This is a general guide for England, Scotland, Wales and Northern Ireland written on 22 October 2026. Rules change and local councils differ; check the gov.uk pages linked below and take advice on your own position.
1. Set up the business
Register as a sole trader or form a limited company; many dealers start as sole traders and incorporate once stock and liability grow. Open a business bank account, because stock purchases and customer payments through a personal account make the VAT records and any finance application harder. Decide now whether to register for VAT voluntarily (see step 5); it affects every invoice from day one.
2. Premises and planning permission
Selling cars from home is often restricted by planning and by tenancy or mortgage terms, and councils act on neighbour complaints about cars parked on the road. A small yard or unit with sui generis use for car sales, or a pitch on an existing forecourt, is the usual first step. Check the planning use class with the council before signing a lease, and check whether business rates apply.
3. Motor trade insurance and trade plates
A motor trade policy covers you to drive customers' and stock vehicles and, with the right cover, your premises and stock. It is the one cost new dealers most often underestimate. Trade plates from the DVLA let you drive untaxed stock on the road for trade purposes (collection, test drives, delivery) without taxing each car; apply at gov.uk/trade-licence-plates.
4. Consumer law you must meet on every sale
A trade sale to a consumer is covered by the Consumer Rights Act 2015: the car must be of satisfactory quality, fit for purpose and as described, with a 30-day right to reject for faults present at sale and remedies for six months after. Distance and off-premises sales (a car bought online and delivered without the customer visiting) carry a 14-day cancellation right under the Consumer Contracts Regulations. Advertising must not mislead; since April 2025 the Digital Markets, Competition and Consumers Act also bans fake and incentivised reviews, with fines up to 10% of turnover. Write a clear pre-delivery inspection and keep it with every sale.
5. VAT and the margin scheme
You must register for VAT once taxable turnover passes the threshold (£90,000 in the 2025 to 2026 tax year); most dealers pass it within a few months because turnover is counted on the full selling price of cars. Registered dealers use the VAT margin scheme for cars bought without VAT, paying one sixth of the margin rather than VAT on the whole price, which needs a stock book and invoices in a specific form. Our margin scheme guide has a worked example.
6. Finance: FCA permission or a broker
Arranging finance for customers, even by introducing them to a lender, is a regulated activity. You either apply to the FCA for credit broking permission (limited permission for most dealers), or work through an appointed representative arrangement or a finance platform that holds the permission and takes the application. Do not advertise "finance available" until one of those is in place.
7. Buying your first stock
Most first stock comes from auctions, trade sellers and private purchases. The rule that keeps new dealers solvent is to know the retail value before you bid: a valuation tool that shows live comparables and days to sell (DealerPricing is from £70 a month; see our DealerPricing page) and a history check on every car for finance, theft and write-off markers. Budget for prep: an MOT, a service and a valet on every car is normal.
| Motor trade insurance | £1,500 to £5,000 a year depending on cover, drivers and premises |
|---|---|
| Trade plates | Around £170 a year per set |
| Premises | £300 to £2,000 a month for a small yard or unit outside London |
| Stock | Five cars at £4,000 to £8,000 each is a common first forecourt |
| AutoTrader package | Priced by AutoTrader by stock and area; budget several hundred pounds a month |
| Software, website and feeds | £99 to £299 a month with DealerSoftware, including the website |
8. Website, marketplaces and software
Buyers start on AutoTrader and Google. You need an AutoTrader package (see our AutoTrader Connect guide), a website on your own domain that shows the same stock and takes enquiries, and a Google Business Profile with your address, hours and reviews. A dealer management system does the stock list, the website, the feeds, the leads and the margin-scheme invoices from one place; the DMS page explains what to look for and the cost guide what to budget.
9. The paperwork for each sale
- Invoice (margin scheme or VAT qualifying), with the deposit or reservation fee shown against it.
- V5C: notify the DVLA of the sale online and give the buyer the new keeper slip.
- Pre-delivery inspection and MOT certificate, service history, spare keys and the warranty terms.
- Finance documents where the sale is financed, and the distance-selling cancellation notice where the sale is remote.