Setting Up a Home-Based Car Dealership: Your Ultimate Guide to Success in 2024

If you’re looking to get into the motor trade and want a relatively low-risk, low-cost place to start, or just want to make a bit of extra cash, starting a home-based car dealership could be a good route.

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Introduction to Home-Based Car Dealerships

If you’re looking to get into the motor trade and want a relatively low-risk, low-cost place to start, or just want to make a bit of extra cash, starting a home-based car dealership could be a good route.  

There are a few things to consider on your route to becoming a home-based car trader, however, and we’re going to run through them here as part of our comprehensive guide to success.

Advantages of Home-Based Car Dealerships

Opening a home-based car dealership can be a great way to find your feet in the world of motor trading, or simply a means to earn some extra money. Some key advantages include –  

  • Low start-up costs – because you’re running your dealership from home, you won’t run into the same overheads traditional car dealers will  
  • Lower risk – less initial investment means a lower level of risk should anything go wrong, or the business not perform as well as you’d hoped  
  • Be your own boss – running your own business from your own home means you only have yourself to answer to  

Market Research for a Home-Based Car Dealership

Before starting a car business from home, much like any business, it pays to do your research - 

Establish demand – you need to know there’s actually demand for a car dealership in your area. If you’re practically next door to another dealership you might face additional challenges, and while this might not necessarily deter you, it should inform your approach.  

Determine your audience – who do you want to sell cars to? Is it family cars and first cars for everyday people? Is it luxury cars for the wealthy? Or even classic or specialty cars for collectors and restorers? If you know one particular niche or audience better than another, start there. It doesn’t mean you can’t branch out later, but you should give yourself a set target to begin with.  

Where does your target audience buy their cars? – You should investigate the buying habits of your chosen demographics, including where they buy their cars and what motivates their final purchasing decisions. This knowledge can help you determine what you’ll do to set yourself apart from the competition.  

What kinds of cars sell in your area – now you know your audience and their buying habits, what cars are they buying? Each area is different, and cars that typically work with your target demographic in one area may not necessarily be popular in yours. Without knowing this, it’ll be hard to gauge which vehicle purchases are likely to lead to quick, high-value sales and which aren’t.  

Creating a Business Plan for Your Home-Based Car Dealership

For your home-based car dealership, your business plan will inform the growth of your operation as well as being a key tool should you need to apply for additional finance to support your expansion. This step is often overlooked but is one of the most important you can make. Your business plan can guide your initial operations and help inform your financial operating capacity 

What should you include in your business plan?  

  • An account of your experience in the motor trade – this could reinforce your case should you need to apply for additional finance  
  • Possible financial support – you should indicate here whether you think you’re likely to require additional support from a lender as well as how much this is likely to be  
  • Local competition – a portfolio of your potential competition can help you identify and track potential threats to your business and demonstrate you understand your local business landscape to potential lenders 
  • Set-up costs – predict and keep track of your start-up costs, including home-based car dealer insurance, legal fees, marketing costs, any equipment purchase costs, and money spent on car purchases, repairs and MOTs  
  • Sales targets – a prediction of your monthly and annual sales as well as the amount you need to generate to make a profit  
  • Stock – identify the stock you have, and what you’re likely to acquire moving forwards  

Remember, when creating your business plan, keep it concise and realistic – don’t include overly optimistic information with the aim of impressing potential lenders as this will only come back to bite you later. You can find helpful information about writing a business plan for your home-based car dealership on the government website 

Fine-Tuning Your Strategy

Essential Considerations for Home-Based Car Traders

As part of your market research and business plan, there are a few extra considerations you should make before branching out as a home-based car trader. You should decide what kind of margins you’re looking for - whether you’re happy selling larger numbers of cars quicker for a smaller profit, or whether you’d prefer to spend time servicing and restoring potentially high-value vehicles for a greater profit but at a slower pace. 

Regardless of how much labour you intend to put into your vehicles, you’ll need to be realistic about what you can and can’t do yourself, and whether you need to pay for outside mechanical help in order to bring your vehicles up to a salable condition.  

Also, you should be sure you have a dependable supply of vehicles to keep your stock fresh and the customers coming.  

If you’re struggling to get started, a trusted voice from within the industry could be a huge help, they may be able to give you insights and things to consider that you’d never have imagined otherwise.  

Navigating Regulations

Informing Local Authorities About Your Home-Based Car Dealership

Unless you have enough private land to house all your vehicle stock, you’ll need to inform your local council about any large number of vehicles you plan to keep on the roadside. They may have concerns about obstructions of the carriageway or safety, but it’s best to work with them from the start, rather than wait for it to become a larger issue. You may also want to inform your neighbours as a courtesy.  

The Balancing Act

Pros and Cons of Selling Cars from Your Home

While there are cons to starting a car business from home, there are plenty of pros that make it a tempting option. We’ll start with the cons –  

Cons –

  • Your home is unlikely to have the advantage of storage space that a dedicated premises will  
  • While dedicated car dealership locations tend to be in highly visible locations, your home may not be, which could make attracting potential customers harder  
  • You’ll have to check with the council whether it’s legal to sell vehicles from your property  
  • You may risk disputes with your neighbours if you don’t notify them and communicate with them  

Pros –  

  • Your start-up and operational costs will be lower than with a traditional car dealership, and your level of risk will be lower in turn  
  • You’ll be your own boss, responsible for the operation of your own business  
  • Working from home means no commute, and an easier work/life balance  
  • Thanks to lower overheads, you can afford to start small and scale the business as you need, so it can begin as a second income and grow to a full-time job as demand rises  

Sourcing and Buying Cars for Your Home-Based Dealership

When it comes to buying vehicles for your home-based car dealership, you’ll likely want to start with online marketplaces and bidding sites such as eBay or Autotrader. This is where your knowledge of the market will come into play, as you’ll need to be able to spot a deal. In order to turn a profit, it’s important you can identify which vehicles are about to be sold for below their potential market value and grab them quickly.  

However, it’s also key you know how to identify when a vehicle might turn out to be more hassle than it’s worth. Before you purchase a car for your dealership, obviously test drive it if you can, but also dive into its history and check that it has all of the relevant paperwork including the V5C document, maintenance history and logbook, and a valid MOT certificate. Without these, you’re unlikely to be able to sell the car. You should also work to identify whether the car has been crashed or stolen at any point, what MOT advisories it’s had previously, and there’s no outstanding finance.  

The government has an MOT history checker on its website, and there are numerous private services that will give you even more information.  

Don’t forget, it’s your responsibility to ensure the vehicle is road-legal and has no undisclosed faults before you sell it, not the buyer’s.  

 

Understanding Your Coverage Needs

Types of Insurance for Home-Based Car Traders

Like any car dealership, your home-based car dealership will need protection in the form of insurance. As well as offering peace of mind in the case that anything should go wrong, motor trade insurance is also a legal requirement for anyone working in the motor industry.  

As a minimum, these policies will allow you to legally drive your stock vehicles on the road, but other levels of cover such as public liability and protection for your business premises, equipment and stock are highly advisable.  

The best way to establish the level of cover you need and to get the best possible coverage for your business is to work with a trusted motor trade insurer who can build a bespoke policy around you and your business.  

Updating the MID and Obtaining Trade Plates for Your Home-Based Dealership

As part of the day-to-day running of your home-based car dealership, you’ll need to ensure you update your database so that it remains accurate. Insurers will provide you with access to their portal once your policy is live. You can check the Motor Insurance Database (MID) which will show the insured status of your vehicles. Always allow at least 48 hours for the system to update, however a vehicle added to your insurance policy will usually be insured with immediate effect.

You’ll also need to apply for trade plates so you can move vehicles that don’t belong to you on public roads without having to tax each individual one every time, as well as offering test drives. It’s advisable to have corresponding trade plate cover too.  

From Sole Trader to Limited Company

Registering Your Home-Based Car Dealership

Once your home-based car dealership is up and running and you’re beginning to turn a profit, it’ll be time to register as a sole trader with HMRC and begin filing tax returns. If you reach the point where you’re expanding and beginning to employ more people, then it may be time to establish a limited company 

A key step you almost certainly want to take early on in your venture as a home-based car trader is to register for a business bank account, most banks won’t let you operate your business using a personal account.  

Marketing Your Home-Based Car Dealership

When it comes to marketing your home-based car dealership, the best way to start is by examining what your potential competitors are doing, and, crucially, what they’re not doing. Social media can give you an amazing advantage, especially if the competition isn’t effectively leveraging it. Not only can you create accounts and pages where you can advertise the vehicles you currently have for sale, but you can also leverage social media ads to reach large numbers of people in your area with relatively small spends.  

As well as digital options, as a small-scale local business, you can use traditional, real-world marketing tactics such as leafletting, posters and advertisements in local newspapers.  

 

Navigating the Home-Based Car Dealership Landscape

Hopefully, you feel a little better equipped to take on the world of home-based car dealerships. Above all, we’d emphasise the importance of proper planning and getting the right insurance to protect your new business 

At Prime Cover, we can help with your motor trade insurance needs. We work almost exclusively in the motor trade and build tailored policies to suit the individual needs of various businesses. Get in touch with us today for a free quote using our online form, or by calling us on 01527 433 434, or emailing us at support@primecover.co.uk