Yet another becoming a part time dealer thread.....

[legendtrader]

Hi Everyone

I am looking for advice from experienced people on what I am thinking of doing. Perhaps those that run online only car dealer companies could help.

I am thinking of starting a car dealing business on a part time basis selling 1 or 2 cars per month to see how it goes. My main skills are buying and selling (in another industry) and also I know a fair bit about cars, my father was in the business. I already have a separate business which pays all my outgoings so I am just looking to make maybe £30k-£40k in the next year in this new venture. I have bought and sold many cars privately in the past and quite enjoy it. So my initial plans are as follows.

• Open a limited company, my accountant already handles my other company so she said she can handle this for £500p/a. I will be under the VAT threshold so that simplifies things.

• Get part time trader insurance from Tradex - estimate £500 - £700 p/annum

• Get trade plates - £160 p/annum + £20 set up

• Warranty - I would plan to use warranty direct to start with at a cost of roughly £150 p/car then after I have built up some considerable capital, self underwrite the warranty. i.e. take the hit on any claims.

• Premises - I live in a rural area of Cambridgeshire and there is a local business park nearby where I can register my company address and collect mail for £40pm. It's a 5 min drive from my house so I can meet buyers there away from my house. So I would have no forecourt. I would only ever have 1 or 2 cars in stock at one time anyway. If they dont sell quickly I would be fine holding on to them for a while, luckily I am not under any pressure. Storage - I have plenty of room in my garage for an extra car or 2 at a push.

• Finance offered - I wouldnt get involved in this at all. The buyer have to sort their own finance out.

• Car preparation/mechanics - I have a lot of contacts locally, 3 friends are mechanics.

• Stock - I have geared all my research to the cars I know, Mercedes C Class and BMW 3 series, both 'stock' luxury cars. I will source nationwide autotrader and London BCA and only look at cars which are <5 years old and <60k mileage with FSH pref DSH. I am confident in my ability to source and negotiate deals for example buying a Merc C Class 2011 40k DSH for 11k and selling for 13k.

• Advertising - This would be via my website, autotrader and gumtree.

As I am not reliant on the income from this business to pay my bills and have a few k to throw at this venture do you think it is viable to make £30k to £40k in a year doing the above.

All advice and help appreciated.

Legend Trader

[POORCARDEALER]

I think the first thing to say is you will not make £1500 a car NET unless you are selling specialist vehicles. Bread and butter cars you will net nearer £500 a car buying from auctions, and thats if you dont run into cars needing additional prep you hadnt known when buying.

Trade plates...in my area west yorkshire, they want to see trading records before issuing them, you have to attend interviews etc...not sure they will let you have them immediately for a new start up.

VAT...In order to keep under the VAT threshold you are going to have to keep under circa £6K a month turnover, this will affect the value of vehicles you are able to buy and thus probably lower your margins.

To sum up...give it a try, auction buying is hard work and the cars can be very expensive, I think you need to think you may make £12K a year rather than your forecast, then you have to ask, is it really worth it?

[The Moose]

I'd be very surprised if you were going to make £30k-£40k and stay under the VAT threshold.

[JimmyConwayNW]

The cars you are looking at selling most people want to buy from a legit trader with premises, warranty, credit/debit facilities and so on.

The cars you mention can fluctuate in value quite a bit month to month and if you are sat with stock a drop on cap/market prices could see you lose out.

You would be far better looking at retailing cars 7/10years old where more people will be in a position to buy outright.

Bca will be tricky to buy from with the fees they charge.

[Bluequay]

Pipe dream. You won't be providing trade-in or finance facilities. You won't have a choice of stock for a potential purchaser or any premises, the only thing you are providing over a private sale is a warranty and a polish, yet you expect 2K for that? Why would anyone buy from you? would you buy from you?

[Defcon5]

A dealer that meets people at the roadside in a business park?

[jeevescat]

We bought a car from a similar set up many years ago, the chap traded solely on word of mouth recommendation from a reputation he had acquired over many years. Most of his customers were around retirement age who preferred to deal with him rather than a main dealer.

It was a friend of my Father in laws who suggested him, apparently he'd sourced all his cars through him, as had just about everyone he knew. So it can work, just takes a while.

[legendtrader]

The Moose said:

I'd be very surprised if you were going to make £30k-£40k and stay under the VAT threshold.

Thanks to you and another poster for pointing this out. Clearly VAT is on turnover not profit, sorry I was being thick. You are spot on it is likely I would have to register for VAT, that's fine though the accountant can handle that.

[legendtrader]

POORCARDEALER said:

I think the first thing to say is you will not make £1500 a car NET unless you are selling specialist vehicles. Bread and butter cars you will net nearer £500 a car buying from auctions, and thats if you dont run into cars needing additional prep you hadnt known when buying.

Trade plates...in my area west yorkshire, they want to see trading records before issuing them, you have to attend interviews etc...not sure they will let you have them immediately for a new start up.

VAT...In order to keep under the VAT threshold you are going to have to keep under circa £6K a month turnover, this will affect the value of vehicles you are able to buy and thus probably lower your margins.

To sum up...give it a try, auction buying is hard work and the cars can be very expensive, I think you need to think you may make £12K a year rather than your forecast, then you have to ask, is it really worth it?

thanks poorcardealer your reply is appreciated. ref trade plates - i guess I will give it a go and see if they accept. if they dont I wonder if I can get my tradex insurance to cover me for demonstrations / transport etc.

[legendtrader]

JimmyConwayNW said:

The cars you are looking at selling most people want to buy from a legit trader with premises, warranty, credit/debit facilities and so on.

The cars you mention can fluctuate in value quite a bit month to month and if you are sat with stock a drop on cap/market prices could see you lose out.

You would be far better looking at retailing cars 7/10years old where more people will be in a position to buy outright.

Bca will be tricky to buy from with the fees they charge.

Hey Jimmy - very good points and this is something other posters have picked up on. I think you guys are right here if a buyer is going to spend around 13k on a 3 year old merc/bmw they will prefer a bigger dealer. Your suggestion of looking at cars of around 7 to 10 years old would bring me to the £4k to £6k price range, maybe this is a better place for a one man part time dealer. I suppose the reason why I wanted to start with cars <3 years old was I would naturally expect less problems which would come back to bite me, maybe I am being naive though, tks.

[markmullen]

You are looking at buying cars retail and, er retailing them? Trust me, you will need a better source of stock than that.

Finding good stock is the major issue at the moment, if you've not got contacts in the trade then you'll struggle.

Sorry to sound negative, I make a nice living from this job but I wouldn't go into it without knowing a whole load of people who will make it viable, main dealers, other traders etc.

[JQ]

Can't help with the business side of things, but from a customer perspective I wouldn't dream of buying from the car park of a serviced office centre from someone who doesn't even have an office there.

[legendtrader]

Bluequay said:

Pipe dream. You won't be providing trade-in or finance facilities. You won't have a choice of stock for a potential purchaser or any premises, the only thing you are providing over a private sale is a warranty and a polish, yet you expect 2K for that? Why would anyone buy from you? would you buy from you?

valid points bluequay I take it onboard. You are right I wont have a choice of cars my sales will be internet/price driven and not based on the large premises, high turnover dealer model. You are right I would be offering very little over and above a private sale. It would be a good quality warranty and I would get the cars immaculately cleaned. £2k is clearly not going to happen. Would I buy from me? a very good question I think if I lower my expectation to say buying cars for 4k ish and selling for 5k to 5.5k then I would by from me if I had a quality warranty but as other posters have pointed out I am not sure I would buy a 12k car from me. I suppose my pitch would be I am small local dealer not looking to compete with larger dealers providing quality 12 month warranties. I would buy a car from someone like that for say up to £6k but above that sure I would have doubts. dunno - maybe I am being naive! lol

[legendtrader]

Defcon5 said:

A dealer that meets people at the roadside in a business park?

very good point and I have underestimated this. if I lower my sights to the £5k to £6k bracket do you think this sort of buyer will be put off. If so I could team up with a local garage I know and come to an arrangement with them however this would eat into margins, which I cant afford to do.

[Bluequay]

If you don't have actual business premises then I think you would have a better chance if you had prospective purchasers come to your house. By meeting people elsewhere it gives the impression that you don't have enough faith in your product for people to know where you live. It makes the venture look dodgy.

[legendtrader]

markmullen said:

You are looking at buying cars retail and, er retailing them? Trust me, you will need a better source of stock than that.

Finding good stock is the major issue at the moment, if you've not got contacts in the trade then you'll struggle.

Sorry to sound negative, I make a nice living from this job but I wouldn't go into it without knowing a whole load of people who will make it viable, main dealers, other traders etc.

you dont sound negative you sound realistic! as I am only sourcing one or two cars at a time I was hoping I could be more choosy with the cars I buy than say a larger dealer who has to buy a lot of stock and keep the forecourt turning over. If I need to sell 10 or 20+ cars a month then I would certainly need to be connected in some way to a good source at wholesale prices. My strategy would be say to contact 10 or 20 private sellers nationwide who have a car listed at a competitive price lets say they are advertising it for 5k and I think I can sell it for 5.5k. So I contact them all and work out which ones will soften their price and look to buy from then around 4.3k cash. This is the sort of deal I would be looking to do. In terms of acutions, I have been to a BCA peterborough a few times and I thought the prices cars were going for were too high, plus the fees on top which are hefty for someone who is not on their volume buyer discount. I was thinking of going to BCA derby where I can watch say 20 or 30 vauxhall insignias auctioned in 1 session. Is it not possible to buy vauxhall insignias <80k miles for £4.5k and sell for £5.5k. genuine question. thanks.

[Frimley111R]

When I started all I did was get insurance and then off I went to an auction. I traded from home and that was fine. No need to get carried away with financing and full warranties. I just told customers to call me if there were any problems and they trusted me to do so. I used local garages for work too. The main requirement was transporting cars, for example, you drive to an auction and buy a car, how do you get it back?

Auctions are hard work as there are so many people trying to buy so many cars for next to nothing and driving the prices up. Its easy to sell a car but far far harder to find good ones cheaply.

[legendtrader]

Bluequay said:

If you don't have actual business premises then I think you would have a better chance if you had prospective purchasers come to your house. By meeting people elsewhere it gives the impression that you don't have enough faith in your product for people to know where you live. It makes the venture look dodgy.

ok thanks for the input. I would have no problem with buyers coming to my house however I live in a small cul de sac and I wouldn't want to upset the neighbours. maybe they wouldnt be bothered if it was only a viewing every other day and I was discreet. thing to think about.

Edited by legendtrader on Monday 23 June 11:20

[legendtrader]

Frimley111R said:

When I started all I did was get insurance and then off I went to an auction. I traded from home and that was fine. No need to get carried away with financing and full warranties. I just told customers to call me if there were any problems and they trusted me to do so. I used local garages for work too. The main requirement was transporting cars, for example, you drive to an auction and buy a car, how do you get it back?

Auctions are hard work as there are so many people trying to buy so many cars for next to nothing and driving the prices up. Its easy to sell a car but far far harder to find good ones cheaply.

Hi. That was a bold move! I could just get tradex insurance and trade from home cut out all the costs. transport for me wouldnt be much of an issue as I live in Cambridge I would just get the train the auctions tup north or into enfield, if i buy a car I would drive it back. I am not sure about selling without using a warranty. Lets say I buy and sell 3 cars and make 3 x 1k then I get a call and one of the cars has a problem that costs £2k to fix, that's a wipe out of profit right away. At least if I have a warranty I spend say £150 a throw on the buyer knows what they are covered for when they buy. My other question to everyone is what happens about car problem post sale that are not covered by the warranty. Lets say I provide a car to a buyer with a platinum warrant from warranty direct. see http://www.dealerwarrantydirect.co.uk/pdfs/WTY.pdf

it seems to me quote a few expensive things can go wrong with a car that wont be covered by a decent warrant such as this.

[Frimley111R]

legendtrader said:

Frimley111R said:

When I started all I did was get insurance and then off I went to an auction. I traded from home and that was fine. No need to get carried away with financing and full warranties. I just told customers to call me if there were any problems and they trusted me to do so. I used local garages for work too. The main requirement was transporting cars, for example, you drive to an auction and buy a car, how do you get it back?

Auctions are hard work as there are so many people trying to buy so many cars for next to nothing and driving the prices up. Its easy to sell a car but far far harder to find good ones cheaply.

Hi. That was a bold move! I could just get tradex insurance and trade from home cut out all the costs. transport for me wouldnt be much of an issue as I live in Cambridge I would just get the train the auctions tup north or into enfield, if i buy a car I would drive it back. I am not sure about selling without using a warranty. Lets say I buy and sell 3 cars and make 3 x 1k then I get a call and one of the cars has a problem that costs £2k to fix, that's a wipe out of profit right away. At least if I have a warranty I spend say £150 a throw on the buyer knows what they are covered for when they buy. My other question to everyone is what happens about car problem post sale that are not covered by the warranty. Lets say I provide a car to a buyer with a platinum warrant from warranty direct. see http://www.dealerwarrantydirect.co.uk/pdfs/WTY.pdf

it seems to me quote a few expensive things can go wrong with a car that wont be covered by a decent warrant such as this.

It was nerve wracking the first time but after that it was a doddle tbh. You may find a warranty claim for something big but in practice I never did. You will know if a car is fine or not from your own experience. If I bought a bad car I'd fix it, take it on the chin, and move on. I was only selling cars up to £5k so worst case scenario I'd just buy it back but this never happened.

I'd choose the same route again if recommending it. Keep start up costs as low as possible. I never had a website as AT was fine for me.