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HOW TO BE A

Published by Car Dealer Magazine

CAR DEALER

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How To Be A Car Dealer.

Part 2: 10 common mistakes

veryone makes mistakes, but who says you have to learn the hard way? With the right advice, you can save yourself some hassle and get your new dealership up to speed more quickly. That’s why, for Part 2, we’ve asked our experts what they’d do differently if they did it all over again. Of course, there’s no definitive rulebook, and, as any oldtimer will tell you, ‘you never stop learning in this game’. But by following these tips, you’ll at least have a head-start. Think of them as shortcuts for the rookie trader, courtesy of those who made the mistakes so you don’t have to…

Not knowing your product

‘Sometimes it’s better to take the deal while it’s there, rather than trying to squeeze every penny from each sale.’

How to avoid it: Stick to what you know and what you’re known for. In my case it was Land Rovers, but in my first year I was mainly focusing on regular cars. That year was OK, but nothing special. In the second year we refocused to Land Rover and WOW, old customers flooded back in, and we picked up new service customers too. It all just fell into place. We now stock 90 per cent Land Rover and 10 per cent sports cars (who doesn’t want toys?) and it’s the perfect combination for us. Tim Wann, Shrivenham Garage

Getting greedy

How to avoid it: Sometimes it’s better to take the deal while it’s there, rather than trying to squeeze every penny from each sale. Otherwise you might be looking at the car on the forecourt for another three months. Set yourself a turnover policy – a 30-day stocking plan is a good idea. And if a car really isn’t selling, be prepared to make a loss and move on to one that will. Having said all that, you should never feel guilty about making a profit! Tony Gordon, Crosby Park Nissan

Going unprotected…

How to avoid it: Really study the Consumer Rights Act and other legislation – things change all the time so keep up to speed. Understand your legal obligations and when things go wrong – which they will – learn from them and move on. Don’t buy vehicles that you don’t know much about – some cars and particular engines are 06 | HowToBeACarDealer

TONY GORDON, CROSBY PARK NISSAN

unreliable and can bite you. And, of course, make sure you have a set of trade plates and a trade insurance policy. Liam Grant, Yes Motor Finance

Relying on charm

How to avoid it: For new dealers, there’s a great opportunity to lift the motor trade to a new level. So listen to your customers. What do they want? The old-school sales charm is dead and buried – these days people want information, and lots of it. They want recommendations, and reassurance that the person they’re buying from knows what they’re doing. Remember, in the Age of the Internet, customers have never had so much information to hand. Tim Wann, Shrivenham Garage

Choosing the wrong plot

How to avoid it: Think hard about your location. Don’t just take a plot because it’s available. For example, having a site

beside a main road might be more expensive, but it can save you a fortune in advertising costs – especially if it’s right by some traffic lights, so people can look at your stock while they wait! And while it’s hard on a beginner’s budget, try to find a site with some room to grow into – no matter how much space you have, you’ll soon fill it. Graham Dudley, Crosby Park Nissan

Thinking you’re a lone ranger

How to avoid it: It’s easy to see other car dealers as a threat, but actually we can all help each other. So talk to people, especially at auctions where traders come together. Mingle and make contacts. You might end up buying and selling to each other – especially if someone specialises in something you’ve taken in part-exchange. Build up your network of contacts – you’ll need a good mechanic, a dent man, a paint man and a valet guy. At least until you

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‘Treat customers fairly. Reputation is everything. And try to get positive feedback as soon as possible.’ RORY ANDERSON, RSCARSALES.COM

grow enough to have your own workshop… Tony Gordon, Crosby Park Nissan

Being left behind

How to avoid it: The industry is evolving all the time; customers’ views change frequently and the methods of buying have changed a lot – a couple of pictures and an advert in Auto Trader are not enough any more. YouTube videos, 24-hour chat, online finance… these are important considerations, and it will keep evolving as customers continue to embrace new technologies. Tim Wann, Shrivenham Garage

Simple impatience…

How to avoid it: It’s not all about today, so keep a clear vision on where you want to be in a few years from now. Do the right thing by people and your business will grow, even when it feels like everything is going against you. Treat customers fairly. Reputation is everything. And try to get positive feedback as

soon as possible – reviews have made a massive difference to my business. I only wish I had pushed for them sooner. Rory Anderson, rscarsales.com

Ignoring little details

How to avoid it: It sounds obvious, but always read the small print. Also, be very careful what you say, because people will hold you to it, and don’t be afraid to put things in writing. Also make sure to list your ads carefully, and consider signing up to Lawgistics – their monthly newsletter is really helpful for keeping up with changes in the law and learning about relevant cases. Graham Dudley, Crosby Park Nissan

Skimping on car prep

How to avoid it: Remember that you’re dealing with people’s lives. If the brakes fail you’re into a whole world of problems. So get everything independently inspected and MOT’d by a trusted supplier, and keep a record of any work carried out. If anything, it’s better to over-prep your cars. Matthew Clarke, SuperMini UK HowToBeACarDealer | 07

How To Be A Car Dealer.

Part 5: Sourcing stock

t’s a big commitment just buying a car for yourself, let alone forking out for enough motors to fill a forecourt. Even a relatively modest dealership can have an inventory worth hundreds of thousands of pounds, so finding funds is a top priority for a newcomer. Of course, it depends on what sort of cars you’re selling, but as a rookie you’ll probably start at the more affordable end of the market. For example, in March 2017 the average price of a car sold through Manheim’s auctions was £5,913. Given that, and assuming you’re aiming to stock around 10 to 15 cars to begin with, you’re looking at an initial investment of anywhere between £50,000 and £100,000.

‘With online buying, you’re offered vehicle inspections with lots of real-time information together with a grading of each vehicle.’ DAVID BILSBOROUGH OF CHESHIRE CARS

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How do I find that sort of cash?

Some new dealers have been saving for years; others have had a good feel down the back of the sofa; a few have generous aunts or angel investors. Either way, it’s likely you’ll supplement any cash capital with some sort of loan. For many businesses, this would simply mean a trip to the bank, and although some of the high street names do lend to car dealers, a traditional lump-sum loan can be expensive and inflexible – especially when you’re selling cars quickly, and therefore able to repay the debt in a matter of weeks or months. ‘Another option is an overdraft,’ says David Bilsborough of Cheshire Cars. ‘They’re usually repayable whenever you have the funds, and interest is calculated daily and only when you’re using it. Overdrafts are also good for keeping the buying going while you’re waiting for customers to pay for just-sold stock.’ But while a healthy overdraft might go some way, it’s unlikely to pay for an entire forecourt. For that, there is another option, as Phil Weaver of Knickerbrook Cars in Chorley explains. ‘We started from a small amount of savings, and as we bought and sold, our investment slowly started to grow,’ he says. ‘Finally, after two years, we applied for a stocking loan of £40,000 from MotoNovo, which really helped to boost our stock.’

What’s a stocking loan?

A stocking loan, or stocking plan, is a bit like a credit card for car dealers. We asked Pam Halliday, sales and marketing director of NextGear

Capital – a major stocking plan provider – to explain more. ‘Our stocking plans provide used vehicle dealers with an overall credit limit, which can be used to fund vehicles for up to 150 days – or less if the car is sold sooner. This enables dealers to stock their forecourt without using their own funds or using an overdraft facility.’ And, unlike a loan, you only use what you need, on a car-by-car basis. ‘With loans, banks charge for the total facility, whereas with a stocking plan you’re charged separately for each of the vehicles you load onto your plan,’ says Halliday. ‘When you pay off a vehicle, you can use your available balance to top up your forecourt again. We typically see plan utilisation run at around 60 per cent [of the credit limit]. However, this varies by dealer and by the time of year. Some run at up to 90 per cent.’ But remember, this isn’t free money. There are fees and interest payments – these vary depending on your provider, but, put simply, the longer you keep a car in stock, the more it costs you. Let’s say the interest on your stocking loan is seven per cent. On a car that cost you £10,000,

that’s a charge of £700 per year, or £1.91 per day. The average used car stays in stock for 55 days, meaning you’ll pay around £105 plus fees, which comes out of your gross profit on that car (for an approximate cost breakdown of each sale, see Part 1 of this publication). The key, then, is quick turnover. If sales are frequent, a stocking plan can work nicely, but consider the quiet months, or the odd car which stubbornly refuses to shift. At least with a ‘regular’ loan – whether from a bank or from an investor – you have a fixed cost no matter how long it takes to move your stock into new hands, but with a stocking loan, the longer you sit on a car the more expensive it gets. One thing to watch out for: some stocking loan providers require you to buy vehicles from certain sources, such as approved auction houses. BCA Partner Finance, for example, only funds cars bought at BCA auctions. ‘All stocking loans are different,’ says Pam Halliday. ‘Some act as a captive finance option for a single source of stock. A NextGear plan can be used to fund trade and part-exchange vehicles at 100 per cent of the CAP average valuation, but also at over 60 auction and wholesale sites where we have digital integration, removing the need for a cash transfer at the point of sale.’ In other words, buy from one of their approved sites, and the car is automatically added to your account.

Where should I source stock? The major auction houses are the most obvious places to start, whether online or in person. ‘BCA and Manheim have both physical and digital

platforms,’ says David Bilsborough. ‘With online buying, you’re offered vehicle inspections with lots of real-time information together with a grading of each vehicle. So you don’t actually have to attend the physical auction.’ (A dedicated guide to mastering auctions appears later in this publication, so keep reading!) Trade-to-trade listings are another good source of stock. Sites such as dealerpx.com and Sytner Auction feature cars taken in part-ex by franchise dealers, which are then offered exclusively to other dealers. Both sites are run as auctions, though the former has an eBay-style ‘buy it now’ price. And don’t forget the good old classifieds. Back to Phil Weaver: ‘Early on, we had a great 12 months buying from private sellers on AutoTrader. Some are better than others, but there is very good profit to be made sometimes.’ David Bilsborough agrees. ‘Keep an eye out for that private seller listing at, or even below, trade price,’ he says. ‘There are no buyers’ fees, plus you get to ask a lot of questions and even drive the car before parting with your money.’ Another option is something called ‘sale or return’, an arrangement in which you sell someone’s car on their behalf, in return for a fee. That way you don’t have to invest in stock at all – effectively you’re acting like an estate agent does in selling a house. This can be an interesting option for new dealers, but it’s vital that you draw up a proper contract with the owner – it could be another trader who doesn’t have room to store the car, or a private seller who doesn’t want the hassle of actually selling it. There’s potential for a decent return, though profit tends to be smaller (you’ll still be responsible for your overheads

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and advertising costs, and, depending on your arrangement, the warranty too).

OK. I’ve bought some cars. How do I get them to the forecourt? As we mentioned in Part 3, it’s vital to get a set of trade plates and a good insurance policy, so you can drive away on the same day. But consider geography when buying: getting 10 great deals is pointless if you have to spend a fortune collecting them all. Many sellers and auctions will deliver the cars for a fee, or it may be more cost-effective to have them delivered via a transporter or transport drivers. ‘Trade platers will usually drive the car for around 50p to £1 per mile plus fuel,’ says Bilsborough. ‘Try to build up a relationship with one or two companies – if they know you, they might be more inclined to move things faster to you or directly to the buyer. Any time saving is money in the bank to you.’

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How To Be A Car Dealer.

Part 15: Staffing up

o matter how much hard graft you do yourself, it’s likely that – after a while at least – you’ll need some help, whether it’s someone to answer calls, valet cars, transport them around, prep them, or maybe a bit of everything. But when it comes to hiring and firing, car dealerships are no different to other businesses. Employment law can be an obstacle course with all sorts of booby traps, but don’t let that put you off – as ever, our experts are here to help…

CONTRACTS AND SMALL PRINT Before you go writing the job ad, think about who you really need and what exactly you need them to do. If it’s just someone to wash a few cars or move them from one place or another, you could consider using a self-employed contractor, who would invoice you for the work like any other supplier. But watch out, because the line between ‘worker’ and ‘employee’ can be easily crossed, and – if not properly managed – could land you in trouble. ‘If they come in every day – effectively working full time for you – and you tell them what to do, then there’s a likelihood they will be considered an employee and you then have obligations, such as making National Insurance contributions,’ says Graham Jones of motor trade legal experts Lawdata. In other words, there’s no fudging it. If you want to employ someone and become a big boss, there are certain things you must do in order to keep everything on the straight and narrow. To find out more, we spoke to Nona Bowkis of Lawgistics, providers of legal help to the motor trade. ‘Independent car dealers should have a basic understanding of employment law if they are going to employ someone,’ she says. ‘For example, there are certain terms and

‘Independent car dealers should have a basic understanding of employment law if they are going to employ someone.’ Nona Bowkis of Lawgistics 32 | HowToBeACarDealer

conditions employers are legally required to give an employee within the first eight weeks of their employment.’ Top of this list is a proper contract. Don’t worry if you haven’t written one before, because help is at hand. Lawgistics, as well as Lawdata and other providers, can supply you with templates with all the right wording. ‘At Lawgistics, we are about to launch an online compliance portal which will include an HR Manager function – dealers will just need to input names, addresses and other simple details and it will automatically generate a contract, making it easy to meet the eight-week legal requirement.’

HR ADMIN

Let’s be honest, you’re here to sell cars, not deal with doctors’ notes and lame excuses. But nobody’s perfect, and that goes for bosses as well as employees. Which is why it’s a good idea to put some procedures in place to protect yourself and your workforce in case things get sticky. A good place to start is acas.org.uk, which has loads of tips on how to log hours, sick days and holidays. Keeping good records of these is really important, especially if there’s ever a dispute.

It also has tools for dealing with disciplinary issues in order to avoid expensive employment tribunals. But what if things do take a turn for the worse? Back to Bowkis. ‘In many cases, it’s relatively risk-free to dismiss an employee if they have been employed for less than two years,’ she says. ‘This is because for most cases of unfair dismissal, ex-employees can only access an employment tribunal after two years of service. However, there are times when they can make a claim for unfair dismissal, so always seek specialist advice before considering dismissal. ‘For employees with more than two years of service, the dismissal process is very different, and so you must follow the Acas Code of Practice and not take any shortcuts. The same applies to all parts of the disciplinary process, including when issuing warnings.’ You’ll also have to think about maternity leave, paternity leave, compassionate leave and, of course, health issues – both physical and mental. Take special care around these and seek as much advice as possible. Portals such as the Lawgistics HR Manager will help to lighten the load – it sets out the required steps and provides template letters for all sorts of issues. It’s included in all but the most basic membership packages.

PAY

Almost all workers in the UK are entitled to be paid at least the National Minimum Wage. The current rates are: Age Minimum hourly rate 25 and over £7.83 21 to 24 £7.38 18-20 £5.90 Under 18 £4.20 Apprentice (first year) £3.70 You might also read about the ‘National Living Wage’, which is effectively the highest rate of the National Minimum Wage. Then there’s the Living Wage (without the ‘national’), which is set by a separate foundation and is voluntary. The rates for that are £8.75/hour nationally or £10.20/hour in London. Finally, you may decide to offer your staff a basic rate of pay that is topped up by bonuses for achieving certain targets, especially in sales. If you opt to pay your staff like this, make sure that the arrangement complies with employment legislation, and remember, an employee’s overall pay must still meet the National Minimum Wage.

OTHER IMPORTANT STUFF

If by now you’re wondering whether it’s all worth it, bad news, because there’s more… Taking on staff means you’ll have to set up a payroll (most accountants can run this for you), make National Insurance contributions, and – thanks to a new law – employers must automatically enrol workers into a workplace pension scheme if the employee is aged between 22 and pension age and if they earn more than £10,000 per year. Then there’s employer’s liability insurance, which according to Bowkis is ‘a must for employers from day one of taking someone on, as failure to have adequate insurance in place can

‘Don’t forget good old health and safety, and the importance of doing proper risk assessments.’

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lead to large fines’. It’s not expensive, and many providers wrap this into other insurance plans. Don’t forget about good old health and safety and the importance of doing proper risk assessments, either. ‘It really can’t be ignored,’ says Bowkis. ‘The Lawgistics online portal also has a digital health and safety system, which means checks can be undertaken on an iPad and digitally stored.’

GET HELP

There’s a lot to get your head around, and on top of everything else you have to worry about you simply won’t have time to become an expert on HR and employment law. So seek as much help as you can. Seriously consider signing up to Lawgistics or Lawdata. Also, take a look around the Acas website (it has all sorts of practical advice and workshops) and keep an eye on gov.uk for updates to employment law. It may seem like a huge hassle, but as your dealership grows and you take on more staff it’s essential stuff. ‘If you get it right from the outset it’s a lot easier,’ says Bowkis. ‘Treat it as a serious issue from the beginning and you’re less likely to have problems as you go along.’ HowToBeACarDealer | 33