A couple of questions - buying and selling cars for profit

[Devil2575]

I've been having a discussion on another forum about the legality of selling cars for profit as a sideline and it's raised a few questions. I was wondering if anyone on here who is in or connected to the trade could answer them?

1 Is it illegal to buy and sell cars for profit is you are not registered as a motor trader?

2 Does a motor trader have to have a trade insurance policy?

I am not considfering this myself but the questins came up when discussing hiow the new insurance rules (car must be insured unless it is sorn) will imapct on comeone who buys and sells a handfull of cars a year on the side.

Thanks

[98elise]

There is no such thing as being registered as a motor trader. Its not a regulated industry. You would simply be a retailer like any other. Anyone can buy a car and sell it for a profit.

You are not required to have a trade policy as such as long as your private policy covers evrything you plan to do, but if you buy and sell enough cars then your insurance co will kick up a fuss, so you will need a trade policy.

Techincally anyone who sells a car for a profit needs to declare it for tax purposes.

Edited by 98elise on Monday 27th June 18:45

[kentmotorcompany]

As above, anyone can buy and sell car for a profit.

One important point is you don't need to sell many car to be over the VAT threshold, and then become VAT registered.

Used car dealers pay VAT on the margin. IE:

£9,000 Purchase price
£10,000 Sale Price
£1,000 Margin
£200 VAT

All very straight forward so far, but if you spend £500 on prep you still pay VAT on the full margin before prep cost have been taken out. Taking the above example you would end up making £300 on a £9,000 investment.

Its not easy and the example I've given isn't as rare as you might imagine. Most times a dealer would aim for more margin than that, but if you have a car in stock too long it becomes more important to get your money back than how much profit you make.


Also where do you intend to buy from?

BCA will not give you the V5 unless you are an account holder (they have seen a copy of your trade insurance) they assume you are a private buyer and send the V5 off for you (charging £25) as you would selling to any private buyer.

[anonymous-user]

Note also that if you sell a car in the course of your business you are subject to the obligations imposed by the Sale of Goods Act, which go beyond the relatively minimal obligations imposed on a private seller.

[Devil2575]

Thanks for the replies. So in order to sell cars for profit you don't need to do anything other than declare any earnings to the inland revenue of course?

[300bhp/ton]

Devil2575 said:

I've been having a discussion on another forum about the legality of selling cars for profit as a sideline and it's raised a few questions. I was wondering if anyone on here who is in or connected to the trade could answer them?

1 Is it illegal to buy and sell cars for profit is you are not registered as a motor trader?

2 Does a motor trader have to have a trade insurance policy?

I am not considfering this myself but the questins came up when discussing hiow the new insurance rules (car must be insured unless it is sorn) will imapct on comeone who buys and sells a handfull of cars a year on the side.

Thanks

Registered with who?????????????? Some of you guys act as though this is your first day on planet Earth

Trade insurance is not required, but advisable. Liability insurance is also something to consider.

[300bhp/ton]

Breadvan73 said:

Note also that if you sell a car in the course of your business you are subject to the obligations imposed by the Sale of Goods Act, which go beyond the relatively minimal obligations imposed on a private seller.

It's a little more comprehensive than that. SOGA doesn't apply for electrical items sold business to business, not sure if it's the same with a car though.

[markcoznottz]

Hes not doing it as a business though is he. Wants a nice little earner on the side. Hard to do undercover nowdays, especially from a residential address. I know someone who did very well selling cars in the local rag, but he lived on a farm miles from anywhere, that always helps.

[minghis]

98elise said:

There is no such thing as being registered as a motor trader. Its not a regulated industry. You would simply be a retailer like any other. Anyone can buy a car and sell it for a profit.

You are not required to have a trade policy as such as long as your private policy covers evrything you plan to do, but if you buy and sell enough cars then your insurance co will kick up a fuss, so you will need a trade policy.

Techincally anyone who sells a car for a profit needs to declare it for tax purposes.

Edited by 98elise on Monday 27th June 18:45

This is about as good an answer as you're going to get. Sums it up perfectly.

[Sukh13]

98elise said:

Techincally anyone who sells a car for a profit needs to declare it for tax purposes.

Edited by 98elise on Monday 27th June 18:45

Not technically correct.

[300bhp/ton]

Devil2575 said:

Thanks for the replies. So in order to sell cars for profit you don't need to do anything other than declare any earnings to the inland revenue of course?

Self employed earning are no different for car sales than anything else.

I would seriously consider looking at insurances and be-aware as a trade seller you do have more responsibility and you may well have customers come back at you.

[SubaruSteve]

kentmotorcompany said:

Used car dealers pay VAT on the margin. IE:

£9,000 Purchase price
£10,000 Sale Price
£1,000 Margin
£200 VAT

Close but no cigar! It is VAT content of margin which is actually £166.66 within a £1000 margin. (£1000 = 120%)

But you are right, it is more difficult than it looks when you start taking realistic overheads into consideration.

[Zwoelf]

Who will provide your warranties? Or do you aim to self-underwrite this aspect?

markcoznottz said:

Hes not doing it as a business though is he. Wants a nice little earner on the side. Hard to do undercover nowdays, especially from a residential address. I know someone who did very well selling cars in the local rag, but he lived on a farm miles from anywhere, that always helps.

The OP asked about doing it legally, not fraudulently.

Sukh13 said:

98elise said:

Techincally anyone who sells a car for a profit needs to declare it for tax purposes.

Not technically correct.

Please show me where selling cars as a trade seller nets you a tax exemption?

Edited by Zwoelf on Monday 27th June 20:58

[Chrisw666]

Zwoelf said:

Who will provide your warranties? Or do you aim to self-underwrite this aspect?

99p shop PAYG sim and £5 credit for each car sold, use a council lock up 1/2 mile from home as 'storage'. Don't go overboard on prep, make sure adverts look a bit amateur.

Sell car 1 as Robert Sole.

Car 2 as Carl Hunt.

Car 3 as Joe King etc etc.


My consultancy fee is beef monster munch, a twix and some diet coke.

[LHD]

Chrisw666 said:

Zwoelf said:

Who will provide your warranties? Or do you aim to self-underwrite this aspect?

99p shop PAYG sim and £5 credit for each car sold, use a council lock up 1/2 mile from home as 'storage'. Don't go overboard on prep, make sure adverts look a bit amateur.

Sell car 1 as Robery Sole.

Car 2 as Carl Hunt.

Car 3 as Joe King etc etc.


My consultancy fee is beef monster munch, a twix and some diet coke.

Worringly i've met a few traders like that.

[Zwoelf]

Chrisw666 said:

My consultancy fee is beef monster munch, a twix and some diet coke.

You squire, have a deal

Diet? I never had you down for a ghey?

[Chrisw666]

Zwoelf said:

You squire, have a deal

Diet? I never had you down for a ghey?

I'm carrying a bit of holiday weight. (unfortunately it seems to be Vanessa Feltzes holiday).

[Zwoelf]

Chrisw666 said:

I'm carrying a bit of holiday weight. (unfortunately it seems to be Vanessa Feltzs holiday).

[Devil2575]

300bhp/ton said:

Registered with who?????????????? Some of you guys act as though this is your first day on planet Earth

Trade insurance is not required, but advisable. Liability insurance is also something to consider.

A registered company. That would be registered with conmpanies house I guess

[Devil2575]

300bhp/ton said:

Self employed earning are no different for car sales than anything else.

I would seriously consider looking at insurances and be-aware as a trade seller you do have more responsibility and you may well have customers come back at you.

Thanks for the tips but I must reiterate, this post is for academic purposes only. I have no interest in becoming a part time motor trader. There seem to be so many people out there at the moment doing it and I wonder how legit these guys are.