Ever dreamt of starting your own car dealership? If you are interested in selling used cars, you’ll need to provide excellent customer service and sell high quality vehicles to be successful.

In this guide we will explain how you can start and manage your own used car retail business. Anyone who is entering this industry will need the right traders insurance policy. Utility Saving Expert, an online comparison site, can help you compare cover from leading industry providers. Simply enter a few details about your business requirements and you’ll be able find the best value on motor trade insurance, saving you time and money.

Conduct motor trade market research

Anyone who’s starting a new business will want to ensure that there is a market for it. Think about the type of vehicles that are in demand and what your customers will be able to afford. For example, trying to sell supercars to those that simply don’t have the finances will prove near impossible. Local housing can help you determine if an area is affluent. You can even go on a walk and see what types of vehicles are on the roads and people’s driveways. It’s also highly recommended that you check what types of cars are advertised at other dealerships and in classified ads.

Market research doesn’t stop there. Once you’ve started trading, speak to your customers to better understand their requirements. It’s worth finding out what makes, models and particular colours are most popular, in addition to those that are difficult to sell.

Competitor analysis

Understand how your potential customers are being served by other businesses in your town/city. You’ll need to find out how many current businesses already sell cars, whether online or at a dealership, this includes those who trade from their own home. You can better understand your competitors’ businesses by looking at their advertisements.

Your largest competitors will be those that offer similar cars and services to the ones you hope to offer. You’ll need to gather as much data on these as you can. Look for the amount and choice of cars they offer, age of their stock, pricing and facilities such as finance, showrooms and warranty. Visiting them in person as an undercover customer can help you get the best insights.

Will you offer other services?

Aside from selling used cars, will your business offer other services? This will depend on what facilities you have access to. Here are a number of activities that could generate additional income:

Vehicle servicing and repairs
Car valeting
MOT tests
Bodywork and accident repairs
Car hire
Motor parts and accessory sales

Pricing your vehicles

In the early stages of planning, you’ll need to focus on a price bracket. This will be determined by what customers in your area can realistically afford. Having vehicles at each price point to meet the needs of many different customers can also help. When you’re deciding upon the price for a car, you’ll need to think about the following questions:

How much did you pay for the car?
How did you acquire the vehicle?
How long has the car been in stock
What is the market value of the vehicle?
How much will a local customer be expected to pay?
Are you prepared to negotiate on the price?
How much profit you expect on each vehicle?

There are a number of tools online that can help you better understand car pricing. It is also important to note that many buyers will also have access to these same tools and will have up to date pricing information before visiting your dealership.

When determining the price of a vehicle, the following factors will help you decide:

Overall condition
Type of engine (petrol, diesel, electric or hybrid)
Gearbox (automatic or manual)

Time taken to sell a car

On average, it generally takes between 25 to 45 days to sell a car. If you’re able to judge the demand correctly, it could leave your dealership in less than a week. Your business plan will need to factor in the time it will take for you to sell a vehicle. If you’re selling vehicles that have very little demand, you could run into cash flow problems.

Trade plates

As a motor trader, you’ll need to apply for trade license plates. These are mobile tax discs that save you from having to tax and register each car that is in your possession on a temporary basis. You will need to contact the Driver and Vehicle Licensing Agency (DVLA) for a trade licence to be able to use trade plates. Normally, these plates last between 6 and 12 months.

In summary, understanding your target market and having a good knowledge of cars can help you start a successful used car dealership. You’ll need to be confident, have the ability to greet customers, negotiate well and ultimately be honest in your approach for long term success.