Am i a car trader if my goal isn't to make profit??

[richard300]

I have always been the kind of chap that changes my car frequently, or had 2 or 3 cars on the go at anyone time...... but all the changing details with my insurer was starting to become a pain.

I took out a traders policy, with their stipulation that i needed to 'turn over' at least 10 cars a year.
Gave myself a budget of £4000 (max)and in the last 15 Months i have bought, enjoyed and sold the following:

BMW E30 Motorsport Edition Convertible

Saab 9-5 Aero HOT saloon

Mondeo Zetec S

Renault Sport Clio 172

Saab 9-3 Sport ARC (Aero pack)

Daimler six LWB

BMW 728i (E38)

BMW 328i Convertible (E36)

BMW 530i Sport (E39)

Audi B6 3.0 A4 Cabriolet

Honda Civic Typre R

VW Beetle

Mercedes (W124) 300ce - Duchatelet



However - My mission has never been to make money (just not to lose money). Most cars i have bought because i have a practical need, some because i wanted a bit of summer fun or the car needed a bit of work and i wanted a very minor project.
Some i bought at the same time as owning another one, as i wanted a bit of diversity in the garage etc.

But what it has let me do, is indulge my slightly eclectic taste in cars, and bring a couple of unloved cars back to a loved condition all on a very small budget.

I have never sold on a car that wasn't freshly serviced and wasn't taxed and didn't have a fresh MOT.

I wont lie, some cars i have made a (very) small profit on, and some cars i have made a small loss on.. but mostly i have(happily)broken even on and after my first 12 months, all in all (including the cost of the insurance policy) i was only down by £250.

Nearly all of them have been registered in my name.

So does this make me a car Trader???

[rallycross]

If you have to make a claim on your trade insurance they will ask for some proof you are indeed a trader and if you are not able to do so they will not pay out.

Did they forget to explain this to you when you bought the policy and happily took your money?

[richard300]

I informed them that my intention was to buy (which i do) and sell (which i do) cars from my home address, and that this was not my main source of income. - And that i needed a policy that would cover my own private use vehicles.

All the cars get logged onto their MID update page.

To be honest, their main stipulation was that i turn over 10 car a year - which i have done, just not at a profit.

Edited by richard300 on Sunday 13th October 10:08

[spaximus]

I would guess that if you have kept books that show you bought and sold and the net outcome, which you declare tot he tax office, then you are indeed a trader. If you make no money you are simply a bad trader.

[itz_baseline]

Some nice cars there. I have often thought about doing the same as I like to have a variety of cars and tick boxes of cars I have owned. Out of interest how much is your traders policy? And what happens if you only sell 7 cars in a years instead what they specify? How do you/prove how many you have sold?

[Chicane-UK]

That E39 looks terrific

[richard300]

I pay £850 fully comp (it was slightly cheaper last year)that gives me fully comprehensive cover and fully comprehensive cover for anyone test driving the cars. Plus £1.000.000 liability insurance BUT no windscreen cover - I have had to walk away from a couple of cars due to chips in the screen.

Limit (per car) is £7500 and i cant have Jap Imports or exotica (not that you would find much exotica for £7500. AMG Mercedes and M-Power BMW's have never been a problem though (nearly pulled the trigger on both an E36 M3 Convertible and a W210 E55 AMG - and both were fine to add to the policy).

I am not sure how they monitor (unless they can demand some kind of audit)BUT i do know that they only let me renew after checking my MID list to see that i had indeed turned over more that 10 cars.

Its very liberating to see something for sale and simply purchase it, knowing that all you have to do is tap in the registration on your phone and you are instantly insured with no messing around, or wondering if your premium will suddenly jump up by a couple of hundred quid. Handy for taxing too!

Edited by richard300 on Sunday 13th October 10:26

[V8LM]

"If it looks like a ducktrader, swimsinsures like a ducktrader, and quacksacts like a ducktrader, then it probably is a ducktrader."

[richard300]

V8LM said:

"If it looks like a ducktrader, swimsinsures like a ducktrader, and quacksacts like a ducktrader, then it probably is a ducktrader."

That's fine... Just wondered what peoples perception would be.
I guess i am happy to live with a previous posters conclusion that 'i am a bad trader' - from a financial point of view.

But i can live with it knowing that A: I buy a car predominantly with my own ownership in mind and B: I only sell a car that i carefully inspected before buying and sold knowing there was nothing wrong with it.

And i think that's where i am able to keep my losses to a minimum - because i buy right and negotiate hard, and if i dont sell at the right price or near the right price, then i am happy to carry on being the owner of the car as i liked it as an ownership proposition in the first place.

Edited by richard300 on Sunday 13th October 10:41

[With these feet]

I'd say that you are, because you meet the criteria for the insurers to issue a traders policy.
Odd how they say turn over 10 cars, though saying that my traders policy doesnt cover test drives though I do have a workshop which "qualifies" me for the policy.

My wife often says I should "flip' cars (too much watching Gas Monkey there dear!) as I do usually have a runabout that I use which inevitably ends up being sold to a current customer if their car becomes uneconomical to repair.

Do you have any accounts for the buying and selling?

[Monkeylegend]

richard300 said:

I informed them that my intention was to buy (which i do) and sell (which i do) cars from my home address, and that this was not my main source of income. - And that i needed a policy that would cover my own private use vehicles.

All the cars get logged onto their MID update page.

To be honest, their main stipulation was that i turn over 10 car a year - which i have done, just not at a profit.

Edited by richard300 on Sunday 13th October 10:08

Read that back and give an honest answer.

I think you would find it very hard to convince the Inland Revenue that you weren't, and as such you would be expected to keep adequate business records.

Edited by Monkeylegend on Sunday 13th October 10:46

[Escy]

I briefly looked into traders policies. I decided to steer clear of them. The policy said you need to have paperwork for everything you buy and sell. That's a paper trail the tax man would like to see if your not submitting anything to them.

Do you put the V5's in your name or send them off as trade? I think if you have 7 in your name over a 12 month period the DVLA pass your details on to HMRC.

[Ozzie Osmond]

If your activity is not "with a view to profit" then you are not trading in the normal sense of the word. Which suggests you are not eligible for a trade policy. So you need to make sure your insurer fully understands what you are doing.

[V8LM]

And a person buying from a trader has different rights to one buying from a private seller.

[richard300]

Monkeylegend said:

richard300 said:

I informed them that my intention was to buy (which i do) and sell (which i do) cars from my home address, and that this was not my main source of income. - And that i needed a policy that would cover my own private use vehicles.

All the cars get logged onto their MID update page.

To be honest, their main stipulation was that i turn over 10 car a year - which i have done, just not at a profit.

Edited by richard300 on Sunday 13th October 10:08

Read that back and give an honest answer.

I am happy that if ever they 'listened to the phone logs' i answered all their questions honestly, all be it, with carefully chosen words.

[Matt UK]

Hmmm interesting one.

So you turn over the required 10 cars, but are you a trader...

This might mean are you a registered trader? Which I am guessing you are not.

When you sell, do you sell as 'private'? I'm guessing so.

So you are getting some benefits of being a trader (insurance) but your punters are not getting the benefits of you being a trader (ie if the car blows up a week later, you have no obligations if you sold private).

I'm not an expert, but you might be somewhere inbetween a grey area and murky waters.

[davepoth]

Ozzie Osmond said:

If your activity is not "with a view to profit" then you are not trading in the normal sense of the word. Which suggests you are not eligible for a trade policy. So you need to make sure your insurer fully understands what you are doing.

And if the insurance company are happy that you qualify as a trader, you need to have that same conversation with HMRC.

[richard300]

I do keep a paper trail - and if i wanted to just 'flip' cars i could have made some good profit. But thats is not what its about for me.

I am happy though, to concede that technically i am a trader, and i do explain my situation when people ask if i am trade or not, when they come to view the car. I leave the decision upto them.

It is though, why i am so careful to make sure i am not selling a 'wrong un' because having to buy back a car that someone else broke would be a hastle, and its supposed to be a hobby for me, not a ball ache.

[Escy]

Have you registered with HMRC?

[richard300]

Escy said:

Have you registered with HMRC?

I will be completely honest and say 'NO' but having 'admittedly' being a little naive in thinking "Well, if i don't have any profit to declare" i don't need to..... I will now do so.