Car trader - how to startup?

[Jaime Johnston]

Hi guys,

Me and a friend would like to start up a business where we buy and sell cars.

We have worked in the motor-trade for numerous years and we would like to start our own thing up now so we can reap the full benefits.

We would be trading from home to start off with and then hopefully be able to later obtain a unit or forecourt but that could be a while yet.

We would still be employed (car sales executives at a main dealership)

What would we need to start up? I am trying to get through to HMRC but having no luck at all!!

Do we register as a sole trader? or a partnership?
If we sell one car, what is taken out as in NI/tax? How does it work?
Is it illegal if you don't put warranties on cars? Or is that up to us?

Just would like those three questions answering to start of with, if anyone can help.

We would only be selling cheap cars for a while (up to £2,000)

I appreciate your time and help.

 

[Mr D]

First, figure out who your target market is. Then what you are going to do.

Among other things check out your company contract, make sure there is no block on doing other work or setting up in business.

Sole traders - your income from the business is the profit of the business. Debts are yours.
Partnerships - 2 or more sole traders working together, each has income as their share of the profit of the business. Debts belong to both or either of you.
Limited company - your income is wages and dividends you get paid by the company. Or even no payment made. The profit of the company is subject to corporation tax. The debts of the company belong to the company, not the directors. Unless directors give a personal guarantee.

I would think warranties would be known to car sales executives.
https://www.thecarexpert.co.uk/used-car-warranty-consumer-rights/

 

[MBE2017]

I would suggest you chat to an accountant, and avoid a partnership at all costs, go Ltd if required. What you pay in NI and tax will depend on how you trade.

Warranties are a vague area, easy to provide in house or bought in, but only the main parts, such as engines and drivetrain will have any real cover at those values. Being a trader you can expect plenty of people returning problem vehicles, at that price range many are more demanding than £30k buyers.

 

[Mark T Jones]

First, I'd establish a reliable source of used metal - surprisingly difficult these days, though your dealership contacts might be able to help.

Then I'd look into motor trade insurance (the cost might be a barrier to you.

Then I'd speak to an accountant about the best way to set up the business (ltd or partnership) - and how to keep records and accrue for tax.

With regards to warranties - my understanding is that you don't technically have to provide a formal warranty, but some level of warranty will be implied in the sale - best to check this out on a motor trade forum.

Also, look at the local and overall laws regarding trading from home. There are definitely rules around selling from public space, there might also be covenants regarding running a business from home - you can bet your bottom dollar your neighbours will be all over these...

 

[John Hemming]

The biggest issue for small time car traders operating from home is where to park the cars. That is where the stress arises from neighbours rather than necessarily using the home.