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

[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.

[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.

[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.

[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.

[legendtrader]

Frimley111R said:

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.

Hey Frimley

thanks for your input and it sounds a good plan to keep costs as low as possible. I see your point about taking it on the chin I just have visions of 10 people lining up at my front door asking for their car to be repaired/replaced. I guess though if I sell 10 cars and make £10k and have to spend £2k sorting out a few problems pre or post sale then it's no huge deal. Did you start as a sole trader or limited company? What about trade plates, did you bother to start with? I am guessing a tradex policy would cover demoing/transporting and everything required, will have to give them a bell. I like the sound of giving it a go on say 10 cars as a sole trader to try it out.

[legendtrader]

mcflurry said:

If they can't sell the car for £5000, why do you think you'll turn it round for £5500 ?

a good point. they probably would be able to sell their car for 5k if they were prepared to wait but most people are inpatient. They may have poorly presented the car and advert, they may need the cash. When I buy the car I valet it and present it with a good advert.

[legendtrader]

daemon said:

The accountant can handle it, but it will take 1/6th of your profit.

sorry I dont follow, mike accountant is quite reasonable so I dont think it will end up being 1/6th of my profit. She can do it all for £800 p/a

[legendtrader]

markcoznottz said:

Which is why most small time traders have a small car transporter. No idea on the insurance for one of these. I imagine they are quite juicy on fuel when loaded up. The small time traders I know are literally travelling the length and breadth of the uk sourcing stock. And if you can't find stock you can't make dough .......,,

yes I am beginning to think that trade plates are a must unless you have a car transporter. even if you have a car transporter you need trade plates for demonstration drives.

[legendtrader]

daemon said:

Generally warranties like this arent worth the paper they're written on. They have entire call centres dedicated to telling you why your claim isnt valid, so after the claim has been declined the customer will be on to YOU - firstly wanting to know why you supplied a worthless warranty and wanting to know what YOU are going to do about their faulty car.

Customers have quite significant rights under the SOGA - and they know it, that cant be palmed off with a cheap warranty.

yes I agree with you on the warranty front, I was given one when I bought a Merc a few years back and it was impossible to claim. They dont make money by paying out! The rights under the SOGA are significant, I can well imagine selling a 10 year old car to a buyer who comes back in 4 months time asking for the gearbox to be replaced... hmmmmmm....

[legendtrader]

daemon said:

I dont think you're going to get too many people who will be happy effectively to meet you at the side of the road in an industrial estate and part with £12-14,000 of their hard earned.

If you do meet them at home, be prepared for callers at all times of the day and night, particularly once you get a troublesome car.

Also, as i put earlier today on the other thread, once people break circa £5,000 for a car purchase they expect full dealer facilities - primarily finance and at very least a forecourt. The amount of people with that amount of cash is very limited.

Also, be prepared for heavy bank fees to lodge that sort of cash. And i mean heavy.

The callers at all times of day and night does concern me. I am looking at offering quality cars and not looking to rip anyone off, I do want to offer a genuine service. The question is will it be profitable taking into account money I will have to pay out to sort out faults etc.

Bank fees - yeah I have run into this before with business accounts. They normally want 1% to deposit and withdraw cash. So if you withdraw 5k then deposit 5k back in cash you would get billed £100 total - which is a joke. I would probably do what I suspect most sole traders do and keep a cash float to avoid repeatedly depositing and withdrawing money incurring fees from the business account. I dont think HMRC would have any issue with this as long as a record of all cash transactions is kept and made.

[legendtrader]

thanks everyone for the responses it has helped. I haven't decided yet whether I am going to go ahead there are a lot of things to consider. In my own mind I am not 100% sure it is viable.

[legendtrader]

thanks everyone for the responses it has helped. I haven't decided yet whether I am going to go ahead there are a lot of things to consider. In my own mind I am not 100% sure it is viable.

[legendtrader]

POORCARDEALER said:

To do properly, its not.

sorry what do you mean? If you do everything properly it is not viable.

[legendtrader]

SpeckledJim said:

Out of interest, why have you chosen cars? You don't seem very well set-up to trade big, heavy, expensive cars, and from a standing start, there are some significant barriers to you doing well.

It sounds like fun and games, but it isn't really. It's bloody tough, and if you're trading 3 Series and C Classes, most of your customers think you're a before they've even met you, yet many of them will be dheads too.

In terms of turning your life into a meetattathon, only hot hatches or Vauxhalls would be worse.

Why not buy and sell something you can stick in the post?

Edited by SpeckledJim on Monday 23 June 21:06

I chose cars as that's where my interest is and I have some knowledge in that area. I dont really class £5k as an expensive car, to me that is £15k+. All I would be doing is buying 1 or 2 cars a month the immediate barriers seem to me to be getting trade plates. I am not overly concerned what car buyers think of me that has never really factored highly in my business decisions.

[legendtrader]

Daemon I just read your post on the other thread. It has really put me off going ahead.

daemon said:

Sorry for the delay.

Basically i stuck it 2 1/2 years before it wore me down. I was shifting cars but margins were getting ever thinner, cars less reliable & less well described by the dealers i bought from and customers more demanding

I started at 07:00 in the morning and rarely got sitting down before 22:00 at night. Saturdays i did 09:00 to 14:00.

Customers want cheap diesel cars. Too often there were either problems identified during prep or the car came back with a fault, negating any profit.

I was making money at it, but not enough to draw the wage i needed, therefore i was eating into my "pot" monthly. This became very frustrating as i really had expected to be able to grow my "pot" as well as draw a reasonable wage. I saw no prospect of things improving so i drew a line on it.

Back in IT now. Have a great wage. Work a standard 7 1/2 hour day and home for 17:15 every night. I did continue selling cars part time for a year or so, but i've had my second decent pay bump inside a year, so i dont need to any more.

My observations :-

• Customers look for the cheapest car on gumtree, usedcarsni and autotrader in that order.
• If your car is pitched mid price range. The phone doesnt ring.
• To get the phone to ring your car has to be the cheapest or second cheapest.
• Whilst you may well want to valet, MOT and prep the car correctly, the person you are "competing" against doesnt and wont, so his costs are lower and chances are hes a fly by night merchant who'll meet them at tescos via a disposable phone.
• Even if you are the cheapest, customer still expect you to be able to take a big discount.
• Customers are lying weasels. They'll blatantly lie about their car to get the best price, but then complain bitterly when something goes wrong with the one they bought.
• Customers expect the car to be prepared to a high standard with fresh MOT, but dont want to pay for any of it - ie, they'll drive 100 miles to buy a rough one £50 cheaper
• You are competing with sellers all over northern ireland. So you cant just be cheapest locally, you have to be cheapest provence wide for the phone to ring.
• If you're operating from home, you will get threats if a customer has a problem that you wont cover. I had various veiled threats like "dont worry, we'll be round to see you soon. we know were you live", when you wouldnt cover a slipping clutch on a 12 year old car three months after purchase.
• Once you break the £5,000 barrier people tend to want finance facilities thus they will gravitate towards dealers who offer that.

Just became not worth the hassle any more. Which is a shame because i did really enjoy my time at it.

Edited by daemon on Monday 23 June 13:13

Edited by daemon on Monday 23 June 13:15