Beginning a small scale motor dealership

Toyotafanboi

I'm just wondering is anybody on here a motor dealer, and if so, how did it all start for them?

Me? I've just finished a degree in a field that I liked at the start but that i've since realised is not for me. Prior to that I had been working in various areas of the motor industry for a good few years (since I was a teenager), parts, service, valeting, you name it. A bit of a jack of all trades but I have a decent knowledge of cars and the industry but with no formal qualification.

Now, I had some money set aside, not a lotto win or anything bit I think this is the oppertune time to start. I'm still fairly young, have a bit of space to store 2-3 cars, I have a flexable job to aid cashflow and I have no real commitments aside from that.

Now I'm not naieve enough to think that 10 or 12k or whatever is going to rent me a premises and get me decent stock etc. My thinking is more along the lines of Geting a trade insurance policy, applying for a motor dealer number to legitimately buy and sell, register it as a business etc, then start trading small scale from home initially.

The idea would be to try pick up low-ish budget cars, say €1-3k (I understand the pitfalls) from private sellers and at auction (I understand the difficulties, pitfalls etc) with a view to preparing them for resale myself with the aim of making a couple of hundred on each car as a cash building exercise (maybe offer a short warranty on each car to give me an edge over private sellers in the same price bracket).

The idea is that after a timeframe of 2-3 years of applying myself to this full time (ideally maybe a little less) I will have built enough cash to rent a small yard with equipment and office on site to display similar stock and hopefully continue to expand from there.

I appreciate that good stock is hard to find and that cars in the price range i'm talking about can be a lottery.

Is this fantasy or does it sound remotely viable? I feel it's an opportune time as I am still young, relatively commitment free and have a few euro to spare. The motor industry is something i've always had a keen interest in and i've been working with cars since i've been able to walk.

How did other independent dealers get started? I'd love to hear. The only other alterntive as far as I can understand is to work in another industry and save for a very long time to obtain a decent amount of collatoral together to help me take out an even bigger loan to start on a much higher scale at greater stakes, when I am much older in an industry I would be more distanced from, which seems much more crazy to me? Or just let the idea go.

smash

Start off by buying and selling as a hobby to see how it goes. I'd guess that you'll soon see that there's really no money in it. Even buy a snapshot from Merlin Auctions to see the values that cars have sold for over the last 3 months.... there's no value there any more.

Toyotafanboi

I actually bought and sold as a past time masquerading as a private seller for years.

Being totally honest I made as much as I expected to make in most scenarios, as suggested, to yield say €500 on a €3k car was achievable if you played your cards right. I think a lot of it has to do with keeping your head, buying wisely and not getting carried away. I passed through in the region of say 40 cars over 3-4 years and lost money on no more than 5.

I understand making a couple of hundred on a car isn't exactly raking it in but as a cash building exercise with virtually zero overheads it's fairly lucrative with a view, as I said in the op, to opening a "yard" after say 2 years.

Admittedly this was from 07-11 so some of that was during the end of the boom and cars were much easier sold.

I appreciate the market has changed a lot since then and the two standard reactions from anyone in the motor industry never deviate from "stay away from the motor industry" and "there's no money in the motor industry", but there are garages out there alive and well and trading, so as a concept, trading in cars isn't as daft as people make it sound. however, I do note that service centers kept a lot of garages alive through the recession.

My own town for example has a population of 15k and no motor dealers at all, franchised or independent and I just feel there is an opportunity to be seized.

pedronomix

The trade insurance and motor dealer number are easy enough. You will also probably need to register for VAT if you are doing this properly. This will reduce your profit margins as the VAT has to be extraceted from your sales margin @ 23% ( €500 includes €93.50 VAT!!). You should set up as a limited company, otherwise you will be personally liable for any claims on the cars and possible injury damages. Your trade policy only covers your own driving risks!!
If you are a motor trader, you are covered by Consumer Protection legislation and autmatically consumers have effective warranty rights that bind you!!

Carman16

Hi,

Similar question to the original poster only I've actually set up as a trader, this questions is directed to anyone in the motor trade buying in UK cars or a anyone who has dealt with VAT for a motor trader..

Maybe I should have started a new topic for this question if so feel free to move it..

I have a query regarding VAT on used cars imported from the UK and would be very grateful if I could get a definite answer on this as nobody else seems to be able to clarify it for me..

I bought a few cars from a UK auction centre earlier in the year, these cars were all "VAT Qualifying Cars" so when I sold them on I calculated my VAT on the "Margin" I now know this was wrong as I should have calculated the VAT as 23% of the full selling price of the car according to revenue.
However I hadn't claimed back the VAT refund it seems I was entitled to from the auction centre, turns out I had 90 days from the date of the sale to apply for this VAT refund..

My question is, the fact I didn't claim the VAT refund from the UK should these cars not now have fallen into the "Margin Scheme" as I didn't claim back any VAT on them, so should I still have to pay the full 23% of the selling price of the car??

I can't seem to get an answer for this I've asked other dealers and an accountant who says he can't answer it and one dealer says YES it would now be a margin car and another says it wouldn't..

I intend to bring more UK stock in now with the strong exchange rate but I'm nervous of doing so until I know where I stand with VAT.
Ideally I would rather NOT claim back the VAT refund on these UK "VAT Qualifying" cars and just pay VAT on the Margin of the sale here in Ireland, I wonder is that possible to do so by NOT collecting the VAT refund from the UK auction centre OR will I still be liable 23% VAT on the full selling price of the car here if I don't collect the VAT refund and leave that VAT in the UK?

I would really appreciate an answer to that questions if at all possible..

Jonny303

Talk to Revenue.

Trust me, I know what I am talking about here.

Don't get advise from boards, don't even get loose advise from your accountant. Get written advise from revenue. This whole area is a bomb that is just starting to go off

Immy

Jonny303 wrote: »

Talk to Revenue.

Trust me, I know what I am talking about here.

Don't get advise from boards, don't even get loose advise from your accountant. Get written advise from revenue. This whole area is a bomb that is just starting to go off

I agree don't get advice on boards, but if your accountant can't advise you on this then get a new accountant that knows either VAT or your industry better. This is the reason you have an accountant to help with stuff like this.

Lockedout2

Carman16 wrote: »

Hi,

I bought a few cars from a UK auction centre earlier in the year, these cars were all "VAT Qualifying Cars" so when I sold them on I calculated my VAT on the "Margin" I now know this was wrong as I should have calculated the VAT as 23% of the full selling price of the car according to Revenue.

How do you know this. Did you have a Revenue audit or its your new interpretation?

Are these commercial vehicles or private cars are they more that 6 months old and 6,000 kms on the clock.

Pawwed Rig

Revenue are not is the practise of giving start up advice. That is what accountants and tax advisors are for. It is not that complicated if you know what you are at.

DubTony

Carman16 wrote: »

Hi,


I bought a few cars from a UK auction centre earlier in the year, these cars were all "VAT Qualifying Cars" so when I sold them on I calculated my VAT on the "Margin" I now know this was wrong as I should have calculated the VAT as 23% of the full selling price of the car according to revenue.

This just seems wrong to me. I think you've confused it with Vehicle Registration Tax.

porsche boy

Toyotafanboi wrote:

Is this fantasy or does it sound remotely viable? I feel it's an opportune time as I am still young, relatively commitment free and have a few euro to spare. The motor industry is something i've always had a keen interest in and i've been working with cars since i've been able to walk.

Everything you discuss is viable. Being young, mortgage free & no kids would be the best time to try.
The motor industry is predominantly full of pr1cks who want to see you fail so don't be suprised at the downbeating you get. Flipping a few cars is fairly common in the industry and the thought of you getting something tasty to make a few quid on will drive other people nuts, no offence. Merlin is mostly retail now so little to be made there, have your wits about you if your buying from the damaged/repairable section of adverts or DD. best place to source would be trade ins from a dealer but the traders have them sewn up.
If you believe you can do it then go for it.

Carman16

Lockedout2 wrote: »

Carman16 wrote: »

Hi,

I bought a few cars from a UK auction centre earlier in the year, these cars were all "VAT Qualifying Cars" so when I sold them on I calculated my VAT on the "Margin" I now know this was wrong as I should have calculated the VAT as 23% of the full selling price of the car according to Revenue.

How do you know this. Did you have a Revenue audit or its your new interpretation?

Are these commercial vehicles or private cars are they more that 6 months old and 6,000 kms on the clock.

I've only recently done returns for March/April & May/June and these seems to be the case now..

They are all ex fleet UK motors with between 80K & 110k 2011 - 2013 reg cars.. So not new..

Carman16

DubTony wrote: »

Carman16 wrote: »

Hi,


I bought a few cars from a UK auction centre earlier in the year, these cars were all "VAT Qualifying Cars" so when I sold them on I calculated my VAT on the "Margin" I now know this was wrong as I should have calculated the VAT as 23% of the full selling price of the car according to revenue.

This just seems wrong to me. I think you've confused it with Vehicle Registration Tax.

It's nothing to do with the VRT. I'm talking about calculating the vat due to revenue on the sale of these cars..
Turns out on a vat qualifying car you pay revenue 23% of the full selling price of the car minus any VRT payed.
I had been calculating my vat return on the profit I made off the car ie the "Margin" which according to my accountant I was wrong..
However I'm being to by others now in the trade that's this is wrong.. Can't seem to get a straight answer off anyone..

Carman16

Pawwed Rig wrote: »

Revenue are not is the practise of giving start up advice. That is what accountants and tax advisors are for. It is not that complicated if you know what you are at.

I have been set up over 12months now surley they have to be in a position to put people on the right track? Even my accountant can't be 100% sure..

Lockedout2

Carman16 wrote: »

I have been set up over 12months now surley they have to be in a position to put people on the right track? Even my accountant can't be 100% sure..

Perhaps you need a new accountant!

Is your accountant telling you that you have to account for 23% VAT on secondhand cars which are brought in from the UK?

mickdw

From a common sense angle. If you are buying a car that is vat qualifying, that means that you are being charged vat at the uk on the entire sale price.
To sell it any other way than charging vat on the entire irish price would be creating a vat loop hole and money making machine.

Pawwed Rig

Lockedout2 wrote: »

Perhaps you need a new accountant!

Is your accountant telling you that you have to account for 23% VAT on secondhand cars which are brought in from the UK?

Agreed. Your accountant isn't up to this (neither are most accountants to be fair). Get someone with a tax qualification.

minibear

Toyotafanboi wrote: »

I'm just wondering is anybody on here a motor dealer, and if so, how did it all start for them?

Me? I've just finished a degree in a field that I liked at the start but that i've since realised is not for me. Prior to that I had been working in various areas of the motor industry for a good few years (since I was a teenager), parts, service, valeting, you name it. A bit of a jack of all trades but I have a decent knowledge of cars and the industry but with no formal qualification.

Now, I had some money set aside, not a lotto win or anything bit I think this is the oppertune time to start. I'm still fairly young, have a bit of space to store 2-3 cars, I have a flexable job to aid cashflow and I have no real commitments aside from that.

Now I'm not naieve enough to think that 10 or 12k or whatever is going to rent me a premises and get me decent stock etc. My thinking is more along the lines of Geting a trade insurance policy, applying for a motor dealer number to legitimately buy and sell, register it as a business etc, then start trading small scale from home initially.

The idea would be to try pick up low-ish budget cars, say €1-3k (I understand the pitfalls) from private sellers and at auction (I understand the difficulties, pitfalls etc) with a view to preparing them for resale myself with the aim of making a couple of hundred on each car as a cash building exercise (maybe offer a short warranty on each car to give me an edge over private sellers in the same price bracket).

The idea is that after a timeframe of 2-3 years of applying myself to this full time (ideally maybe a little less) I will have built enough cash to rent a small yard with equipment and office on site to display similar stock and hopefully continue to expand from there.

I appreciate that good stock is hard to find and that cars in the price range i'm talking about can be a lottery.

Is this fantasy or does it sound remotely viable? I feel it's an opportune time as I am still young, relatively commitment free and have a few euro to spare. The motor industry is something i've always had a keen interest in and i've been working with cars since i've been able to walk.

How did other independent dealers get started? I'd love to hear. The only other alterntive as far as I can understand is to work in another industry and save for a very long time to obtain a decent amount of collatoral together to help me take out an even bigger loan to start on a much higher scale at greater stakes, when I am much older in an industry I would be more distanced from, which seems much more crazy to me? Or just let the idea go.

I'm not a motor dealer but I think you have a good chance of making a success of this enterprise. You're young enough to have the enthusiasm, have a bit of cash to get you started and the experience to know what to buy and how to sort small issues before sale.

In my own (extended family) we've bought cars between €1000 and €8000. The cheaper cars are always very carefully sourced, checked and driven before purchase. These are the cars for the 18/19 year old students who are so screwed on insurance they just haven't the money to spend more. Yet they need to be safe and reliable for these young drivers. I suppose the same can be said for the much older drivers (granny & granddad) who have no interest in spec really, just something small and reliable and easy to tax & insure. And then there's the stop-gap cars we buy. Something to keep you motoring until you can afford something better in twelve months time.

Because we've been so careful in selecting cars before we buy we have often sold the cars after a year or two for more than we bought them for. I think there's a really strong market there for cars between 1000 and 3000. Some people have a car and something goes wrong and if they haven't the know how or the contacts to source good value parts (scrapyard/trade discount?) they just sell it on "as is " often with no nct.

I'm guessing from pervious posts that you're capable of doing services and other work on the cars that would all help to make them more saleable?
Would you need to invest in equipment for the above?

you mentioned that you masqueraded as a private seller in the past. I don't think that's a good idea if you want to make a name for yourself as someone trustworthy and isn't that really what will grow your business? I always google a contact number of any car ads I might be interested in. I can't be the only person to do that and unless you go down the route of having multiple throwaway phones.. well you understand what I'm saying.
You want someone to buy a car from you and in a few months time when their daughter/wife/granny/friend is looking for a good cheap car they immediately give them toyotafanboi's phone number because you looked after them when they needed a cheap runaround.

You might even have contacts in small independent mechanics who would let you know when a decent car might be coming up for sale.

Apart from all that what stands out for me as a buyer is a very clean car inside and out. I know it doesn't always reflect the parts you can't see but it helps that the car looks like someone cared enough to have it looking good for sale purposes. And of course has to be nct'd.

It wouldn't put me off if you had more than one car advertised but were selling from your own house. As long as you are up front about it.

I'd be a little bit wary about warranty I think. Some people expect every single thing to be covered.


I'm actually coming from the opposite end of the scale from you. Finished school more than twenty years ago, qualified in automobile engineering and never used it since. Still passionate about anything with an engine though.

sorry if my post is a bit all over the place. Four year old wants to "help" me write it so I'm rushing before she overpowers me and gets to the keyboard. :eek:

Carman16

Lockedout2 wrote: »

Carman16 wrote: »

I have been set up over 12months now surley they have to be in a position to put people on the right track? Even my accountant can't be 100% sure..

Perhaps you need a new accountant!

Is your accountant telling you that you have to account for 23% VAT on secondhand cars which are brought in from the UK?

I agree.. Just also looking for some advice here from others traders or maybe accounts who have been down this road..

Yes apparently I'm liable for 23% of the FULL selling price of the second hand car minus the VRT that will have been already paid prior to the sale.

So if I purchased the car for 10000 and pay 3000 that's 13000 if I sell for 15000 I pay vat @ 23% 12000
I will be able to claim back @ 20% UK vat paid on the car when purchasing it that's say 2000..

Lockedout2

Carman16 wrote: »

I agree.. Just also looking for some advice here from others traders or maybe accounts who have been down this road..

Yes apparently I'm liable for 23% of the FULL selling price of the second hand car minus the VRT that will have been already paid prior to the sale.

So if I purchased the car for 10000 and pay 3000 that's 13000 if I sell for 15000 I pay vat @ 23% 12000
I will be able to claim back @ 20% UK vat paid on the car when purchasing it that's say 2000..

Do you have a link to this scheme.

mickdw

Carman16 wrote: »

I agree.. Just also looking for some advice here from others traders or maybe accounts who have been down this road..

Yes apparently I'm liable for 23% of the FULL selling price of the second hand car minus the VRT that will have been already paid prior to the sale.

So if I purchased the car for 10000 and pay 3000 that's 13000 if I sell for 15000 I pay vat @ 23% 12000
I will be able to claim back @ 20% UK vat paid on the car when purchasing it that's say 2000..

That would make sense and would work out very similar to buying a non qualifying car in uk and then charging vat on your margin only.
If you buy the qualifying car, you get to claim vat on it then must charge vat on full price.

Lockedout2

mickdw wrote: »

That would make sense and would work out very similar to buying a non qualifying car in uk and then charging vat on your margin only.
If you buy the qualifying car, you get to claim vat on it then must charge vat on full price.

Because the purchaser in Ireland can't recover VAT it won't work under the regular VAT system.

The U.K. seller charges VAT so let's say €8,000 plus VAT you get the VAT back pay the VRT and have to charge VAT so let's say that's €10,000 plus VAT or €12,300.

Under the margin scheme the €8,000 includes margin VAT and your sales value of €10,000 includes margin VAT. Not sure you can complete if you have to charge €12,300 for the same car.

mickdw

If you pay 2k vat in uk and get it back, it seems perfectly reasonable to have to charge 2300 vat here on the sale. Anything less will be a uk vat back money printing business.

Pawwed Rig

Would there not be a reverse charge mechanism in place or are motor vehicles excluded from the normal VAT laws?

Jonny303

As far as I am aware, the only two places that you can buy cars that qualify to sell on the margin scheme are:

1. Motability cars

2. Directly through finance houses, not sure exactly how this works, or if they are even available.

The rest, by right should have the VAT deducted by the seller and repaid to HMRC. You then have bought the car ex VAT, you then pay the VAT on the full sale price.

Note: Be careful on the finance house. There is quite a few companies out there with names like "Jonny303 Finance". These are not finance houses but are businesses that simply buy and sell. If not careful you may think you are buying off a finance house and be in a different situation

dbran

Hi

This is a revenue project that is being going on for some time now in connection with the motor industry. They are examining the V5 forms submitted to UK revenue by UK dealers and vies returns for high end motor vehicles imported to Ireland

Generally, when a used vehicle is sold between two authorised dealers the margin scheme applies on the sale even if the authorised deler is establised in another member state.

Where a vehicle has been pre-owned, and this includes a dealer demonstrator, but is sold where either, it has been driven for 6,000 kilometres or less or, was registered less than 6 months of the date of its sale then the vehicle is considered to be a new means of transport.

This is where the problem arises because in that case it does not qualify for the margin scheme but as an inter Eu acquisition and you must charge VAT on the full selling price to the end customer and not just on the margin.

So the question is what steps did you take to ensure that the cars qualified for the margin scheme. In particular, did it say on the uk dealers invoice that the vehicle qualified for the margin scheme? There is also an argument to say that if the error arose with the dealer in the UK then it is a HMRC issue and not an Irish Revenue issue.

It is beyond the scope of the forum to give specific VAT advice because of the money involved here.

You need proper professional advise from an accountant or tax advisor. If you do not trust your current accountant then you need to get another one.

I am therefore closing this thread also because it is over a year old.

Best of luck

dbran