin scheme anyway so silly not to be fully registered and claiming your premises VAT etc back.
I find it quite enjoyable. Its not without its problems and there are still a lot of people out there not paying the VAT/Income tax etc nibbling at your heels which is annoying but I always feel by having premises (although modest) supplying a VAT invoice and warranty in my area of specialisation puts us a cut above most. I've sold 7 cars this month which is a record for us. Makes up for the quiet winter months!
On the VAT/turnover I think theres a bit of a general misunderstanding how this works. If you buy a car at 10k and sell it for 11k your turnover there is £1k not £11k. Vat registration is a must as you'll be paying VAT on the margin scheme anyway so silly not to be fully registered and claiming your premises VAT etc back.
I find it quite enjoyable. Its not without its problems and there are still a lot of people out there not paying the VAT/Income tax etc nibbling at your heels which is annoying but I always feel by having premises (although modest) supplying a VAT invoice and warranty in my area of specialisation puts us a cut above most. I've sold 7 cars this month which is a record for us. Makes up for the quiet winter months!
fridaypassion said:
On the VAT/turnover I think theres a bit of a general misunderstanding how this works. If you buy a car at 10k and sell it for 11k your turnover there is £1k not £11k. Vat registration is a must as you'll be paying VAT on the margin scheme anyway so silly not to be fully registered and claiming your premises VAT etc back
Turnover on £11k sale is £11k not the £1k. The £1k is your gross margin from which you must pay vat, is 1 sixth of the £1000Vat margin scheme us generally considered a bad thing. Particular as for the o/P's model he won't have premises or any large outgoings to off set the bill
fridaypassion said:
On the VAT/turnover I think theres a bit of a general misunderstanding how this works. If you buy a car at 10k and sell it for 11k your turnover there is £1k not £11k. Vat registration is a must as you'll be paying VAT on the margin scheme anyway so silly not to be fully registered and claiming your premises VAT etc back
Turnover on £11k sale is £11k not the £1k. The £1k is your gross margin from which you must pay vat, is 1 sixth of the £1000Vat margin scheme us generally considered a bad thing. Particular as for the o/P's model he won't have premises or any large outgoings to off set the bill
In typical "someones wrong on the internet" Style - you're wrong 
This is how the VAT scheme works your sale is £1000 so you pay 20% vat on it. It works in exactly the same way as the sale of any other widget or service. Initially confusing but when you look at regular VAT business trading it actually works in the same way. Same goes for getting your head round why you can't negate your VAT on gross profit claiming for repairs and the like - You dont do that with widgets because any costs come off your bottom line not the margin you make on the product or service.
This is how the VAT scheme works your sale is £1000 so you pay 20% vat on it. It works in exactly the same way as the sale of any other widget or service. Initially confusing but when you look at regular VAT business trading it actually works in the same way. Same goes for getting your head round why you can't negate your VAT on gross profit claiming for repairs and the like - You dont do that with widgets because any costs come off your bottom line not the margin you make on the product or service.
fridaypassion said:
In typical "someones wrong on the internet" Style - you're wrong
This is how the VAT scheme works your sale is £1000 so you pay 20% vat on it. It works in exactly the same way as the sale of any other widget or service. Initially confusing but when you look at regular VAT business trading it actually works in the same way. Same goes for getting your head round why you can't negate your VAT on gross profit claiming for repairs and the like - You dont do that with widgets because any costs come off your bottom line not the margin you make on the product or service.
No. You dont pay 20% vat ON the £1000, you pay 20% vat OUT OF the £1000, equiating to 1/6th.This is how the VAT scheme works your sale is £1000 so you pay 20% vat on it. It works in exactly the same way as the sale of any other widget or service. Initially confusing but when you look at regular VAT business trading it actually works in the same way. Same goes for getting your head round why you can't negate your VAT on gross profit claiming for repairs and the like - You dont do that with widgets because any costs come off your bottom line not the margin you make on the product or service.
Also it would be quite possible to run a small business / be self employed and stay under the threshold in a lot of other fields, however with motor trading if you're doing it at all you're going to break that VAT threshold.
Oh, and are you clear now what turnover means now?
I understand the VAT out of/from whatever your T/O amount is £1000 on that sale. Motor trade VAT is more to do with the fact you HAVE to pay vat so may as well be VAT registered. You don't have to hit the threshold you can register voluntarily as I did when my business first started. As much as I would love to be in the pub smoking my cigar telling everyone I turn half a million a year over the fact is I dont.
fridaypassion said:
On the VAT/turnover I think theres a bit of a general misunderstanding how this works. If you buy a car at 10k and sell it for 11k your turnover there is £1k not £11k.
It's not it's 11k, that is quite wrong.Based on what you've said every company's turnover would be their gross profit figure.
legendtrader said:
thanks guys I have been well and truly put off now. lolol./ I am going to take a look at the auctions to by myself a good deal and then try and move it on after a couple of months. Probably best to just keep it as a hobby selling 3 or 4 cars per year on a personal basis.
Thats all I doProbably a few more that 4, but it's been free motoring in effect for me for years.
fridaypassion said:
markmullen said:
Sorry mate, you're mistaken there, £11k is your turnover.
Not according to my accountant. Last years books confirm.Turnover is definitely £11K in your example.
fridaypassion said:
markmullen said:
Sorry mate, you're mistaken there, £11k is your turnover.
Not according to my accountant. Last years books confirm.If i buy 100 cars for £4,000 and sell them at £5,000 each, why would my turnover be £100,000?
You seem to be confusing turnover with gross profit.
fridaypassion said:
lol I think a call may be on order but I'm pretty sure the HMRC website would throw a warning up if you stuck a load of figures in reflecting trying to pay 300 quid VAT on a 10k T/O sale where margin was 2k as an example. ie T/O on that deal is 2k hence 2k sale and £333.33 VAT.....
No. It doesn't. You are seriously confusing gross profit with turn overfridaypassion said:
lol I think a call may be on order but I'm pretty sure the HMRC website would throw a warning up if you stuck a load of figures in reflecting trying to pay 300 quid VAT on a 10k T/O sale where margin was 2k as an example. ie T/O on that deal is 2k hence 2k sale and £333.33 VAT.....
It wouldnt throw up any warning at all as you're paying the same amount of VAT as you otherwise would.If i buy an item for £1000 including VAT, then i can reclaim £166.66 in VAT.
If i sell it for £1200 including VAT then i would be liable for £200 of VAT. £200 - £166.66 is £33.33, which is what i'd be giving the VAT man. (There is probably a more correct way of wording that but thats how it would work)
If i buy a car for £1000, and sell it for £1200 then i have to pay VAT out of the £200 gross profit which is £33.33.
Edited by daemon on Thursday 10th July 07:57
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