Beginner’s Guide on Starting a Used Car Dealership Business in the United Kingdom

Starting a used car dealership business is ideal for those who have a genuine passion for automobiles and want control over an enterprise’s management and direction. You can start a small or medium dealership with moderate investment and earn a 20-40% profit on your sales. It also opens you to different opportunities to operate other automobile business activities for additional income.

This article will be your guide to company registration in the United Kingdom. Here, you’ll learn about car dealership industry practice, business registration, licenses, and permits. Equip yourself with the right knowledge and support to kickstart your new business venture in the right direction.

 

What is a Used Car Dealership Business?

Used car dealership businesses usually obtain their inventory from used car auctions or wholesalers. Depending on the cost, they then get their profit from individual sales or retail of used cars directly to customers. These marked-up prices may also be up for negotiation based on the dealership owner’s pricing strategy. Used car dealerships businesses generally care more about gross margin than the actual selling price, so they typically have a price range that determines whether they can accept or decline the negotiated price.

Used car dealership businesses may still feature one or two popular brands and types of vehicles. However, the cars have much lesser prices compared to affiliate businesses of car manufacturers. Compared to new car dealers, used car dealerships have a wider selection as giving diverse options is part of their advantage. These dealerships may also be in the business of selling insurance for used cars.

Moreover, sector stakeholders have been trying to improve the image of used car dealerships in the United Kingdom. Before, the sector has been known for dishonest practices like clocking which has made starting a business here difficult. Measures taken to better this image include quality assurances and low-pressure sales tactics, straightforward insurance, and used car approval schemes.

The Office of Fair Trading (OFT) also published special guidelines to encourage fair trade in the sector. And in 2014, the Used Car Commission developed used car codes of practice to improve consumer protection and address some recurring complaints and issues. Many concerns still affect the sector, like carbon emissions and climate change. But with improvements, in-car technology, and the car companies’ initiatives to reduce diesel models, the used car dealer sector has also seen improvements regarding these matters.

 

How to Start a Used Car Dealership Business

Choose a Target Market

Evaluate the market in the area you want to start the business in and see if there is enough demand to sustain it. If there is, pick a niche or particular type of vehicle you want to sell and get to know the potential clients you may have. Look at the gender, age group, family structure, and income of your average client. Assessing them will give you a grasp of how best to implement your marketing strategies.

Pick Services to Offer

You can decide to offer a full range of second-hand cars or offer a specific brand or vehicle type. In addition to dealing in used cars, you may also offer ancillary services like vehicle repair, petrol retailing, alarm fitting, motor part sales, or even convenience retailing. Offering these services will, of course, depend on your capital and capacity. You would want to make sure that when you offer services, your customers will receive their money’s worth.

Calculate Startup Cost

To start a used car dealership business, you need to have, at minimum, a lot of space for the vehicles and capital to acquire your initial inventory. You may decide to stock up with only a few vehicles at first and then work your way up. Or you may also immediately buy wholesale. Be sure to set enough capital for registration fees, licensing, hiring employees, promotions, and other miscellaneous expenses. You can calculate your startup costs and estimate the capital you need to raise by listing all the possible expenses.

 

Should You Offer Customer Financing?

Used cars are high-value items, and even if it’s second-hand, some customers may be unable or unwilling to pay for them in one payment. To incite potential sales, you can offer them credit schemes to pay for the vehicle in installments. The most common method is requiring an initial down payment and the balance paid in fixed monthly payments. To help protect the business, you can offer credit through a specialist finance company that can give the customers various schemes and finance packages.

 

How to Register

Business registration is one essential part of starting a used car dealership business. In the United Kingdom, you have three options on how you can register a business: set it up as a sole proprietorship, partnership, or limited company. Sole proprietorships have the advantage of simple management, easy recordkeeping, reportorial compliance, and taxation. Partnerships are practically the same as sole proprietorships. Only that is greater potential with more talents and skills managing the business.

To set up a sole proprietorship or partnership business, you have to register for taxes with the HMRC. A business organized as a partnership has to appoint a nominated partner who will be responsible for the business’s accounting records and tax returns. You can complete this process online or by completing form SA400. After completing this application for tax self-assessment, there is no more need to notify the Companies House.

Moreover, limited companies give their owners protection against the affairs of the business. By registering a company, you are essentially creating a new and separate entity. Therefore, any activities and properties of the business are that of the enterprise alone. If there should be problems with the debts of the company, the owners are protected from being personally held liable for them.

United Kingdom company registration starts with company name registration. Then you would have to appoint a company director, furnish shareholder details, submit a memorandum of association, and adopt articles of association. You can complete the process online for a £12 fee or acquire United Kingdom company incorporation services for much more convenient processing.

 

Licenses and Other Legalities of Used Car Dealership Business in the United Kingdom

In starting a used car dealership business in Scotland, you need to acquire a second-hand motor vehicle dealer’s license. Starting business owners in other parts of the United Kingdom may also need a second-hand dealer license, but often exempts motor dealers. To be sure, check in with your local authority for the licensing requirements you have to fulfill.

You have to look over different legislation in starting a used car dealership business in the United Kingdom. In particular, you need to follow tyre safety and labeling standards to ensure quality and full disclosure of product information to customers. You need to check the car’s tyres for significant defects, and part-worn tyres should be accordingly marked before putting them up for sale. Your nearest trading standards department should be able to help you with your concerns regarding these matters.

Moreover, under the Money Laundering Regulations, motor dealers must register with the HMRC and set up anti-money laundering measures in the business. The Financial Conduct Authority (FCA) also requires businesses that offer financing to customers to acquire customer credit authorization. The same agency regulates the sale of general insurance and insurance-backed motor warranties; and so must apply with them as an authorized representative.

Other legislations you need to be familiar with include regulations for hazardous substances, disposal of old tyres, and employment. Additionally, keeping computerized records of customers’ personal details requires data user registration with the Information Commissioner’s Office (ICO). If you plan on doing car refinishing (spray painting), you need to get a permit from your local environmental health department. Lastly, if you also intend to sell petrol, you need to get a petroleum storage certificate from the petroleum enforcement authority.

 

Start a Used Car Dealership Business With Professional Support

Get the right support to start your business on the right footing. 3E Accounting is a United Kingdom corporate service provider with professionals who can assist you in the registration and other legal matters relating to business startups. You can put your trust in the top-qualified company formation experts in the United Kingdom and depend on us for all the issues and concerns you may have.

So what are you waiting for? Contact 3E Accounting today to register your used car dealership business the right way! We will help you with your business registration process in the United Kingdom.