HOW TO BE A
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ow do I get involved in the motor trade? It’s a question we’re asked a lot here at Car Dealer Magazine, the UK’s best and brightest monthly publication for the automotive industry. Of course, many of our readers have been buying and selling cars for a long time – maybe they are the second or even third generation of their family to have entered the trade. But we know from our online forum that although there are already thousands of dealerships up and down the country, there are plenty of people keen to join them and make a name for themselves shifting metal. It can be a crazy business sometimes – infuriating even – but there’s never a dull moment, and you can’t beat the feeling of shaking hands on a fantastic deal with a happy customer who’s just secured the car of their dreams. There’s nothing like it! Maybe you’ve already dipped a toe in the water. Perhaps you have sold a few cars on the side, or made a tidy profit when selling your own pride and joy. But there’s a world of difference between a bloke who’s just disposed of his own motor, and a proper trader making a decent living in the car biz. So what does it take? What are the risks? How do you actually do it? These are the big questions, and in this
special online publication brought to you by the Car Dealer team, we’ll be providing the answers. Split into 16 essential sections, we’ll tell you how to find your first forecourt; nail your first sale, and much more besides. Should you offer finance? Should you specialise in a particular make of car? What happens if you expand and want to take on staff? We’ve got the inside information – and at the very reasonable price of £9.99 (no offers, sorry!) this guide could help you make some serious money. After all, that’s what it’s all about! Think of this guide as the Car Dealer Bible. Have faith, read the advice contained within its pages, and with a bit of luck you’ll see the light. And don’t forget to let us know how you get on in the Car Dealer Magazine online forum! On behalf of the Car Dealer magazine team, I’d like to wish you the very best of luck!
Rebecca Chaplin Car Dealer editor
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HowToBeACarDealer | 03
How To Be A Car Dealer.
Part 1: Homework
ight, let’s make a start! As we have mentioned, we have 16 must-read sections for you to check out in this essential guide to getting up and running as a car dealer. Before you actually get involved in the trade, there are a few basic questions you’ll want to consider – and we can help you formulate some answers.
Should I sell from home or find a forecourt? This is probably the biggest decision you’ll make when starting out, and it’s the one people ask most often. Put simply: yes, you can sell cars from home, but for it to be completely above-board there are certain things you should do. Firstly, you’ll need planning permission to use a domestic property for commercial purposes, and local councils aren’t known for their generosity towards car traders. You’ll also have to pay business rates on the portion of the property you use, and you’ll need space to park your stock. But the legal practicalities aren’t the only consideration… ‘Selling cars on my driveway got out of hand,’ says Mathew Clarke of SuperMini UK. Just 18 months ago he was trading from home, and now runs a successful second-hand showroom in Nottingham. ‘I had people coming round my house at 10 o’clock at night,’ he says, ‘looking at cars with torches and sitting in my dining room doing deals. ‘One month I sold 11 cars from home and that was the final straw – at the very minimum I needed a proper place to store the cars.’ Of course, finding premises and taking on overheads can be financially daunting when you’re just starting out. But, says Clarke, it’s a risk worth taking if you’re serious about selling. ‘I had people turn up at my house, expecting a forecourt, then looking a bit worried and walking away,’ he says. ‘Working from a unit looks far more professional and gives people the reassurance that you want to do things right.’ You’ll also be taken more seriously by other businesses and providers. For example, if you plan to offer finance, most providers won’t go near home traders. 04 | HowToBeACarDealer
How big should I be? Start small, but not too small. Selling a few cars on the side could help you raise the capital you need to go further, but as we’ve just discussed, it can be tricky if you don’t have the proper facilities. It’s a chicken-and-egg situation and it’s different for everyone – some will work their backsides off in two jobs to raise funds, some will sell an internal organ. Like any business, look at it rationally, don’t over-commit and remember that every kidney has its price. The main start-up cost – and the biggest barrier for many people – is stock. As a brandnew forecourt trader, it’s likely you’ll stock somewhere around 10 to 15 cars at a time. Any less and you might struggle to meet your fixed costs, which we’ll investigate shortly. With that level of stock, and given an average cost of £5,000 per car, you’re looking at an initial investment of £50,000 to £75,000. If you don’t have that sort of cash in your trousers, you could apply for a special ‘stocking loan’, but we’ll discuss that in later sections.
What should I sell? It helps if you know your way around a certain model, brand or type of car, but be careful – it’s vital to look at what will actually sell, whether it’s a specific model, category or price-point. ‘Look and study what others are selling,’ says Umesh Samani of Specialist Cars in Stoke-on-Trent.
‘You may decide that locally, most dealers just sell average, run-of-the-mill hatchbacks so there could be a gap for people carriers or sports cars.’ So sussing out the local competition is important – some people will only travel so far for a car – but it’s only part of the story. With sites like AutoTrader and eBay, you’ll be listing your cars for sale nationally, competing with dealers all over the country, so it’s important to get the bigger picture. ‘You could look for a niche market and capitalise on it,’ says Samani. ‘You could specialise in one model, or in one genre such as estate cars, then build a national reputation around your expertise. But you have to consider whether you can actually buy them in sufficient numbers.’ Having a forte has other advantages. Back to Mathew Clarke: ‘You get to know what specs sell, and if there are any common problems, so you know what to avoid when buying stock. ‘Not only does that reduce the chance of comebacks, but people trust that you know what you’re talking about.’
Do I have to register with anyone? Yes and no. No official licence is required and there’s no industry regulator, but in order to trade properly, there are five things you’ll have to do. 1. Apply for planning permission from the local authority, even if operating from a commercial property.
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2. Register as a public limited company with Companies House online, and find yourself a good accountant. 3. Get VAT registered with HMRC if you expect to turnover £85,000 or more annually, which you probably will. 4. Your sales are subject to the new Consumer Rights Act. Search for it online and brush up on the used car section. 5. If offering finance, you’ll need to register with the Financial Conduct Authority. You should also think about joining the Independent Garage Association, the trade body for any garage business that retails to customers but isn’t a franchise. The majority of its members are servicing and repair places rather than car dealers, but don’t let that put you off. ‘There are deals on insurance and credit card payment providers,’ says Terry Gibson, head of IGA member services, ‘but the big things we offer are help with running a business and legal support.’ Membership is around £600 a year, which could pay for itself quite quickly if you make the most of the help available.
Enough of all that. Let’s talk numbers… There’s no simple answer to this, and what you make depends on all sorts of things. We asked several dealers about their typical costs, and how
they factor them into each sale. Using their sums and averaging the results, here’s how your typical monthly costs might break down – assuming you’re a sole trader with a small-ish forecourt selling 10 cars a month.
remember – you’ll have to re-invest a lot of this in new stock, and so far you’ve only paid yourself a basic salary, so you’ll probably take dividends on top. You may also have loan repayments, which add to the fixed monthly costs you face.
Fixed monthly costs (approximate) Rent & business rates Electricity, gas, water Phone & internet Insurance Trade plates, fuel, logistics Basic wage for one person Accounting, books, admin Total
Surely I can make more than that…
£1,000 £150 £50 £350 £350 £800 £100 £2,800
That’s £280 for each of the 10 cars you sell. But the costs don’t stop there. Other big bills include advertising, servicing and inspections, MOTs, valeting, warranties and the real stinger, VAT. Using the following example, let’s see how they break down per car. Costs per sale (approximate) Price paid Sold for Gross profit
Absolutely. This is only a guide. Rental costs vary. Bills vary. And every car is different: some will need less prep than others; a few will go wrong but most of them won’t. If you’ve bought wisely there’s often a much greater margin to be had, especially if you’re a canny salesman, in which case it’s highly likely you’ll sell far more than 10 cars a month. The more cars you sell, the more you spread the costs, and the more money you’ll make. What’s clear is that there’s no one way of doing things. There are, however, certain golden rules that will make life easier for you, as we’ll find out later in this special publication …
£3,000 £5,000 £2,000
VAT @ 20% on gross profit HPI check MOT Service, inspection, repairs Full valet Advertising (4 weeks) Warranty Rent, bills, insurance etc. (see table on the left)
£400 £30 £50 £400 £80 £160 £200
Net profit per car
Based on shifting those 10 cars a month, that’s a net profit of £4,000, or £48,000 per year. But HowToBeACarDealer | 05
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
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
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
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 3: Getting going
f you’re still reading, you must really want to be a car dealer, and who can blame you? Millions of used cars are sold in Britain every year, and more and more people want a piece of the action. Thankfully, as you’ll have realised by now, we’re here to give you a head start, with our step-by-step guide to starting up. So far we’ve done some homework, looked at the basic economics and listened to some wise old pros talking about common mistakes and how to avoid them. Now it’s time to make some moves. Are you ready to get your car dealership up and running? Step this way…
How do I find a forecourt? A lot depends on whereabouts you are. If you’re in London or the south-east, land is pricier than it is elsewhere, but the theory applies nationally. A visible site beside a busy road will cost more to rent, but could save you thousands in advertising as you can rely more on passing traffic. A less prestigious plot will be cheaper to rent, but you’ll spend more on ads to let people know where you are. There are generally three types of premises: an open pitch, a showroom, or a warehouse unit. ‘For start-ups,’ says Ian Watson of Jack Ford Motors in Northumberland, ‘aim for an open pitch with a small office and room for 20-25 cars, even if you don’t stock that many to begin with. But be warned – storing cars outside means insurance is higher, and they’ll need regular cleaning. I do all of mine by 10am each day! ‘Showrooms tend to be smaller, more expensive and are often on high streets where it’s hard to get planning permission for a car dealership (see next section). Warehouse units are easier to come by, and keeping cars indoors helps to reduce insurance premiums, but you’ll probably spend more on advertising.’ As for actually finding a location, a basic online search is a good starting point. Most of the big property websites have a commercial lets section, but even searching sites like Gumtree for ‘car sales pitches’ can turn up good results. 08 | HowToBeACarDealer
‘You could also just drive around looking for sites,’ says Watson, ‘though it’s a good idea to notify warranty company reps who can often give you a lead, or ask older traders who may recall sites which were car sales pitches but now have different uses.’
Do I need planning permission? Yes, any property used for car sales must have the correct planning permission in place. This applies to home traders too. If you’re moving into an existing car sales plot, there’s a chance it will have the correct planning permission already, but don’t assume it has. If your premises were previously used for something else, even if it was related to the motor trade, it’s highly likely that you’ll need fresh planning permission. Commercial properties fall into different categories, and they can be confusing. For example, shops and retail outlets are in the A1 group, but that doesn’t include car showrooms. Garages primarily used for car repairs are classed as B1, but again, that doesn’t include premises used purely for car sales. Instead, car dealerships fall into a category called ‘sui generis’, meaning ‘unique’ or ‘in a class of its own’. The website www.planningportal.co.uk has
some definitive advice on the issue: ‘Before you negotiate a lease or buy a property for your business, check whether you need to obtain planning permission for your intended use, and, if so, your chances of getting it.’ And remember, not all local authorities take the same view of car dealerships, so talk to your council’s planning office before you sign any sort of lease.
Let’s talk about rent and rates… Again, rental costs vary hugely depending on the size and location of the premises. An open pitch with room for 15-20 cars in the midlands could cost around £1,000 per month, whereas the same set-up in London could easily be double that, probably more. ‘But don’t just consider the rent,’ says Watson. ‘Sometimes business rates can be just as much.’ Business rates are based on your property’s ‘rateable value’ – in other words, what the government says it’s worth in annual rent (find out the value of your property at tax.service.gov.uk). It’s a bit like paying council tax on your house and, generally speaking, the bigger the property,
the more you’ll pay. Let’s look at the following example: • A forecourt with a small indoor showroom near Ringwood in Hampshire is on the market for £1,750 per month. • Its rateable value, which you can find online, is £20,000. • You then multiply this rateable value by 46.6p (or 47.9p if the rateable value is above £51,000). • That gives us business rates, for the Ringwood garage, of £9,320 per year. That’s almost half as much as the rent itself.
Should I set up a limited company? It’s not essential, and you could start as a sole trader. But as your business grows it makes sense to trade as a limited company. Not only will it make life easier when it comes to accounting, but it gives you more access to finance and warranty suppliers, and card payment providers. Setting one up is simple. All you need is a company name and address, at least one director,
at least one shareholder (this can be a director or someone else), and an ‘SIC’ code that describes the nature of your business – for used car sales it’s 45112. Once you have all that, you can register with Companies House online. It costs £12 and it’s usually sorted within 24 hours.
What about insurance? Many new car dealers underestimate the cost of insurance, but it really is essential. Motor trade cover comes in many forms, and at the very least you’ll need something called a road risk policy, which allows a legitimate trader to drive any car in their possession for business purposes, whether they own it or not. On top of that you should insure against theft and damage, both to vehicles and your premises. Many policies will also cover your buildings and contents as well as your stock. You’ll need public liability insurance – what if someone is injured on your forecourt? – and, if you have staff, employer’s liability insurance. ‘Some extras may be included on the policy as standard,’ says Sean Davies of GoCompare.com. ‘Others may require an additional fee, and
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some areas of cover may not be available with your insurer at all. ‘Only pay for the cover elements you need, avoiding unnecessary add-ons.’ Some of the big names are Tradewise, Tradex, Bollington and OneSure, though call as many as you can because, like private car insurance, some will be more amenable to your circumstances. As we found in Part 1, it’s likely that you’ll pay around £300 per month for a comprehensive policy including the extras mentioned here.
Should I get trade plates? ‘These are an essential part of a dealer’s toolkit,’ says Watson. ‘It would be impossible to function without them.’ Having trade plates means you don’t have to register or tax every car in your possession. It’s the major difference between selling a car privately – which adds a new keeper to the V5 document – and selling one as a motor trader, which doesn’t. To apply, you’ll need to prove you’re a trader by supplying the DVLA with one of the following: your registered company number, a public liability insurance certificate, or a motor trade insurance certificate. A licence from January to December costs £165, though the length of your licence, and the subsequent pro-rata payment amount, depends on the month in which you apply. It’s a little bit tricky, but you’ll find everything you need at gov.uk/trade-licence-plates. HowToBeACarDealer | 09
How To Be A Car Dealer.
Part 4: Top 10 industry insights
e all have an imaginary lightbulb above our heads, but wouldn’t it be nice if it flashed a little more often? Unfortunately, there’s no magic switch, but at least we can take inspiration from others. That’s why this month we’ve asked some successful traders about the moments of clarity – and the big breakthroughs – that changed their businesses for good. Because despite best-laid plans, things don’t always go the way you think they might. With any new business, it takes time to see the light, and sometimes it happens when you least expect it. Let’s not forget, some of history’s finest thinkers had their eureka moments while sat in the bath or under a tree. Maybe you’ll have yours while reading this very publication…
Jordan Glynne-Jones blakedowncarcompany.co.uk
Eureka moment: Deciding to specialise
When we first started trading, we sold mundane, everyday cars, but almost immediately we realised that – with the huge volume of dealers entering the industry at the moment – it was difficult to sell ‘normal’ cars. As a result, we were slow to grow. So we took inspiration from our love of sports and performance cars, starting with hot hatches – things like the Focus ST, Astra VXR and Civic Type R – and quickly discovered a huge, fast-moving market for this type of car. Now our stock is made up almost entirely of hot hatches, super-saloons and big-engined coupes, and we recently moved into the sports prestige market with Audi RS cars, BMW M cars and Mercedes AMG.
Big breakthrough: Moving premises
For the first nine months we traded from home, which obviously had severe limitations and difficulties, so it was a huge step forward when we decided to move our operations into a real base. We initially found a small industrial unit with room for around 12 cars, but shortly before signing the lease we realised that – with the rate at which we were growing – this could have restricted us considerably. At the very last minute, we changed our minds and found a large, detached industrial unit almost twice the size as the one we had been 10 | HowToBeACarDealer
considering, with an adjacent forecourt. We can now stock around 40 vehicles and would have outgrown the smaller premises months ago!
Advice to others: Leave room to grow
A commercial lease is a long-term commitment, so make sure you find one with the physical room to grow, otherwise you’ll be stuck. We would say the most important moment in the progression of our business so far has been the decision to take a chance on larger premises with plenty of room to grow.
Alan Harding jaautos.co.uk, Sutton
Eureka moment: Earning trust
I grew up around the motor trade, and my current place has been going for 13 years now. I quickly realised that customers were really putting their faith in me, and seeing as some car dealers have a shady reputation, I decided to try to change that by making people feel as comfortable as possible. I felt if I could help change people’s opinions of car dealers then I’d be elevated above those who see customers as just a number.
Big breakthrough: Winning awards
One moment that really stands out was becoming a finalist in the 2014 Sutton Business Awards – it was the first time
a car dealer had been featured! I followed this up by being commended in the 2015 awards for customer service (proving car dealers aren’t all shady), and finally won the best SME category in 2016. This has lifted my local profile and helped my business to survive.
Advice to others: Fight like a boxer…
My advice is very simple. Believe in your abilities, work hard and dedicate yourself to doing things properly. If it works for Floyd Mayweather then it can work for us!
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‘My lightbulb moment was realising the power of social media. It’s such a useful tool.’ UMESH SAMANI, SPECIALISTCARS-STOKE.CO.UK
be over-estimated. Just think – when looking at online reviews of hotels or restaurants, we like to know we’re going to be looked after and have a great experience, and it’s the same for people buying cars. So many of my customers tell me how reading my online reviews influenced their decision to buy a car from me.
Big breakthrough: Car Dealer gongs!
Umesh Samani specialistcars-stoke.co.uk
Eureka moment: Harnessing social media
My lightbulb moment was realising the power of social media. It’s such a useful tool – not only for connecting with potential customers but also for connecting with other dealers and like-minded people – not just in the motor trade but elsewhere, too. Similarly, the power of online reviews cannot
One moment that sticks in my mind was the time I won two Car Dealer awards on the same night – and I’m not just saying that because I’m talking to you! I won the Dealers’ Dealer of the Year and Social Media User of the Year awards, which gave me and my business a massive boost. A small, one-man band was now recognised throughout the country. I can honestly say that I am still buzzing from that... and it was in 2013 !
Advice to others: Act honourably
Treat customers fairly, look after them in the same way you would like to be looked after, and it will pay dividends. It’s amazing how little it costs to help a customer sometimes – it may only be a matter of £50
or £100 to sort an issue but in my experience, that customer will either return or recommend someone simply because of that little gesture of goodwill made by you.
Luke Doran blakedowncarcompany.co.uk
Advice to others: Go the extra mile
Make sure customers are happy – not only during a sale but, even more importantly, in the future as well. It can be stressful when used cars go wrong, but it’s inevitable, so dealing with it in the right way is what matters. Spending time and money that you aren’t legally obliged to isn’t easy, but it’s important that you do. In the long run, looking after customers, gaining good reviews, building a strong NEXT UP reputation and earning repeat SOURCING business will easily STOCK pay for any initial financial outlays. HowToBeACarDealer | 11
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 6: Selling supercars
f you’re just starting out as a car dealer, the thought of selling supercars may be a distant dream. But you might be surprised. In just over 10 years, Andrew North – co-founder of Alexanders Prestige in North Yorkshire – has gone from selling high-mileage Golfs to low-mileage Lamborghinis. And the secret to his success, he says, applies to all dealers. Here’s what he’s learned…
How did you start out?
The day after my GCSEs – literally the day after, when all my mates went to the pub – I started at a BMW dealership as an apprentice. I worked my way up to sales manager within five or six years. Even then I was dealing with high-net-worth individuals, so I asked them how they afforded cars like that. One said: ‘You’ll never buy one if you work for someone else. You have to work for yourself.’ I was only 25, so decided to start this journey with Alex, my business partner.
How did you get going? We started with pretty much nothing – just a little unit, a little bit of money, but no cars. I went to the auction, bought a 150,000-mile Golf and started grafting. Then we got a small overdraft from the bank and used it to buy 10 cars within the first couple of months. We sold prestige cars, BMWs and Mercedes for example, but slightly older ones.
Was there a turning point?
It’s been a gradual evolution to be honest. We’ve had some big uplifts – especially when we got our first stocking loan, which allowed us to sell in bigger volumes and purchase higher value cars. In year one we traded cars up to £20k, in year two up to £30k… each year it went up slightly. It wasn’t zero to hero in one hit. Those increments soon get you to high-value stuff. It’s now 12 years since we started, our turnover is £55 million and we employ 70 people.
What’s the key to achieving growth like that?
We’ve always re-invested. We used profits to buy 14 | HowToBeACarDealer
‘I would say to anyone starting out that you should do what you do best, and stick to it – you can never be the jack of all trades.’ ANDREW NORTH – CO-FOUNDER AND NOW MD OF ALEXANDERS PRESTIGE new stock – that’s been our growth strategy. By doing that, banks and other funders look at you favourably. Put simply, have a good plan, and stick to it. Do what you do best and re-invest all the time – I mean, when you’re starting, re-invest everything, your whole profit margin. Be prepared to take your minimum salary drawings and take little or no dividends. Don’t take all of the cash out of your business, no matter how much you’re tempted. You’ll need it!
Has specialising been important to you?
Specialising is of huge value. I would say to anyone starting out that you should do what you do best and stick to it – you can never be the jack of all trades. Also, I can only sell something I’m interested in and passionate about. Put me on a fruit stall and I’d be the worst market trader ever.
I didn’t just want to be a used car dealer. I wanted to deal with nice cars and nice people. It’s not about selling, it’s about treating people right and eventually the profits will come.
Are you a petrolhead, then?
Absolutely. The passion for cars has to come across. You wouldn’t run an expensive clothes shop and wear scruffy jeans to work. We’re not just car dealers, we’re car enthusiasts. For me that means you buy better and you sell better. And being into cars is important because people expect you to have the product knowledge. They don’t want sales patter, they want us to tell them everything they need to know about the car. I don’t need to sell someone a Lamborghini, but they need to trust us on the spec, the history and the preparation of the car. Knowledge is power, and that comes across to customers.
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What’s your most important tool?
The website and, although it’s less tangible, our reputation. We had clients from where we worked previously who came along with us – they trusted us and believed in us and they’re still clients today. I’m all about the long term, not about making a quick buck. I’m growing a business. We can sell cars every month simply based on our reputation and repeat custom. People check you out, and research the background of the company. Also, these days people go to showrooms less, they will buy online, and that requires trust – people will put £250,000 in our bank account without even seeing the car.
Where do you source your stock?
A lot of cars just seem to find us! We have a huge database of customers we’ve known for a very long time. When it comes to supercars, some people might only keep them for six months or even less – they have to have the next big thing, so there’s a quick turnover. There are also some main dealers and manufacturers who also sell used/part-exchange stock to us.
Alexanders Prestige: ‘We deal with nice cars and nice people’
What about the business side? Fortunately, we don’t just understand cars; we understand how to run a business. If you’re starting fresh, pay for good advice. You may understand cars and how to sell, but you’re not a lawyer or an accountant. The last thing you want to do is spend money on that, but getting good advice in year two or year three will come to fruition. If your company is set up properly from a legal perspective, with corporate governance in place, it will make life easier later.
Are supercar customers different to others?
We’d always sold prestige cars, and some customers grew with us. Often the same people who buy a Range Rover buy a Ferrari. But overall, our customers really do know what they want –
that’s why product knowledge is so important. But funnily enough, a £200k supercar may have less impact on their finances than someone spending £30k on a BMW. One thing I know is to never underestimate anyone. People who buy a Rolls-Royce don’t always wear expensive suits.
What’s been your biggest lesson?
People are the most important thing. The clients, of course, but also the people within your business. If you invest in and mentor the right people, they’ll look after you. Everyone from your valeter to your sales staff. It comes back to the point about re-investing in yourself and in others. It really is worth paying people properly and not scrimping. If clients and staff are happy then you’re half way there. We have the same philosophy in all our businesses. HowToBeACarDealer | 15
How To Be A Car Dealer.
Part 7: Mastering auctions
ere’s a fact for you: according to NAMA – that’s the National Association of Motor Auctions – the UK’s car auctions sell a total of 1.5 million vehicles a year between them, and NAMA members sell approximately 90 per cent of all vehicles wholesaled in Britain. Of course, as we investigated in Part 5, there are other ways to source your cars. But even if you have some luck with the
classifieds or elsewhere, it’s still worth keeping an eye on the auctions, and at least understanding how they work. The two biggest players are British Car Auctions and Manheim, the latter of which sells 600,000 vehicles every year at 17 centres around the UK. So we started by asking Tim Hudson, MD of Inventory Solutions at parent company Cox Automotive, how it all works.
How often do you hold auctions?
vehicle at Manheim has a reserve price. If it doesn’t reach its reserve, we propose the highest bid to the seller who then has the opportunity to consider the price.
At Manheim we hold around 50 auctions a week and we also host auctions online. We have multiple sales every day, so our online offering gives buyers who can’t attend in person the opportunity to bid on stock across the network. The vehicles sold at auction come from a variety of sources – they could be partexchange or ex-fleet vehicles or brand new, direct from the manufacturer.
Can people view the cars first?
During the week before the auction, buyers can view the listings on our website, and we also provide the details of each vehicle in a comprehensive auction catalogue, which is released no fewer than 24 hours before the event. We inspect every car and publish a full condition report ahead of the auction. Due to the number of vehicles at each auction, it’s very difficult for dealers to inspect them individually before bidding on them. To reassure buyers, we offer three vehicle inspection levels: a 28, 54 or 78-point check, including engines, transmissions, steering and brakes. The checks are carried out by Manheim’s own NAMA-accredited inspectors.
How do auctions actually work?
On auction day, buyers can join us in person, or online through our Simulcast system. This means buyers can place a bid on any vehicle at any of our auctions across the UK from the comfort of their office, home or while on the move via a mobile device. Vehicle auctions are very similar to regular auctions, with each buyer outbidding another to secure the win. Unlike other auctions however, where reserves aren’t always set, each 16 | HowToBeACarDealer
Can anyone come along?
major issue when it arrives, we can make a claim on it.
Open sales, which make up the majority of our auctions, are open to anyone. We try to ensure dealers don’t feel overwhelmed or confused when attending, especially for the first time. The pace of the auction very much depends on the style of auction. Closed sales (for dealers who only operate with one car brand) are generally faster, selling anywhere between 50 and 100 vehicles per hour. But sales with the general public and a mix of dealers will be paced accordingly.
Arrive at an auction early
So that’s the gist of the Manheim auction world, and it’s a similar story at BCA (check out their website to see how they do things). But how do you get the most from it all? Are there any golden rules? What happens if you sneeze at the wrong moment? To find out, we asked some dealers who’ve been around the block to give us their top auction tips…
We say hi to the auctioneers and remain friendly – they can help you out more than you might imagine. I usually end up leaving the bidding to Steph, my other half. For some reason the hammer goes down quicker when she’s bidding!
MATT CLARK, SUPERMINI UK:
Set a budget and stick to it
Sometimes it’s very tempting to go an extra £100 here or there rather than walk away with nothing. We’ve made those mistakes before, and ended up with some not-so-great cars just because we wanted to buy something.
We’ve saved ourselves hours of travelling by bidding online. We only buy an approved or assured car online as we know if there’s any
There’s only so much the pictures will tell you, so we always get there, grab brekkie and go through the catalogue, checking our valuations against CAP and seeing if there have been any amendments to the lot. We then walk the lines and check each car we have our eye on, discounting anything that requires major prep.
Make yourself known to the auctioneer
STUART SAUNDERS, URBAN CAR COMPANY:
Look for a good vendor
We buy lots of ex-lease cars that are three to four years old and come with good service history. In our experience those sorts of cars rarely have any mechanical issues.
Research, research, research!
Look at the entries in advance, form a shortlist and look at what other dealers are selling similar cars for. This will give you a competitive selling price – work backwards from that to create your margin. Also, try to spot something the auctions have missed on the specification, especially
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‘It’s better to walk away empty-handed than with five cars that you paid over the odds for, just to fill your forecourt.’ ROB HIGHAM, RH TRADING things that add value such as Bluetooth, xenon lights or upgraded alloys.
Do some detective work
If the car is declared with no service history, you might still be able to trace it. One place to start is with the supplying dealer – you’ll often find their details on the car’s number plate. They will probably have electronic records, and once you’ve sourced it, it could add hundreds or thousands to the potential retail price.
ROB HIGHAM, RH TRADING:
Go to a few auctions first
Just observe, don’t buy anything – watch others and get a feel for when to bid and when to keep your hands in your pockets. Also, don’t limit yourself to one auction site, and try to use their online systems. I’ve found the same cars can go for a lot less in some areas than others, so know which location is best for you.
Have a plan
Probably the most important part of successfully buying at auction is to ‘retail backwards’ – check the price the cars are going for right now, know your costs, and find out how long you can sit on
a car before it starts costing you money. Then profile the auction stock and know exactly what cars you’re going to bid on. Having worked out all your costs, you should know your margin and therefore your maximum bid. Stick to it at all costs, and don’t get drawn into a bidding war.
Identify buyers from car supermarkets
These guys tend to buy a lot of stock, and will generally pay more. If they turn up to the auction it’s not really worth trying to bid against them – they have targets to hit, and overpaying on one car when they’re buying 50 that day won’t bother them.
Stay calm and rational
Cars can go through in seconds and you have a very short time to consider them. It’s a very stressful atmosphere, so be dispassionate – it’s better to walk away empty-handed than with five cars that you paid over the odds for, just to fill your forecourt. It’s also a good idea to get to know the auctioneer to make sure they notice you. There are stories in the trade about auctioneers favouring particular dealers – every auction I go to I hear things like ‘he put the hammer down quickly on that one’, meaning the buyer received special treatment. HowToBeACarDealer | 17
How To Be A Car Dealer.
Part 8: Advertising and building a website
nce upon a time, advertising a car was about writing a good classified with a half-decent picture. And that’s OK if you’re selling one privately. But what if you’re shifting 10, 20 or 50 cars a month? People expect way more. Do you really need to tell them about split-fold
seats when you could give them a 360-degree video with engine sounds and more? Advertising is one of your biggest costs, and in a cut-throat world, getting it right is the difference between life and death – in business terms at least. But fear not, we’re here to help, so check out Part 8 of this invaluable publication!
WHAT’S THE FIRST STEP?
HOW DO I MAKE A SITE LIKE THAT?
Well, you could spend your days uploading ads to a million classified sites, from Auto Trader to Exchange & Mart, eBay and CarGurus or wherever. But think about it – let’s say you’re selling 20 or more cars a month. Doing separate uploads to the five big sites alone would mean writing 100 individual classifieds every month, along with all the images and admin. There’d be no time left to actually sell the cars. That’s why, for the most successful dealers, advertising starts with your website. But it’s no good making a cheapo DIY site on GoDaddy and sitting back, waiting for clicks. The best car sales sites are actually made for car dealers and use lots of online voodoo to get your stock seen. Most importantly, your site should link to the classified providers, meaning you upload one advert to your site, which is automatically pinged to Auto Trader and others – saving you hours of mouse-work. Chris Roach of Chequers Cars in Surrey knows a thing or two about all this. ‘Having a website without third-party exports would be like having a shop window with nothing behind it,’ he says. ‘And make sure you get a site that lets you export your ads to where you want, not where someone tells you to.’ Think of your website as a hub for all your operations. Not only is it a place to show off your stock, with images and videos and even live chat (which we’ll come to later), but it’s also your advertising base station. It could even be a place for online transactions, and for customers to apply for finance, again through an embedded third-party source. 18 | HowToBeACarDealer
Fear not – someone has already done it for you. There are several companies that make sites specifically for car dealers, with all the behindthe-screens functionality built in. Most let you choose from standard templates, to which they add your branding, so nobody notices it’s an off-the-shelf design. Different providers offer different services and pricing plans – have a look at the products from Auto Trader, AutoWeb, Click Dealer and Spidersnet – though one of the most popular and affordable is Car Dealer 5. David Cox, the Car Dealer 5 sales manager, says: ‘We offer a suite of templated websites to car dealers. From the most basic option to a responsive, mobile-ready website, dealers can pick a template to suit their budget, their customers’ requirements and the type of stock they sell. Our website designs will be fully branded to the dealer and generally ready to go within 24 hours.’ And what about those third-party feeds? Over to Cox again... ‘All of our templates feed directly into 15 of the main car sales websites, including eBay, Auto Trader, PistonHeads, CarGurus, Motors, AA Cars, Carfinance247, Gumtree and the RAC. As well as a Facebook showroom feed, we also offer additional services such as finance calculators, video showcases and live chat, depending on the dealer’s requirements.’ How much are we talking for this sort of site? ‘A fully responsive Car Dealer 5 website can cost as little as £450 +VAT per year,’ says Cox. ‘Our Elite package is £1,050 +VAT per year, which
includes many extras such as social media posting and monthly prices when finance integration is applied. With all of our sites, you can edit your content on the fly, whenever you like, even via mobile.’
DO I STILL HAVE TO SUBSCRIBE TO THE CLASSIFIEDS? Yes. Sounds obvious, but even if you’re managing ads through your own site, you’ll still need accounts with any of the classified providers you use. Like it or not, Auto Trader is the most tempting, given how many people it reaches, but it’s also the most expensive, so be wary. ‘When starting from scratch, and assuming you’re not selling 50 cars a month, you could get on the Auto Trader bus, and although it probably is the best way to get started, it’s expensive, so try to get off as soon as possible,’ says Roach. ‘You can become very reliant on it, and in the long term you’ll be tied to their price increases. We have a 50-car package, which costs around £41,000 per year…’ That’s an awful lot of cash to spend on one classified provider. OK, so as a newcomer it’s unlikely you’ll be advertising 50 cars at a time, but even the smaller packages aren’t cheap. Some dealers we asked pay around £470+VAT for a seven-car package on Auto Trader, whereas you could advertise 100 cars on motors.co.uk for about half that. ‘I’m very much a spread-bet advertiser,’ says Roach. ‘AA Cars, Exchange & Mart, Gumtree – I export to them all. ‘Consumers look at more than one platform, so spread your budget.’
CHRIS ROACH, CHEQUERS CARS
GOT IT! SO HOW DO I WRITE THE PERFECT AD?
‘Text has become less important. Customers are savvy. They often know the car’s spec already. It’s why images and video are the way forward.’
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Put down your quill and get out your camera. In the not-so-old-days, a classified ad would list a thousand features with all sorts of acronyms such as PAS and ABS or FSH. Some of those are still important, but today people want to see everything in sparkling high definition from anywhere in the world. ‘Text has become less important,’ says Roach. ‘Customers are savvy. They often know the car’s spec already, and there’s no point writing that a three-year-old car has power steering. It’s why images and video are the way forward.’ Consider this: according to an Auto Trader study, 63 per cent of car buyers make their first steps to purchase based on photos. The better they are and the more you take, the more confidence the customer has in the car, and
the more they’ll want it. And they’ll stay on your site for 13 per cent longer if you have a video tour of the car. It doesn’t need to be super-slick – a quick walkaround filmed on your phone is often good enough, especially if you focus in on details. The same study also says that 78 per cent of customers search for cars after 6pm, and 74 per cent make inquiries after work hours. So instead of waiting to reply until the next morning, engage with them while they’re actually browsing via the magic of live chat – as we mentioned earlier, it’s readily available through most website providers. Even if you’re doing the kids’ dinner or having a not-so-quiet pint, answering a quick question might make the difference between a deal or no deal. In fact, live chat is predicted to grow by 400 per cent in the next two years. That might not bode well for your relaxing nights in, but who ever said being a car dealer was easy? HowToBeACarDealer | 19
How To Be A Car Dealer.
Part 9: The legal stuff
nless you wear a certain kind of wig and work in a courtroom, it’s unlikely that you’ll know the ins and outs of British law. But as a car dealer, there are certain bits you should understand: from getting your paperwork in order, to hiring and firing. Sounds scary but fear not – there are companies out
THE CONSUMER RIGHTS ACT Whether you’re selling sports cars or scented candles, there’s one thing you should read before taking a single penny from a customer and that’s the Consumer Rights Act 2015. Admittedly, it’s not the most riveting of bedtime books, but give it a go because it’s the single most important piece of legislation for car dealers – and, indeed, candle sales people. Just ask ‘No Nonsense’ Nona from Lawgistics. ‘You need to know the basics of the CRA,’ she says. ‘For most issues or problems, a consumer will use it to argue their case. ‘What it essentially says is that any car you sell must be fit for purpose, of satisfactory quality and properly described.’ That’s not all. If a car is deemed to be unsatisfactory, a customer has a ‘30-day right to reject’, meaning you could be obliged to issue a full refund. That’s understandable if you’ve sold a smelly candle with a dodgy wick, but what about a £10,000 car with a dodgy wiper? Ultimately, it comes down to a judge’s interpretation of the word ‘satisfactory’, and thankfully – when it comes to second-hand cars – they tend to take a sensible approach. ‘It has to be of satisfactory quality for its age and mileage – not as if it were a brand-new car,’ says Bowkis. ‘For a car to be rejected – and refunded – it has to be a fundamental issue. On a £3k used car, a faulty spark plug doesn’t mean the customer is entitled to a refund but they are entitled to a repair. Dealers often accept rejections when they don’t have to. The big issue is that some consumers have over-zealous expectations – they expect a brand-new car for used car money. So if in doubt, call someone like myself for advice before doing anything!’ 20 | HowToBeACarDealer
there that specialise in helping car dealers keep everything above board. That’s why this month we phoned experts from two of the biggest providers of legal advice to the motor trade – Nona Bowkis from Lawgistics and Graham Jones from Lawdata – who agreed to lay down the law for us, starting with the biggest issue of all...
‘The big issue is that some consumers have over-zealous expectations’ Nona Bowkis, Lawgistics
HOW TO PROTECT YOURSELF It’s over to Graham Jones from Lawdata for this one. ‘The most important thing is selecting the right stock,’ he says. ‘Wherever the vehicles come from, you need to do your HPI or similar background checks, and make sure there’s an indemnity clause on the check so that if the results are wrong, you have comeback. Then you need to do your own investigations. Make sure that the mileage matches the available service history and MOT history, and – importantly – you must carry out mechanical checks, known as PDIs or pre-delivery inspections.’ Bowkis agrees. ‘If you buy good stock you’ll have fewer problems,’ she says. ‘Do your HPI checks, do your mileage checks, look for any safety recalls from the manufacturer and do your PDIs. If you’re qualified to do them, fine. If you’re not, use someone who is. Get a deal with a local garage and have them do the checks – that will carry more weight if anything is questioned later on. Always think, right from the beginning, “What would a judge say in court?”’ All of this comes back to the CRA. ‘For the consumer to have a right, any problem must have been apparent from the point of sale,’ says
Bowkis. ‘And in the first six months, any problem is deemed to have been there at the point of sale, unless the dealer can prove otherwise. So your best chance of proving otherwise is to do all those pre-delivery things.’ Jones says: ‘At the very least, make sure the car has a fresh MOT. That tends to show it was in satisfactory condition and roadworthy. And for goodness’ sake, if you do a PDI then get a piece of paper confirming what’s been checked.’ He’s not talking about just any piece of paper, either. From your sales invoice to your warranty booklet (which we’ll talk about later), you must have proper, legally sound stationery with all the right wording. Both Lawdata and Lawgistics provide these as part of their annual memberships. ‘You need to make sure your documentation is correct,’ says Jones. ‘And use a proper invoice pad, which lays out your terms and conditions – you can get these from various suppliers, including ourselves. If you get the contract right in the first place, everything else falls into place thereafter. There might be a temptation to write your own conditions, perhaps excluding certain things or using terms such as ‘‘sold as seen’’, but these won’t stand up in the eyes of the law.’
WHAT HAPPENS WHEN SOMETHING GOES WRONG? ‘It’s very important that dealers are quick to react to problems – customers have significant rights, and if you push them away they can come back to bite you,’ says Jones. ‘Take a proactive approach at the outset, and if you do receive a complaint, get the car booked in and looked at as soon as possible. This can avoid subsequent arguments.’
He’s right. And remember: a ratty speaker or faulty sat nav doesn’t necessarily mean you’ve sold the car in an unsatisfactory condition. ‘If there’s an issue, we suggest offering to get something done, without getting into an argument about whether something is satisfactory or not – especially in cases where the customer is prepared to accept a repair,’ says Jones. ‘The most common mistake is trying to brush off a problem and letting it become worse when it could have been resolved earlier at a lower cost.’ Of course, it’s not always straightforward, and even when a customer really stamps their feet, you might want to take some advice before offering anything. ‘That’s where helplines such as ours are useful,’ says Jones. ‘Even a five-minute chat can give the dealer the confidence to move forward. We often find customers will speak to their lawyers, or Citizens Advice, so dealers need to have an equivalent level of knowledge.’
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WHAT ABOUT TRADING STANDARDS?
AREN’T LAWYERS EXPENSIVE?
As well as the Consumer Rights Act, you also have to think about the Consumer Protection Regulations, which is what the trading standards people are interested in. ‘This gives consumers additional rights,’ says Bowkis. ‘For example, if you don’t tell a customer that a car had its engine replaced in the past, it could be treated as an omission or misdescription, and therefore may have affected whether a customer entered into the deal in the first place.’ That’s why the background checks and a car’s history are so important. Also, be very careful about how you describe your cars in adverts, particularly if you use one of the third-party systems we discussed in Part 8 of this series. ‘Many of the online ad systems pre-populate the car’s details from its registration,’ says Jones. ‘So check and double-check the spec is correct.’
Ordinarily, yes. But here’s some good news: both Lawgistics and Lawdata have small business membership packages starting from under £70 per month. Lawdata costs even less if you’re a member of the IMDA. Both offer broadly similar services, including legal helplines, stationery packs, warranty booklets and casework services. ‘Dealers don’t want to spend their time getting into disputes with customers,’ says Bowkis. ‘They want to sell cars and concentrate on what they’re good at. So if there’s a dispute or a stalemate, they can hand it over to us. Some years, a dealer may call us twice for advice; other years, we might handle five court cases for them.’ Just 70 quid a month for a legal pro on the end of the phone when you need one, plus a full toolkit to cover your back. You’d be mad not to. HowToBeACarDealer | 21
How To Be A Car Dealer.
Part 10: Warranties
ype ‘used car warranties’ into Google and you’ll be presented with more than 40 million results, from companies flogging them, to ratings and slatings, to whole forums of angry buyers with stories of suppliers refusing to pay out. So how do you
make sense of it all? What separates a decent warranty from a dodgy one? And how do you make sure the one you offer is worth the paper it’s written on? Sit down, take a deep breath and prepare to become an instant expert.
SHOULD I PROVIDE A WARRANTY?
and the warranty provider, you have acted as an agent and therefore – in order to offer this type of warranty – you must be authorised by the Financial Conduct Authority. Sales of these insurance-backed warranties are subject to Insurance Premium Tax (IPT) but not to VAT. Pros: Potentially greater protection for both dealer and customer, customer is covered if you cease trading. Cons: Requires FCA registration, IPT cannot be reclaimed, premiums can hurt profit.
Firstly, there’s no legal obligation whatsoever to provide a warranty – a customer already has a considerable level of protection and comeback under the Consumer Rights Act (see Part 9). However, most buyers will expect some sort of warranty, even on a budget car. ‘There’s a general customer perception that a warranty should be provided,’ says Graham Jones of Lawdata. ‘It can also be a useful way of managing a customer’s expectations and helping to deal with any claims that may be received.’ Sound advice, but before you start drawing up a DIY policy, take a moment to listen to Nona Bowkis from Lawgistics, the motor trade legal experts. ‘If you’re going to offer a warranty, do it properly,’ she says. ‘It has to be detailed. It’s no good writing ‘‘three-month engine and gearbox warranty’’ on the invoice. That’s worthless and will trip you up in court. If something goes wrong with a wear and tear item, which isn’t normally covered under the Consumer Rights Act, or even under a good warranty, you could be liable for a big bill.’ So how exactly should it be done? In a nutshell, there are three main ways of offering a warranty, all of which have their pros and cons. Here are your options:
1. INSURED Put simply, you buy a policy from a provider who then deals with any claims and pays for any repairs they agree to undertake. The risk is underwritten by an insurer, much like your home insurance – which explains why this type of warranty is, generally speaking, the most expensive. You will pay a premium per vehicle, the cost of which depends on the level of cover offered by the supplier and the age/ mileage of the car being covered. While the contract is ultimately between your customer 22 | HowToBeACarDealer
2. UNINSURED Similar to above, you buy a warranty from a provider for a premium, only that provider takes on the risk rather than passing it to an underwriter. Essentially it’s an agreement between you and a provider, who agrees to administer and pay for claims, although this does not constitute a contract of insurance. Instead, it’s considered a contract of service. Therefore, you don’t have to be registered with the FCA, and rather than being subject to IPT (which you can’t reclaim) the sale is subject to VAT (which you can). These are sometimes referred to as ‘obliger’ warranties, and are often offered by the same companies who provide insurance-backed schemes. Pros: VAT can be reclaimed, no need for FCA authorisation, generally more affordable than insured policies. Cons: Relies on service of third-party provider, dealer has limited control over claims.
‘A dealer running their own scheme has to be very rigorous.’ Keith Pipe, WMS Group
3. SELF-FUNDED This one is simple: if the car breaks and it’s covered by the warranty, you’ll pay for it. The idea is that you put a cut from each sale into a dedicated pot, to cover any claims that may arise. You should give the buyer a proper policy booklet with the correct wording – you can source these from various suppliers such as Lawgistics, Lawdata and countless others. You can then choose whether to administer the policy yourself (from taking calls from customers to dealing with repairers), or take the more popular approach and appoint someone to do it for you – usually it’ll be the company that provided your booklet. Some warranty administrators will also hold your funds, so they are able to pay out quickly when necessary, then refund the surplus at the end of the year. Pros: More affordable, puts you in control, you only pay for claims if and when they happen. Cons: You take on more risk, requires disciplined saving, self-administration can pose problems if customer is not local.
WHICH ONE IS RIGHT FOR ME? ‘One size doesn’t fit all,’ says Keith Pipe of WMS Group. ‘However, the majority of non-franchised, independent dealers would probably opt for an uninsured scheme. The reason for that is that the dealer doesn’t have to pass any FCA exams, and he or she can claim their VAT back whereas on an insured product the insurance premium tax is not reclaimable.’ What about the bells-and-whistles, insurancebacked products? They might cost more, but the
idea is that everyone has more peace of mind. ‘The customer is more secure in the event that the warranty administrator or dealer ceases trading,’ says Pipe. ‘The dealer has effectively sold an insurance product, so the risk sits with the insurer.’ On top of that, a fully insured product also gives the customer a certain amount of confidence in the deal. Then there are self-funded schemes, which are becoming increasingly popular among independent dealers who don’t want to pour their potential profit into third-party warranties when they could be running their own pot (and reinvesting funds once they reach a certain level). ‘A dealer running their own scheme has to be very rigorous,’ says Pipe. ‘Sometimes there’s a temptation to spend money intended for warranties on new stock. Also, the numbers have to work – a dealer selling 12 cars a month doing his own fund probably won’t work. But doing in excess of 20, his own fund becomes more viable. So it doesn’t work for everybody.’
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Of course, the key to all of this is good car prep. If you source good stock and make sure cars leave your showroom in top condition, you will ultimately have fewer claims to handle and be more confident in running your own warranty.
says Pipe, ‘a six-month policy could cost £100 for a fairly comprehensive level of cover – either plus IPT or VAT depending on whether it’s insured or uninsured. That’s a ballpark figure – premiums are higher for more expensive cars.’
HOW MUCH WILL IT COST?
AND ANOTHER THING...
If you’re self-funding, it’s really up to you, but put aside a sensible amount per sale, say £150-£200 for a run-of-the-mill car. And don’t forget the admin fee if you have someone administer the warranty for you – expect to pay somewhere around £15 per vehicle, or less if you’re taking out several policies with the same supplier. As for third-party products, it depends on what type of policy you go for, what cars you sell, their age and mileage and what deal you strike with the warranty provider. Let’s say you’re an independent dealer selling everyday, affordable cars. ‘For argument’s sake,’
Remember: any form of warranty is an addition to the customer’s statutory rights, but it does not replace them. If a problem can’t be resolved under the terms of a warranty, a customer can revert to the Consumer Rights Act. But if you have a good attitude and handle things correctly, it shouldn’t come to that. ‘At the end of the day, it’s the consumer that must be protected,’ says Pipe. ‘If the dealer can put the best level of cover on that vehicle at the time of purchase, generally things go smoothly. The days of buying cheap cover to save 30 quid have gone.’ HowToBeACarDealer | 23
How To Be A Car Dealer.
Part 11: Revealed: Your worst nightmares !
promised to keep everyone’s identity a secret. We wouldn’t want any angry punters on our hands after all! Read on... and count yourself lucky if you manage to escape incidents similar to these.
1. TWISTED FIRESTARTER
4. SKID MARKS
o compile Part 11, we asked 13 dealers (it seemed like an appropriate number) to share their unluckiest experiences. The stories are absolutely true, although we
We once rented premises in south London from a guy who’d been there many years selling motorhomes. One day we arrived to find that most of our stock had been scratched and needed repainting. We then got a call from an Irishman, apologising for doing it. He said he did it to get our attention, as he wanted to contact the previous occupier (our landlord) in order to get a refund for a motorhome he’d bought two years before. He said that if the landlord did not comply, he would burn down the whole building, including the rented flats above. So we contacted the landlord, who was on safari in Africa. ‘I remember those guys,’ he said. ‘Find out what name I should put on the banker’s draft.’ Later, the Irish guy brings in the motorhome, collects the banker’s draft, shakes hands and goes away. Shortly after, we got out of south London.
2. WHITER SHADE OF PALE
Recently, I had a customer drive 50 miles to look at a white Clio. More than 20 minutes went by and they looked a little confused, so I asked if everything was okay. The response? They loved the car but couldn’t live with the colour, which they were hoping would be a ‘darker shade of white...’
3. SOFTLY SPRUNG
The other day, a 20-stone woman came in for a test drive in a Micra. She squeezed herself into the driver’s seat while her six-stone husband jumped in the passenger side and I got in the back. She drove it dreadfully, complaining that she was struggling to reach the pedals, but eventually we got back to base. At that point, the husband said he thought something was wrong with the suspension, as it seemed to list to the driver’s side. What was I supposed to say? 24 | HowToBeACarDealer
My worst test drive was with a Subaru anorak, who would only buy if he could test the car ‘properly’. Sure, I said. Five minutes later we’re doing 130 mph with me screaming. Still, at least he bought the car, while I bought some new pants.
5. AT THE SHARP END
Back in the 90s, I was taking a customer for a test drive in a Mazda RX-7 on the A49 in Warrington, when he stopped, pulled a knife to my throat and told me to get out. Which I did.
6. DING DONG
I remember returning to the dealership after a test drive in a Clio RS200. The customer was struggling to get it in reverse, finally found it, or so he thought, then lurched forwards and smashed into the back of our dent repairer’s van. Worst of all, the dent man was actually in the back of his van at the time, sorting out his tools.
7. FARE PLAY
When I was working for a Seat main dealer, a well-dressed man came in and asked to test drive an Ibiza. He asked if we could go to the next town, 15 miles away, to show his wife as the car was for her. ‘No problem,’ I said, and off we
went. When we arrived in the town, we pulled up outside a parade of shops where he jumped out and said he’d just go and get her. I sat there for about 20 minutes, before coming to the conclusion that he’d used me as a free taxi.
8. FARE PLAY (AGAIN)
It’s 1982. I’m a 19-year-old trainee salesman at a large north London dealership and I go out for my very first test drive with a customer. He drives about five miles away, pulls over and parks up. ‘Mmm, very nice,’ he said, stroking the steering wheel of the Mini Metro. And with that, he jumped out of the car and walked off, never to be seen again. My manager properly laid into me when I got back.
9. NOSE JOB
Not long ago, I purchased a nice little Toyota Yaris from a lovely old lady who’d owned the car from new. She was very prim and proper and a delight to deal with. My thoughts changed, however, upon discovering a selection of dried bogies neatly stuck to the front of the driver’s seat, some of them quite impressive. It wasn’t just one or two; it was a whole army. I just can’t picture this dear old lady with her finger up to her knuckle, fishing them out.
10. VA VA VOOM
I remember one guy who came to view a really peachy, low-mileage Clio 182. He turned up in a battered old MX-5, a really hateful thing with rotten sills, rotten arches and what sounded like a valve out. He then proceeded to tell me all the faults of a Renault – French wiring, French brakes, French engine. ‘Well then, this one’s probably
not for you,’ I said. When he asked why, I said: ‘Well, because unfortunately the rest of the car is French, too.’ He looked like a little schoolboy.
11. MISTAKEN IDENTITY
This guy comes to view a new-ish Merc C-Class, and has an older model (in toilet-brick blue) for p/x. So I give him a price and he says he’ll think it over. Several days later I’m outside when an older C-Class, in the same toilet-brick blue, pulls up and parks in the same space as before. I catch the guy on his way in, write down the deal for him again, and say we just need a £100 deposit. He looks at it and says no problem, he’ll even pay the full balance now. At which point I hand over the deal to my salesman. The next day when I go in, our sales guy says, ‘The guy with the C-Class – was he a good friend of yours?’ It turns out it was actually a different bloke, with an even older C-Class in the same toiletbrick blue, worth about £3,000 less. I’d given him the deal of the century.
Then all of a sudden, in came seven – yes, seven – warranty claims, including a £1,000 bill on a £1,600 Beetle. Usually I don’t get seven claims a year! Next I sold my oldest car in stock and made about £2.50. A customer was due to collect a car they’d bought the week before, so I decided to smash it into the shutter door (£200 damage). Caught a cold. Put on weight. Drank too much beer and wine. Is it the weekend yet?
13. CLUTCHING AT STRAWS
When I worked at a Land Rover dealership, I inherited a deal from a chap who’d left. The car was a factory order and took three months to
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arrive. When the day came, we arranged to drop the car off to the customers, a husband and wife. While I was doing the paperwork with the husband, my colleague went through the controls of the car with his wife. He mentioned the stop/start feature, at which point she asked for more detail. ‘The engine will start almost instantly when you touch the clutch pedal,’ my colleague said. ‘But why has my car got a clutch pedal?’ she replied. ‘I ordered an automatic!’ We loaned her an auto while we sourced the correct model, and I even managed to sell the manual car to her brother. All’s well that ends well!
12. A WEEK FROM HELL
I love my job. Can’t beat it. But last week it took its pound of flesh. At first, all seemed hunky dory. HowToBeACarDealer | 25
How To Be A Car Dealer.
Part 12: Pricing
n the old days, a car’s ‘book’ price was exactly that: a price plucked from the pages of a monthly directory as thick as a phonebook. These days it’s all digital, so not only can you carry all the info in your pocket, but it’s updated
WHERE SHOULD I START?
The big two valuations providers are Glass’s and Cap HPI. Both have a mine of data services, while Cap also incorporates HPI history checks. Both have live valuations based on real-time info from auction houses, classifieds and other sources. And both work in broadly the same way: enter a reg number, select the spec, mileage and condition, then get an instant appraisal. But hold on, because at the end of the day, there’s no such thing as a definitive valuation, and what works for one dealer doesn’t always work for another. Glass’s and Cap HPI can certainly be useful and a good starting point for newcomers with limited pricing experience, but they aren’t the only ways.
HOW ELSE CAN I DO IT?
Auto Trader has an i-Control function – accessed through its dealer portal – which includes a valuation tool based on live market data. This is essentially a smart version of the classic ‘retail back’ technique, where you see how your competitors are pricing similar cars and work backwards from there. You could do this manually, but trawling through the classifieds can be very timeconsuming, especially if you want an overview of them all. Then there’s good old-fashioned experience. But arguably the most reliable method is to combine every tool at your disposal. ‘I use various places to check what a car is worth, then make an informed decision based on that information,’ said Umesh Samani of Specialist Cars in Stoke. ‘I might check Glass’s Guide, then compare that to the Cap valuation, maybe check what the Auto Trader portal says it’s worth, then look at the classified adverts to get a feel for what that model/spec is selling for. Then, armed with 26 | HowToBeACarDealer
minute by minute and allegedly more accurate than ever. However, be warned: pricing cars can be a pricey business, especially if you get it wrong. So whether you’re buying or selling, make sure you’re armed with the tools for the job.
all that confusing information, I’ll go with my gut feeling.’
KNOW YOUR OPTIONS
A few factory-fitted options can make a world of difference to a car’s value, so it’s important to factor them in. Most valuation tools do this, but sometimes the customer doesn’t and may get the impression that your car – with more options than others on the market – is somehow overpriced. ‘Often a customer wants a car with full leather, but they price-match it against one without,’ said James Bush, a regular on the Car Dealer Forum. ‘This is becoming more of an issue with the ‘‘value markers’’ the online adverts are displaying.’ These flag certain cars as being particularly good value. Bush said: ‘I don’t think I’d totally abandon an independent valuation guide, because they can spot trends better than we can, but I worry that more and more dealers just trust the Auto Trader valuations, which can leave very small margins.’
‘I use various places to check what a car is worth, then make an informed decision based on that information.’ Umesh Samani, Specialist Cars
REMEMBER YOUR MARGINS!
Ultimately, you know what you need to make from each sale to cover your overheads and make a profit. So it’s important to have a clear idea of a car’s forecourt value before you raise your hand at an auction or wherever you buy your stock. Whatever valuation method you use, make sure you leave enough room for variables such as market fluctuations, haggling (customers inevitably expect you to knock something off) and plain old bad luck, because if the stock doesn’t shift, you may have to drop your price. ‘I look at my prices every two or three days and reprice if necessary,’ said Rob Higham of RH Trading. ‘Not to be the cheapest but to make sure I’m in the mix. ‘I try to get the maximum margin from day one, but if the phone’s not ringing after four or five days I reduce the price and monitor the effect that has on my ads. ‘I won’t knock £500 off straight away, but I might do £100 then keep an eye out. When I see people clicking on it, I know I’ve priced it right.’
WHAT ABOUT PX PRICES?
We’ll be covering part-exchanges a bit later on, but they’re worth briefly mentioning here. Because while it’s hard to value a car on the spot, especially without a proper inspection or knowing its full history, customers often expect a price there and then. At times like these, instant valuation tools can be very useful, as you won’t
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‘I look at my prices every two or three days and reprice if necessary.’ Rob Higham, RH Trading
have time to check the classifieds until later. ‘I use the Glass’s app for part-ex valuations when out on the forecourt,’ says an anonymous dealer. ‘But more often than not, it’s only to show punters that their car isn’t worth what they’re expecting...’
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££££ from one dealer to another. It’s worth noting, too, that Cap valuations tend to include HPI history checks as well. We also asked a few independent dealers for some ballpark figures. Understandably, they asked to remain anonymous, but came back with similar numbers: roughly £100 per month for around 40 Cap valuations with HPI checks included, and around £50 to £70 per month for a Glass’s package.
WHAT WILL IT COST ME?
Just like pricing the cars themselves, there’s no easy answer to this, so we contacted Glass’s and Cap HPI to find out more. First, Glass’s. For its ‘Radar’ service – basically a live, retail-back pricing tool that does the legwork of scanning classifieds for you – prices start at £950 per year (+VAT). Cap HPI responded with the following: ‘Our pricing structure is built around the customer to give them the best value possible. ‘The individual business needs of the customer are taken into account, from the number of vehicles they buy and sell, to the depth of service they want to offer their customers. The approach ensures the customer isn’t paying over the odds for a service they don’t need.’ In other words, what it charges varies
AND FINALLY In the words of Umesh Samani: ‘There’s no one place or easy way to value a car. And, on top of this, each dealer will have their own personal experiences with the model and each one sees desirability/saleability differently.’ In time, you’ll get a feel for what a car’s worth and how to make the most from it, especially if you specialise in a certain make or model. At this point, some dealers abandon the guides. But when you’re starting out, you can’t expect to have this depth of knowledge. So for now, keep an open mind, don’t rely on one source, and leave some wiggle room. If the price is right, the rest will follow. HowToBeACarDealer | 27
How To Be A Car Dealer.
Part 13: Accounting
here’s no easy way to say this: doing accounts is a right old pain in the backside, especially when it comes to selling cars. What’s more, the motor trade is notorious for its knotty transactions, and
if you can’t tell a bookkeeper from a bookmaker, you’ll be having an awkward chat with the taxman before you know it. But fear not... our experts are on hand to help, starting with some business basics.
SETTING UP A COMPANY
how to calculate the VAT you owe the taxman. Generally speaking, most second-hand cars can be sold under the VAT Margin Scheme. This means you’re charged VAT on the difference between the price you pay for a car and the price you sell it for, so long as you didn’t pay VAT on the vehicle when you bought it. The profit margin is treated as VAT-inclusive and the current ‘VAT fraction’ is applied to this to calculate the output VAT due. With the current VAT rate of 20 per cent, the VAT fraction is 1/6. So if you make a profit of £500, the VAT calculation is £500 x 1/6 = £83. You don’t have to use the scheme but it can save you money. Without it, you would have to account for VAT on the full selling price of each vehicle. It’s also worth noting that if you sell a vehicle for less than you paid for it, you won’t have to account for any VAT on the sale. Seems simple enough, right? Not so fast… ‘Remember,’ says McMahon, ‘motor trade transactions are far more complex than the average retail sale. Think about it: you buy a car at auction, service it, maybe buy parts, prep it for sale, take a car in p/x, add some accessories or finance and so on. A single sale can have 20 to 30 accounting transactions.’ To add to your headache, your official margin – for VAT purposes – can’t include the costs of bringing the car to sale, eg, repairs, refurbishment, accessories or your business
‘There’s nothing wrong with being a sole trader, or two mates setting up as a partnership,’ says Ian McMahon, a partner at automotive business and accounting experts ASE Global. ‘But – for example – if you have a really good year and make £100,000, it would all be taxed as personal income. In other words, if you’re doing a good job you’ll get into the 40 per cent tax bracket quite quickly.’ The most common approach is to set up a limited company, where the trader is separate to the company. If the company makes a profit it’s taxed on that profit (corporation tax) and will most likely pay you a salary and/or dividends. You will still pay personal tax on the money you draw from the business (either via PAYE or selfassessment), but this can be more efficient than paying tax on the overall profits, which can stay in the business or be re-invested. ‘At the outset, when you don’t know how many cars you’ll sell or how much money you’ll make, it can be hard to know which course to take,’ says McMahon. ‘A decent accountant will be able to advise you, as well as regularly checking you’re doing the right thing as your business grows.’
If your turnover is more than £85,000, you must become VAT-registered with HMRC. Note, that’s £85,000 turnover rather than profit. ‘Half a dozen car sales and you’re already there,’ says McMahon. ‘So it’s typical for a dealer to register almost straight away – you can still register if your turnover is under £85k.’ The upshot of registering for VAT means different things to different businesses, depending on what they sell. Of course, you can also reclaim the VAT on many goods and services sold to you. We’d run out of room if we explained it all here (thankfully, www.gov.uk has more space) so instead let’s deal with the most important upshot for car dealers: 28 | HowToBeACarDealer
‘There are some fantastic lower-cost options available, most of which link to something like Sage accounts’ Becky Jury, accountancy consultant
overheads. Those are dealt with separately, but still need to be factored in so you know where you stand on each sale. It’s therefore vital to keep good records to avoid getting tangled in a web from which you’ll never escape…
BOOKKEEPING & SOFTWARE
Just like the old days, a dealer relies on a ‘stockbook’ to track a car from purchase to sale, including all the associated costs. It’s a vital tool, but these days it’s normally built into a digital dealer management system that also links to accounting software such as Sage, Xero or Quickbooks. You could use those programs on their own, like any other business, but given the mindboggling workings of car sales, it’s worth using a specialist DMS with the whole kit and caboodle – helping you keep on top of everything from stock management to calculating margins and VAT. Accountancy consultant Becky Jury says: ‘There are some fantastic lower-cost options available, most of which link to something like Sage accounts. But I use different software depending on the nature of the dealer.’ In other words, shop around for one that feels right for you – you could start with something like a Dragon2000 or Click Dealer DMS. Whichever you go for, a certain amount of dayto-day bookkeeping is unavoidable, even if you eventually hand everything to an accountant. ‘At the end of the day, it’s important that you know the figures you’re looking at each month are accurate – if they’re right, your year-end accounts will be too,’ says Jury. McMahon agrees. ‘Be disciplined,’ he says. ‘Get a phone app to keep instant records of expenses and income. Even if it’s a simple spreadsheet to itemise and sort income/expenses, just make sure you can easily piece everything together. ‘If you don’t, it can come crashing down around
you. It’s horrendous trying to unravel 20 or 30 transactions for one car...’
‘Firstly, have an allocated business bank account,’ says McMahon. ‘Don’t get into the muddy waters of running it through your personal bank account. It will go wrong.’ As for taking payments, there are plenty of chip-and-PIN devices, some of which connect to your phone via Bluetooth. Back to Jury for this one... ‘I recommend debit cards or BACS transfers linked directly to your business bank account. But remember, the
‘Just be sure you have the funds before the car drives off the forecourt...’ Ian McMahon, ASE Global partner convenience of taking card payments may be outweighed by the transaction charges.’ And don’t think you can add a surcharge to cover this – as of January 2018, that became illegal. This means you’ll be taking the hit, typically around three per cent on credit cards,
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which have higher fees. ‘Whichever option you go for, just be sure you have the funds before the car drives off the forecourt,’ says McMahon.
GET AN ACCOUNTANT
No matter how confident you are, an expert pair of eyes could ultimately save you thousands. Ideally it would be someone who knows the used car biz, but as long as they have an unhealthy knowledge of VAT law, they will hopefully keep you out of trouble. But keep in mind that even a superhero accountant can only go on the information that you give them… HowToBeACarDealer | 29
How To Be A Car Dealer.
Part 14: Selling
e’re up to Part 14 of this guide now, and it’s taken this long to get around to the very thing we’re here to do: sell cars. Which probably tells you all you need to know about the importance of the groundwork. At some point though, the magic moment will come,
and you’ll throw open your doors for the first time. But before you blow up the balloons and decorate your forecourt, spare a moment to read some advice. Because believe it or not, if you’re doing things right, the cars could pretty much sell themselves. To find out more, we turned to the Car Dealer forum for some expert advice…
In this internet age, any monkey can sell a car. That’s the easy bit. The car is usually sold before the buyer actually sees a salesman. The hard work has already been done – buying the right stock with the right spec, prepping it and advertising in the right places without giving all your margin away.
Being a salesman is the last quality these days. You’re also a valeter, painter, mechanic, child minder, dog minder and counsellor (that one depends on the punter).
Most customers aren’t here to be sold to – they’re actually here to pick up the car they’ve already chosen. 30 | HowToBeACarDealer
If you’re the owner and operator of a small dealership, there’s no such thing as regular hours, it’s 24/7. I employ two people in my sales team and they’re fantastic – they work alternate weekends between them, start at 10am and are still here most nights at 6 or 7. We have live chat and that’s always on and responded to within minutes.
Keep your office modern, avoid clutter and keep the forecourt clean and tidy. We have a concrete forecourt – we changed it from a gravel one due to local cats sh***ing everywhere. Go for a smart casual appearance and consider staff uniforms: our sales team have blue jeans and branded polos/jackets and mechanics wear branded overalls. On that note, brand awareness is key to a long and sustainable business. We invested for
years in brand awareness and as such do not have the reliance on Auto Trader. Last year, our return business was 41.7 per cent. It pays off over time.
Remember, proper punters pay proper money. So ask proper money for your proper cars, and accept you may not be busy seeing customers, but you won’t be a busy fool either. I was more profitable selling 160 cars last year than when I sold 255 three years ago.
In my experience, 95 per cent of the time, a punter turns up to see a particular car, so they’re half-sold before viewing. So it’s straight, frank, honest talk all the way for me. Anyone talkingup their cars or making false promises is asking for comebacks. As for opening hours, I run on appointments so my phone is answered when it
Anyone talking-up their cars or making false promises is asking for comebacks. BHM suits me. Phone calls at 9pm are ignored (very few phone the next day) and my phone is definitely off on a Sunday.
Selling cars is stressful and takes up most of your time, but if you can’t break away from it to have a family or social life, then running a business isn’t for you. If you get the correct stock and prepare it correctly, a car will sell itself. And just be honest
– the customer has travelled to see the car, not to hear you waffle on.
Selling is easy if the car is right – the challenge is buying stock at the right price and managing the costs of prep, which should be to a high standard, whilst retaining a decent margin.
I don’t think I have ever actually ‘sold’ a car. Like everyone says, good stock sells itself. The real skill is knowing when NOT to sell to someone. Always think about profit retention!
People aren’t stupid and can spot when you’re coming on with any sales techniques – we had someone come to look at a Q5 S line, lovely car, £25k, then went away to look at another at a
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local Audi main dealer. But they came back and bought ours, saying they didn’t like the pushy salesperson at the main dealer. That’s where we win. As small independents, we can give so much more than some of the big boys by NOT being your stereotypical dealer.
We ditched shirts and ties about five years ago and have some nice branded uniforms, cargo pants, polo shirts and fleeces. And as for balloons and bunting, that might have worked 20 years ago, but these days the car is 90 per cent sold before the buyer turns up. They usually come for a specific car they’ve seen online and if you handle it right, people buy the car.
Have A Word With The Wife
Proper cars will sell themselves, we just supply the trade plates and facilities… HowToBeACarDealer | 31
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.’
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.
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.’
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
How To Be A Car Dealer.
Part 16: Growing up
ell, you’ve made it this far, so you must be really keen! Let’s assume you’ve got your operation up and running by now and that you’re buying and selling cars successfully. The question is, what’s next? How do you go from selling 10 or 20 cars a month to double, treble or even quadruple that? Take Imperial Car Supermarkets for example. Like many independent car dealerships, it started with two blokes trading from an old petrol station
forecourt. Before long, it was selling 50 cars a month and employing 10 people. That was in 2006. A little over 10 years later, it now employs more than 170 people at several sites and turns over £142 million per year. So how did they do it? What’s the secret to that sort of growth? Could you possibly achieve the same thing? To find out, we talked to Imperial’s operations director, Neil Smith, who knows a thing or two about rapid expansion…
WHAT DRIVES GROWTH?
volume anyway. It really is a gut feeling at that point – the number will be so obvious, you’ll know that if you had larger premises you’d turn over more each month.
It sounds obvious, but the only way you can grow and expand in this business is by selling more and more cars. Volume drives growth. It’s all about the basics really – making sure the cars are priced right, prepared right and that customers are treated right. Do that, and naturally you’ll sell more cars, because your reputation will build, you’ll get referrals and if you’re recognised – especially in our business where the perception of car dealers is still not great – you’ll stand out as the one doing things right. That will give you opportunities to expand.
WHAT’S THE TIPPING POINT?
Reaching a certain sales volume. It really could be as simple as that, or not having enough space any more. If your site can accommodate 15 cars and you’re selling 15 cars a month, then you know there’s potential there. Having a certain amount of capital helps, but that will be driven by your 34 | HowToBeACarDealer
WHAT MOVES SHOULD YOU MAKE?
It’s down to what the individual wants to do. Some will stay trading five to 10 cars a month because they’re happy with that. Others have an ambition to push things as far as they can. So if you’re sitting there thinking ‘I know I can sell another 10 cars… all I need is bigger premises or more storage space’, then start looking for larger sites. It’s exponential. But at a certain level, a bigger site won’t necessarily work. You can then start looking at additional sites.
WHAT ABOUT INVESTING IN AN ONLINE PRESENCE?
Online presence increases brand awareness, even
if it’s just in your local area. You need a presence across all digital channels, but once the customer is on your actual website, it should fill them with confidence. Over the years, we’ve made a real effort to ensure that everything we publish about our vehicles is open and transparent. Continuous investment in that digital platform is key to making sure you’re one of the 1.7 dealerships a customer physically visits before buying.
‘Ultimately, growth will be driven by the success of the business and the ambition of the person running it.’ Neil Smith
HOW ABOUT ADDING TO YOUR OFFERING WITH A WORKSHOP, FOR EXAMPLE? Adding a workshop certainly helps with vehicle prep. We’ve always had a fixation with prepping cars well. When we were smaller we outsourced it all to bodyshops and garages. Now we do it all in-house, so there are obviously cost and efficiency savings there. It’s also a way to open another revenue stream and meet new customers – someone might visit for an oil change but suddenly they’re aware of your brand. If you’ve got the servicing right, hopefully they’ll remember you when it comes to buying their next car.
WHAT ARE THE BIG RISKS WITH EXPANSION?
If you grow too much it’s then very hard to downsize. The only way you can scale back is by
reducing stock. You can’t really reduce the size of your site or the cost of it. The natural progression is to acquire bigger premises, but do it step by step: start with one site for 20 cars, then move to another that can handle 40 and so on. Don’t buy 100 cars and wonder where to put them; work the other way around.
HOW DO I AVOID GETTING AHEAD OF MYSELF?
Take advice from the people around you. Speak to your accountant. Growth should be measured. We’d never have gone straight from two sites to 10. Look at where you want to go next, look at the demographics, at the competition and at your stock profile – just like you did from the outset. Understand who you want to be and how you’re going to get there.
WHAT IF I GET REALLY BIG?
The bigger you get and the more you spread
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your reach, the more likely you are to get on the radars of bigger companies that might make you an offer. You could even be approached by a manufacturer to become a franchise – I know independent traders who’ve gone on to take manufacturer-sponsored programmes and become main dealers. But to go from being an independent to suddenly answering to someone else could be awful for some people – especially if, like us, you prefer a more dynamic and flexible approach.
ANY OTHER WORDS OF WISDOM?
Unfortunately, there’s no magic formula. But if you’ve got the right ambition and you’re seeing your business grow, there will come a time when you have to make a decision: stick with what you’ve got or go after more. Ultimately, growth will be driven by the success of the business and the ambition of the person running it. HowToBeACarDealer | 35
Looking to make your first steps into the motor trade? Car Dealer Magazine is here to help. Split into 16 essential sections, in this guid...
Published on Oct 26, 2018
Looking to make your first steps into the motor trade? Car Dealer Magazine is here to help. Split into 16 essential sections, in this guid...