Beginner’s Guide on Starting a Motor Trade Business in the United Kingdom

Starting a Motor Trade Business in the United KingdomIf you’re thinking of plunging into the motor trade business, there are certain things that you must know. Learning about the legal requirements is the start of understanding the industry before even thinking of starting. Starting a motor trade business in the United Kingdom is a bold step towards building your reputation in the industry.

Here’s a guide on starting a motor trade business in the United Kingdom.


Industry Practice

The motor or automotive industry in the UK is vital, and it’s worth more than 78 billion pounds. The statistics indicate that around 3,000 companies are in the motor trade industry, from manufacturers to suppliers to mechanics and garages.

Car Dealership

This segment of the motor trade industry is integral as they buy and sell new and used cars. They typically have a forecourt where the members of the public can view the vehicles.

Repair Garages

If you are thinking about the motor, repair garages will always cross your mind. Most owners have tools, premises, and employees that are integral in the smooth running of the garage.

Vehicle Restoration

Some business owners invest in restoring classic cars to their former glory within the motor trade industry. For you to succeed in this industry, you must know what your customers are looking for. Some organizations, such as the Society of Motor Manufacturers and Traders (SMMT), have more data about the latest trends.


Business Registration Process

The motor industry is fast-growing in the UK, and for you to succeed, you must get to know the industry. You must ask yourself whether you want to specialize in specific cars such as classics or high-end vehicles.

Here are some fundamental things you should consider before starting a motor trade business in the United Kingdom.

Register Your Business

Every entrepreneur knows that you’ll need to register as either a sole trader, limited partnership, or company to run a business legally. Each type of business structure has its benefits and requirements. The government of the UK website has a guide to company registration. The Companies House is the department responsible for company registration in the UK. You only need to have all the legal documents to complete the registration process.

Apply for Trade Plates

Once you’re through setting up your motor trade insurance policy and confirming the legalities behind the business, you’ll need to apply for trade plates. This is a temporary number plate used by motor traders or vehicle testers. According to DVLA guidelines, you must provide a copy of your Motor Trade Insurance Certificate, which must match the name on the application when applying for trade plates. If you do not possess one, you’ll explain to the DVLA and give your Companies House’s registration number details.

Purchasing a Car(s) to Sell

The moment you’re set, you have the task of getting your first car (s) for sale. Within the UK, there are several different areas in which you can purchase cars, such as online or attending an auction house. Before making any purchase(s), ensure you’ve done your research on the vehicle (s), their condition and take it for a test drive if possible. Check with the MOT for the car history using the government’s online MOT checker service. Additional things to check include:

  • Whether the car has a V5C document, without this proof of ownership, it may be considered stolen.
  • Check whether the car has a maintenance history. It’s important to know whether there’s anything that could affect its reliability and value.

Pricing Policy

How you price your services will depend on several factors. Before you set up your prices, get to know how your competitors are charging. This can act as the basis of your price policy. Remember that your pricing should be able to cover all your overheads and make some profits.

Promote Your Motor trade Business

When you’re new in the industry, you must make yourself known. You could begin by word of mouth within the area you’ll be operating. Again, you can create flyers or business cards and distribute them to various outlets.

Secure a Motor Trade Insurance Cover

Before starting a motor trade business in the United Kingdom, you must cover your business from liability. Getting the appropriate trade insurance policy may cover everything essential. These may include repairs, repossessions, road incidents or damages, loss of contents, and stock.

Research Your Target Market

Before starting company incorporation, you must do market research. Get to know the demand of the services you’re offering, what kind of social status your customers belong to. Besides that, you need to understand how your competitors and the variety of services they are offering. Know how they’re pricing their services and the types of equipment they’re using.

Develop a Website

Digital marketing is one way you can promote your business online. By creating a website, then you can showcase what you offer as a service to your target customers. The website should be simple and has all the details where customers can easily reach you.

Have a Solid Business Plan

More often, it’s tempting to jump straight into a new business idea. But it is essential to start with your business plan for the success of your business. You must ensure that the business plan provides a clear picture of what you’ll be offering as a service. Start by putting down the key objectives, your skills, and experience, target market, and customers. The plan should show the competition, your marketing plans, operational and financials. It would help if you outlined your strengths and weaknesses and how you’ll handle any challenges.


Licenses, Permits, and Regulations

With this kind of business, you must clearly understand critical areas of legislation that affect you as the dealer. These are some of the regulations you plan to start a motor trade business in the United Kingdom.

  • Within the provisions of the Money Laundering Regulations, (high-value dealers) consisting of motor dealers. You must register with HM Revenue & Customs (HMRC) and set in place anti-money laundering systems.
  • To conduct MOT testing, you’ll require approval from the Driver and Vehicle Standards Agency (DVSA). You will need to complete an application form and return references and plans of the premises and surroundings. Officers from the DSVA will pay a visit to your premises to check that the testing equipment is functional and currently calibrated.
  • If you plan to offer finance to customers, you must have consumer approval from the Financier Conduct Authority (FCA).
  • If you plan to sell, advise on, assist in selling general insurance, the FCA bust authorizes you even if insurance is only a small part of the business. This comprises insurance-backed warranties. As a businessman, you can directly get approval from the FCA, or they can act as an ‘appointed representative’ of an approved principal. You can even seek assistance from a corporate service provider in the UK like 3E Accounting United Kingdom if you find it challenging.
  • If you plan to sell petrol, you’ll require a petroleum storage certificate from the local petroleum enforcement authority. You may also need to have an environmental permit or pollution prevention and controlling permit.
    If you’re operating in Wales and produce over 500kg of hazardous wastes in a year, you must register with Natural Resources Wales.
  • If you’re temporarily in possession of unregistered or untaxed vehicles, you require trade license plates from the DVLA. The law allows you to drive on trade plates for specific purposes, for instance, test driving, deliveries, and taking a vehicle to another motor trader’s outlets. Remember, trade plates exempt you from the need to tax a car, but not from MOT testing requirements or the need for proper insurance. Nevertheless, registering your trade plates with the Motor Insurance Database (MOT) ensures the relevant authorities see you have complied with the trader’s insurance policy. The trade license is only valid for a period of six to one year, after which you must renew.
  • You must register all vehicles number plate suppliers with the DVLA
  • You will require a goods vehicle operator license if you operate goods vehicles such as car transporters with a gross plated weight of over 3.5 tonnes. You also must have an operator license for each Traffic Area within which you operate from.
  • You must have a music license from PPL PRS Ltd if you play music in the showroom and elsewhere in your outlet.


Insurance, Taxing and Registering Vehicles

All the vehicles must have the necessary paperwork when you register them for the first time. The responsible authority allocates each car with a registration number and taxes it on behalf of the buyer. Ensure you follow all the proper procedures and observe the necessary security measures at all times.

Starting a Motor Trade Business in the United Kingdom

If you’re a beginner and probably need assistance on this, you can contact 3E Accounting.