Calling all car dealers - advice for home dealing
Discussion
I'm interested in bunging a few grand at some stock and see if I can make any money.
Drove a used car dealer home last night and he said it was the best thing he'd ever started from home. Sounds like there is plenty of money in it, and I'm well used to buying motors and selling them privately, but I guess it's a different matter entirely to sell them for an income.
What sort of margins should I aim for, and what are the best markets to concentrate on?
What do you need in the way of insurance, trade plates and what-not?
I'm fast becoming the Del Trotter of PH so I may as well start trading green Capri Ghia's
Drove a used car dealer home last night and he said it was the best thing he'd ever started from home. Sounds like there is plenty of money in it, and I'm well used to buying motors and selling them privately, but I guess it's a different matter entirely to sell them for an income.
What sort of margins should I aim for, and what are the best markets to concentrate on?
What do you need in the way of insurance, trade plates and what-not?
I'm fast becoming the Del Trotter of PH so I may as well start trading green Capri Ghia's
Eric Mc said:
Location is important - as you could have serious planning issues if you tried to run it from home (not to mention grief from your neighbours).
If you can operate it froma a site that already has the correct planning permission, then by all means go for it.
My neighbours hate me anyway If you can operate it froma a site that already has the correct planning permission, then by all means go for it.
Eric Mc said:
If you
a) don't have the correct planning permission to run such a business from home then it acrually IS a crime - or at least a breach of local planning regulations - so you could well be fined.
b) if you are running a business trading in cars you will obviously be required to notify HM Revenue and Customs that you have strarted a business. Failure to do so within three months of commencement is definitely an offence and subject to fines and penalties.
There are no laws against owning more than one car (at least, not yet anyway) so selling any of those cars if and when you want to is not looked on as running a business. However, if you genuinely start buying cars with the express intent of selling them as soon as you can and you intend to make a profit on the sale, that falls within the legal and tax definitions of trading and the correct steps whould be taken to notify the relevant authorities and clear the local planning regulations.
Eric,a) don't have the correct planning permission to run such a business from home then it acrually IS a crime - or at least a breach of local planning regulations - so you could well be fined.
b) if you are running a business trading in cars you will obviously be required to notify HM Revenue and Customs that you have strarted a business. Failure to do so within three months of commencement is definitely an offence and subject to fines and penalties.
There are no laws against owning more than one car (at least, not yet anyway) so selling any of those cars if and when you want to is not looked on as running a business. However, if you genuinely start buying cars with the express intent of selling them as soon as you can and you intend to make a profit on the sale, that falls within the legal and tax definitions of trading and the correct steps whould be taken to notify the relevant authorities and clear the local planning regulations.
Edited by Eric Mc on Monday 25th February 07:57
Why are you trying to make me look like a dodgy used car salesman running from a layby? It will all be legitimate, as I've explained... I know you know your stuff but I'm after advice on the aspects of trading cars, not a lecture on running an illegal business. I do not intend to do that, so please stop suggesting that's what I am trying to do.
peterguk V6 KWK said:
I stand to be corrected, but i understood you can sell 12 cars in a year, and its the 13th that makes you a trader?
TBH I would want to be properly insured for test drives etc, so I would have to hold trade insurance and (I presume) Public Liability insurance as well.I don't think it would benefit to keep the cars in my private name (another owner on the V5, constant admin with insurance companies, recovery costs for untaxed cars when I could whip them back on trade plates etc.).
Thanks for the pointer though
Eric Mc said:
KingRichard said:
Eric Mc said:
If you
a) don't have the correct planning permission to run such a business from home then it acrually IS a crime - or at least a breach of local planning regulations - so you could well be fined.
b) if you are running a business trading in cars you will obviously be required to notify HM Revenue and Customs that you have strarted a business. Failure to do so within three months of commencement is definitely an offence and subject to fines and penalties.
There are no laws against owning more than one car (at least, not yet anyway) so selling any of those cars if and when you want to is not looked on as running a business. However, if you genuinely start buying cars with the express intent of selling them as soon as you can and you intend to make a profit on the sale, that falls within the legal and tax definitions of trading and the correct steps whould be taken to notify the relevant authorities and clear the local planning regulations.
Eric,a) don't have the correct planning permission to run such a business from home then it acrually IS a crime - or at least a breach of local planning regulations - so you could well be fined.
b) if you are running a business trading in cars you will obviously be required to notify HM Revenue and Customs that you have strarted a business. Failure to do so within three months of commencement is definitely an offence and subject to fines and penalties.
There are no laws against owning more than one car (at least, not yet anyway) so selling any of those cars if and when you want to is not looked on as running a business. However, if you genuinely start buying cars with the express intent of selling them as soon as you can and you intend to make a profit on the sale, that falls within the legal and tax definitions of trading and the correct steps whould be taken to notify the relevant authorities and clear the local planning regulations.
Edited by Eric Mc on Monday 25th February 07:57
Why are you trying to make me look like a dodgy used car salesman running from a layby? It will all be legitimate, as I've explained... I know you know your stuff but I'm after advice on the aspects of trading cars, not a lecture on running an illegal business. I do not intend to do that, so please stop suggesting that's what I am trying to do.
I thought that it would be useful to you and any other forum members who were thinking of running a car business from home that they might need to be aware of the various hoops and hurdles that exist out there.
I have a number of clients who run there businesses absolutely legitimately and with no planning problems from their homes. However, most of these businesses either have the correct planning permissions in place or operate a busnesss for which no permission is actually required.
I have one second hand car dealership as a client but he runs his business from a proper forecourt style premises (it's a former garage and car repair workshop).
I just felt like every post was a character assassination So as long as I notify HMRC that I'm running a business and I double check with the council re: planning permission I should be ok? Do I need to notify HMRC if I'm already a sole trader with another business?
I don't want to use the current business account but do I need to notify anyone of my change in status?
Simpo Two said:
Eric is only pointing out what might happen. I work from home but it doesn't involve vehicles coming and going excessively, nor any noise/inconvenience to neighbours. His point was that if you have 5-10 cars parked outside clogging the place up you might attract complaints, and if any of your neighbours don't like you, it's very easy for them to call the Council and drop you in the poo.
It doesn't mean 'don't do it'; ir just means be aware of a potential issue and have plans to deal with it if the worst happens.
Cool. I do understand the advice given, but I am likely to be keeping vehicles on commercial property (sure, I may have 1 or 2 at home occasionally, but they won't have prices in the windows or be on display or under repair.).It doesn't mean 'don't do it'; ir just means be aware of a potential issue and have plans to deal with it if the worst happens.
How's it going for you anyway? Did you start out doing this then?
insurance_jon said:
We have a number of part time clients who trade cars to make a few extra quid. all you need as a minimum is RTA (road traffic act/Third party only cover) Motor trade insurance. Public Liability is advisable, but not a legal requirement yet.
The only tough bit is some of the better Part Time Trading policies exclude certain main occupations, in your case Taxi Driving IIRC......Don't take it heart though they exclude Insurance Brokers too!
If you need any further help on this (or Taxi Fleets) drop me a message.
Cheers. Actually I would be interested in what you have to say on our fleet insurance when we come up for renewal.The only tough bit is some of the better Part Time Trading policies exclude certain main occupations, in your case Taxi Driving IIRC......Don't take it heart though they exclude Insurance Brokers too!
If you need any further help on this (or Taxi Fleets) drop me a message.
As for the trading... I'm not really a taxi driver am I? I know what the issue is though, that I will use the cover to go cabbing. Surely some companies will evaluate the real risk? ie; an underwriter would look at the case. I don't mind paying to have the right cover
Simpo Two said:
KingRichard said:
How's it going for you anyway? Did you start out doing this then?
No, entirely different - corporate video production and now photography and new media as well. All I have at home, business-wise, is a desk, PC and a bedroom converted to a photographic studio. A lot of the video work is done elsewhere, eg filming on location.So apart from the fact that I'm in most of the time, there's no external difference.
I didn't think you were a car dealer, and a check of your profile gave no clues either
Simpo Two said:
KingRichard said:
I didn't think you were a car dealer, and a check of your profile gave no clues either
Blimey, I hope you're not a detective! At my end it says:simpo's profile said:
'Occupation: Marketing Communications, Corporate and Social Photography
My Website: www.autograph.uk.com
Also featuring at www.blokewithacamera.co.uk for digital corporate and social photography.
My Website: www.autograph.uk.com
Also featuring at www.blokewithacamera.co.uk for digital corporate and social photography.
JeffC said:
another thing to remember is if you buy a car for £5k and sell it for £6k, sounds good on the face of things you have made an easy £1000.
BUT you pay vat and tax on the profit so if you are in the upper tax bracket with what you earn all ready you will pay 17.5% vat and 40% to the tax so your £1000 profit has dropped to under £450 less any prep /advertising/cleaning and any other mechanical expenses you may incur.
Bloody hell, so fairly quickly you're going to want to go Limited and minimise your tax liability. Cheers. I doubt there will be many things you can reclaim VAT on... because you buy without VAT but then have to stump up when you sell. Value added tax my arse. Swizz more like BUT you pay vat and tax on the profit so if you are in the upper tax bracket with what you earn all ready you will pay 17.5% vat and 40% to the tax so your £1000 profit has dropped to under £450 less any prep /advertising/cleaning and any other mechanical expenses you may incur.
Eric Mc said:
Sounds like you need to do some homework on this .
You only have to charge VAT when your annual turnover/sales exceeds £64,000. However, in the car trade, it doesn't take that many individual transactions to occur before this threshold is reached.
VAT on 2nd hand cars is charged on a "margin scheme" where (unlike most other businesses) the VAT is charged on the difference between the buying price and the selling price (the margin).
Once registered, you can reclaim VAT on business costs that contain VAT - but that won't, on most occasions, include the purchase of your car stock as you will be buying these with no VAT included in their purchase price.
Companies pay tax on their profits too - and it will soon be at a Corporation Tax rate of 22% (from 1 April 2009). On 1 April 2008 it is increasing from the current 20% to 21%.
Finally, what you draw personal income (as a director or a shareholder) from your company you will be subject to personal Income Tax - although there is quite a bit of flexibility in how you decide to remunerate yourself and how much Income Tax and National Insurance you end up paying.
So, simplified example... but let's say I'm a sole trader who has broken the £64k turnover threshold (that's based on sale price of car I would guess?) and is VAT registered..You only have to charge VAT when your annual turnover/sales exceeds £64,000. However, in the car trade, it doesn't take that many individual transactions to occur before this threshold is reached.
VAT on 2nd hand cars is charged on a "margin scheme" where (unlike most other businesses) the VAT is charged on the difference between the buying price and the selling price (the margin).
Once registered, you can reclaim VAT on business costs that contain VAT - but that won't, on most occasions, include the purchase of your car stock as you will be buying these with no VAT included in their purchase price.
Companies pay tax on their profits too - and it will soon be at a Corporation Tax rate of 22% (from 1 April 2009). On 1 April 2008 it is increasing from the current 20% to 21%.
Finally, what you draw personal income (as a director or a shareholder) from your company you will be subject to personal Income Tax - although there is quite a bit of flexibility in how you decide to remunerate yourself and how much Income Tax and National Insurance you end up paying.
I buy a car for £1000 cash, from a private owner. I then have the car valeted by a VAT registered valeters for £50. I buy some parts for the car at a total of say £100.
I then sell that car for £1800. My margin is £650 so I am then liable for a VAT payment of £113.75, but I can claim £26.25 of that back on my next VAT return?
Eric Mc said:
VAT is not as straightforward as many people might think.
Edited by Eric Mc on Wednesday 27th February 14:15
I've NEVER found it straightforward. Loads of things have different rates of VAT, it's not all 17.5%. Bloody confusing really, but keeps the accountants in business
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