Entering the motor trade industry can be a rewarding business venture, but it requires thorough planning and preparation. You will need to carefully consider how you intend to operate, where your business will be based, and the type of trade you wish to specialise in. Additionally, it is essential to ensure your motor trade business complies with all relevant legal and regulatory requirements.
This guide provides an overview of the key steps and considerations for those looking to become motor traders.
What to consider when becoming a motor trader
You might already know what you want your motor trade business to look like. But it’s not as simple as selling a few car models and hoping for the best. Building a successful automotive business requires a lot of research.
First, you’ll need to understand your audience demographics and customer demand. For example, you might want to sell classic car models, but your target market might be interested in all-new electric and hybrid vehicles. Explore your audience’s interests, local area, and UK trends to understand the market.
Remember to check out the competition too. If multiple other nearby garages are also selling the same vehicles you want to market, assess how you’ll stand out from the competition.
Next, it’s time to think about how to structure your business. Consider whether you’ll operate as a sole trader, limited company, or franchise.
Each option comes with different tax liabilities, regulations, and levels of responsibility.
For example, operating as a franchise involves entering a contract with a car manufacturer to sell their vehicles. This arrangement may provide a steady supply of vehicles and support, but it also limits the level of control you have over your business. On the other hand, operating as a sole trader or limited company gives you more flexibility and independence, as you will be responsible for sourcing and selling vehicles yourself. However, this can be more challenging for start-up motor traders who need to ensure profitability. It is important to carefully evaluate each option and consider which structure aligns best with your goals and circumstances.
Which motor trade business should I start?
There are many different types of motor trade businesses. Generally, the motor trade involves working on or with automotive vehicles and parts. It also extends to vehicle services, such as MOTs, services, and repairs. This typically includes the following businesses:
- Vehicle sales
- Servicing or repairing vehicles
- MOT car services
- Vehicle recovery
- Tyre fitting
- Mobile mechanic services
- Valeting
- Bodywork repairs
- Automotive electrical work
- Car dealership
While offering a bit of everything is tempting, narrowing down your services might be wiser—especially if you’re just starting. It’s better to do one thing well and ensure your customers are satisfied. Then, as you expand and employ more people, you can increase your offering.
Should I work full-time or part-time as a motor trader?
If you’ve little experience in the motor trade industry, it might be better to start small. Some start by buying and selling a couple of vehicles together with another job. You could work part-time to build experience and make a profit. Once you’ve generated enough sales and stock of vehicles, you can move full-time.
However, if you’ve already a lot of experience in your motor trade area, such as vehicle sales, you may prefer to jump right in from the start. That said, it doesn’t guarantee sales or customers, so it may be wise to build your business on the side first.
If you go down the ad-hoc route, consider part-time motor trade insurance to help protect yourself against risks. Even though the risks may be lower than a full-time motor trader, working in the automotive industry at any level presents unique hazards. So, it could prove vital to safeguard yourself from financial liabilities if things go wrong.
Should I work from home or a business premises?
Getting the location right could be critical to the success of your business—and your profits. If you’re working part-time, you may find your home garage is more than sufficient. But your home garage is unlikely to be big enough if you're launching a large motor trade business offering vehicle sales, servicing, and more. Let’s explore both options to help you decide.
At-home motor trade business
Working from your home garage is easy if you’re operating alone and only selling or servicing a few vehicles at once. You don’t need much space or too many tools and machines to carry out business. It also means you don’t need to pay any rent or specific fees associated with running a business premises away from home.
However, home working comes with additional considerations. Sometimes, you may need permission from the council, especially if you sell cars from your home. Discussing your business plans with neighbours is also essential to make sure they’re happy with people arriving, parking, and leaving the area regularly.
Another thing to consider is accessibility. If your home is in an area that’s hard to get to, such as down a small lane and with limited parking, it might hinder your business operations.
Motor trade business premises
Moving to a business premises gives you more flexibility. A garage or forecourt can help you serve more customers, employ others, and scale your business up to the next level. However, you’ll need to factor in the additional expense of running a separate premises.
Consider the location of any business premises carefully. You might want to be in an area with more people to promote your services or a quieter area with less competition. You need to ensure your premises are secure, away from the risk of a natural disaster like flooding and are easily commutable.
When searching for a business premises, remember to consider factors like customer parking, reception and office areas, and toilets or kitchens for employees.
Creating a motor trade business plan
Having a clear plan and goals is key to helping your business grow. Whether you work part-time from your home garage, or full-time at a large franchise, business plans are necessary for running a successful, profitable organisation.
When drafting your business plan, consider the following:
- A clear overview of the services on offer
- Overall objectives and goals of the business
- Market analysis and audience demographics
- Initial outlays
- Ongoing outgoings and expenses
- Any capital investments
- Any employees and their responsibilities
- Pricing of services or products
- Tax and National Insurance liabilities
- Marketing plan
- Competitor analysis
- Unique selling points (USPs) to market your business
The most important thing is to set realistic and achievable targets. Whether it’s building a team or making a specific profit each month, with these targets in place, you can measure success and make adjustments if needed.
How to register as a motor trader
To trade legally, you need to register your business. How you do this depends on whether you operate as a sole trader, limited company, or partnership. Visit the GOV.UK website to guide you through the registration process.
There are different requirements for each business type, especially regarding finances, so be sure to consider these before registering. For instance, as a sole trader, you’re personally responsible for the company’s finances, including any debt. As a limited company, the business is responsible for its own finances, but you have additional reporting and filing responsibilities.
Apply for trade plates
You should apply for trade plates if working in the motor trade industry. Having trade plates means you don’t need to tax every vehicle you own separately. Instead, vehicles on your forecourt are covered by a single trade plate licence, helping you save time and money.
Trade plates also allow you to drive other vehicles legally, which is essential if you’re responsible for picking up and dropping off vehicles, or test driving cars. In addition, trade plates cover you to take an untaxed vehicle from your premises to the customer’s address, avoiding additional fees or potential fines.
Get motor trade insurance
Motor trade insurance is a specialist type of insurance that can help provide protection for theft, accidents, liability claims, and your business property. At ChoiceQuote, we offer flexible motor trade insurance to help protect you and your business. We can offer protection against theft, accidents, and damage.
Plus, our motor trade insurance provides essential road risk cover, so you can drive customers’ vehicles and test cars on the road. We can also insure you, your employees, and your customers to test drive vehicles, so you can rest assured that your entire organisation has adequate protection. Get a quote online or call us on 01625 885046.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. We do not accept any liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.