How to become a motor trader

Whether you’ve been thinking about it for a long time and are just deciding to take the plunge, or it’s a relatively new thought for you to get into the motor trade, there are things you need to know on your way to become a motor trader.

We’ve been insuring motor traders for over 50 years and in that time we’ve learned a lot about the legal requirements and what you need to consider before taking the step into business as a motor trader. Here’s our guide.


The first step is getting to know the industry, and understanding what type of business you’d like to create. Are you looking to specialise in specific cars such as classics or high value cars? Getting to know what is popular in your area can be helpful, but also noting any developments in the news that could affect the market – especially at the moment with access to car dealers and routes to market affected by COVID-19.


To run your business legally, you’ll need to register as either a sole trader, limited company or partnership. There are different benefits and requirements for each kind of setup, so it’s worth doing a bit of reading to find out what will suit your business needs best. The website provides guidance on how to set up as a business.

You also need trade plates in order to legally drive the vehicles you buy to sell, or to test vehicles on a public road. Trade plates mean you don’t have to individually register and tax each vehicle – instead you pay a licence rate for a designated period. If you only repair vehicles, you may not need trade plates. See more information on trade plates in the next section…

Insurance is a legal requirement for motor traders – based on your business plans, will you need part time or full time motor trade insurance? Do you plan to run your business from home, or from a dedicated business premises? You might also want to consider tools and goods in transit cover, if you’re transporting vehicles or tools that are an important part of your motor trade business.

If you’re thinking of employing staff, you’ll need to ensure that you have insurance that covers them, too. Employers liability insurance is a requirement for anyone employing even one other person.


After setting up your motor trade insurance policy and checking out the legalities behind the business, you’ll need to apply for trade plates.

A trade plate is a temporary number plate used by motor traders or vehicle testers to save them the cost and time to register and tax every vehicle temporarily in their possession. You can find out more about trade plates here.

DVLA guidance on applying for trade plates states that in addition to your trade licence application form, you’ll need to provide a copy of your Motor Trade Insurance Certificate, which must match the name on the application. If you do not have one, you’ll need to tell DVLA why and give details of your Companies House registration number.


Once you’re all set up, you can look for the first car or cars you’d like to purchase.

There are many different areas in which you can purchase cars, such as websites such as AutoTrader, or attending an auction house. At the moment a lot of auction houses are only running online auctions, but this may change when lockdown restrictions are further eased.

We’ve created guides for each area so that you can find when and where the nearest auctions are to you, click here to find out more.

Ensure that you’ve done your research on the car, that you’ve checked the condition and taken it for a test drive if possible. You can check MOT history using the government’s online MOT checker service.

Other things to check:

  • Does the car have a V5C document? Without this proof of ownership, it’s possible that the vehicle is stolen
  • Does it have a maintenance history? You need to know if there’s anything that could affect its reliability and value
  • Various websites offer car history checking services that will let you know further details about the car such as whether there is any finance on the vehicle that could make it unsellable

Once you’ve found a car that you’re certain will make some profit, ensure that it’s in the best possible condition and is ready to sell. Consider removing any scratches, carry out any work on advisories from the previous MOT, and make sure that the car is clean and presentable.


It’s also important to know how to price your cars. If you’re selling too high, you can put off potential customers, but selling too low will mean you make no profit. Finding the right balance doesn’t have to come with years of experience; online auction sites such as AutoTrader can give you an insight as to the price that others are selling the same spec vehicle for.


A lot of motor traders sell through word of mouth recommendation and social media listings, but when you’re new to the trade, it might take a while to get this established. You could set up your own website, or use a car sales forum like AutoTrader to get going. Cars can also be sold on eBay. Whatever you choose, and you may well want to market in multiple ways, make sure you’ve checked for:

  • Selling fees
  • Listing restrictions
  • Details like delivery and collection arrangements are included in your listing


If you’re considering becoming a motor trader and would like more information around how to make sure your business is properly covered and legal with the right insurance, we’re here to help. It may not cost as much as you think – many business insurances can be combined under one policy, making life simpler for you and giving you peace of mind that your venture is protected.

Give our team a call on 0121 248 9300 or send us a message below and we’ll call you back.


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