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.

As we move into 2024, the available stock of both new and used vehicles is increasing, and people are hunting around for a bargain as belts are tightened, meaning home-based car dealers with smaller overheads that can offer competitive prices could really stand out.

Running your own business from home also opens you up to a world of flexible, autonomous working as you become your own boss.

However, there are a few things to consider on your route to becoming a home-based car trader 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 is a great way to find your feet in the world of motor trading, or simply a means to earn some extra money. It also has a range of other benefits that you’ll be able to enjoy.

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, meaning you’ll potentially enjoy more disposable cash and a lower level of risk.

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, leaving you more room to learn and hone your new craft.

Be your own boss – Running a home-based distributorship means you only have yourself to answer to. You can set your hours and make all your own decisions.

No more commuting – Working from home means you can say goodbye to commuting to work and all the extra stresses and expenses that come with it.

Healthier work-life balance – Because you can set your schedule, you can flex your work around your personal life and create a much healthier work-life balance.

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. More than a third of start-ups that fail do so as a result of a lack of demand in the market; something that can be anticipated and avoided with proper market research:

Establish demand – You need to know if there’s a 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. One of the easiest ways to establish local competition is by looking at your area, either in person or using Google Maps, which will show you similar businesses as well as information about the kinds of vehicles they’re selling. You can also try making Google searches for terms like ‘car dealerships near me’ and reviewing the results.

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 speciality 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, known as your buyer persona. Having your buyer persona nailed before you start selling will also help inform any marketing activities you undertake further down the line.

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. For example, EV buyers typically prefer a more digital buying process, so if you’re planning to sell EVs you might want to invest more heavily in your website. This knowledge can also help you determine what you’ll do to set yourself apart from the competition. This is all part of building your buyer personas, as we mentioned before.

What kinds of cars are sold 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. You could spend some time browsing sites like Auto Trader or even looking at Facebook Marketplace to see the kinds of cars that are being listed in your area and, importantly, which ones are selling and at what prices.

Creating a Business Plan for Your Home-Based Car Dealership

One of the key steps in ‘How to become a car dealer from home’ is your business plan. For your home-based car dealership, your business plan will inform the growth of your operation as well as be 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.

The Harvard Business Review summarises the importance of a strong business plan:

“The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds.”

What should you include in your business plan?

An account of your experience in the motor trade – Collate a record of your experience in the motor trade along with that of any of your business partners. If you don’t have any, don’t lie but perhaps discuss how your experience in another relevant field could be helpful. 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. Make sure to be honest and realistic with these predictions.

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. This should be as detailed as possible and you should make sure to keep an eye on the competition moving forward as well as any emerging contenders.

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 – Include a prediction of your monthly and annual sales as well as the amount you need to generate to make a profit. Remember to take into account your investors’ expected return on investment, which is often in the region of 40-60%.

Stock – Identify the stock you have, and what you’re likely to acquire moving forward including why and at what costs and potential returns.

This is by no means an exhaustive list, you can find helpful information about writing a business plan for your home-based car dealership on the government website.

Remember, when creating your business plan, keep it concise and realistic – don’t include overly optimistic information to impress potential lenders as this will only come back to bite you later.

It’s also key to emphasise the strength and the potential of the market you’re entering as this is what your investors are likely to be interested in, rather than the benefits of your particular products or chosen niche of vehicles. Even if you’re planning to finance your new venture independently, having a keen understanding of your prospective market will help act as something of a compass when it comes to launch.

Regardless of whether you intend to seek external investment or not, you should write your business plan as though you do.

Fine-Tuning Your Strategy

Essential Considerations for Home-Based Car Traders

With your business plan in place, your next step is to refine your strategy and how you intend to get your new operation off the ground.

Here are a few key tips that might help you get started:

Put together a growth plan – Set out a series of goals for your new business and how, in detail, you plan to achieve them.

Integrate tech – The world of digital technology can seem a little foreboding to some but building your business with digital in mind from the start will help you improve efficiencies, grow faster and be more resilient to future threats.

Cultivate new customers – One of the first things you’ll need as a fledgling business is customers. Plot out how many customers you need to help you reach certain goals and just how deep their pockets need to be.

Don’t neglect existing customers – When you have customers on board, don’t forget them. One of the best ways that you can ensure reliable, long-term income is through return custom. A happy customer who buys one vehicle may come back for their next, recommend you to friends and family or even think of you when it comes to buying a first car for their child.

Learn from mistakes – There’s an adage attributed to Bram Stoker that reads “We learn from failure, not from success!” This is very much the case when it comes to your business; you’ll experience a lot of trial and error, just make sure you learn from the mistakes and refine your approach as you go.

Can I Run a Car Dealership from Home? - The Law

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.

Should I Become a Home-Based Car Dealer?

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 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, at the end of the day, you’re responsible for ensuring that a car is legal to be driven and has no undisclosed faults before you sell it.

 

Understanding Your Coverage Needs

Types of Insurance for Home-Based Car Traders

You’ll need road risk insurance to run your home-based car dealership, but aside from this, the level of cover you choose is up to you. You can learn more about getting motor trade insurance for your start-up business including the different types available in our blog post here.

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 one every time, as well as offering test drives. It’s advisable to have a 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 spending.

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 now feel a little better equipped to launch your own home-based car dealership. 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.