9 Tips On How to Become a Car Trader in 2025 [+Mistakes]

The car trading business in the UK involves buying vehicles and selling them for a profit.

You don’t need a showroom, a full dealership team, or even a garage to get started.

Many traders begin with one or two cars and even work from home.

But you do need to register properly, understand the law, and know where to find stock that people actually want to buy.

Let’s go over how to become a car trader, where to source cars, how to sell them, what tools to use, and what to avoid.

1. Choose a legal structure for your car trading business

Before you buy or sell anything, you must decide how you will run the business, since this affects your taxes, how you report income, what paperwork you need, and how much legal protection you have.

There are three main options when you are deciding how to become a car trader:

• Sole trader – You operate under your own name or a trading name. This is the simplest setup. You pay income tax on profits and submit a Self Assessment tax return to HMRC each year.
• Limited company – You register a business with Companies House. This creates a separate legal entity. You pay Corporation Tax instead of income tax, and you may have more options for business loans or insurance.
• Partnership – You go into business with someone else. You both share the profits and legal responsibilities. Each partner must report their share of income to HMRC.

✅ Example: If you want to start small and work from home with just a few cars, registering as a sole trader is usually the easiest option. If you plan to scale up later or want to separate your personal finances, you can switch to a limited company when the time comes.

📌 Steps to follow to register:

• Register as self-employed with HMRC
• Or set up a limited company with Companies House or through ANNA
• Choose a name for your business and open a separate business bank account

💡ANNA makes setting up a company simple. You can register a Limited Company online for free and open a business account at the same time.

It only takes a few minutes to complete, and you’ll receive your Certificate of Incorporation shortly after.

Once you're up and running, ANNA can also help with essential filings like your Confirmation Statement and annual accounts.

2. Understand the car market in your area

You need to know what cars people actually buy, how much they pay, and which vehicles sell quickly.

• Are buyers in your area looking for cheap cars under £5,000?
• Is there demand for electric vehicles or hybrids due to ULEZ zones?
• Do people want low-mileage hatchbacks, small SUVs, or vans?

✅ Example: If you're based near London, ULEZ-compliant petrol cars and small automatics tend to sell faster than older diesels. In more rural areas, 4x4s or utility vans might be a better choice.

📌 Steps to follow to find what cars actually sell:

• Go to Auto Trader and filter listings within 10 miles of your postcode. Sort by “Recently added” and “Sold” to see what’s moving.
• Use the Auto Trader “price guide” feature to check the average selling price for each model.
• Visit local dealerships and compare what they sell versus what’s missing. If every forecourt has three-year-old Vauxhall Corsas, there might be room for a specialist in first cars or hybrid SUVs.

Also, research how much cars are selling for at auction and from private sellers, as this will help you set the right buying budget and target margin. Many successful traders aim for a profit of £500 to £1,500 per car, depending on condition and demand.

3. Register your business and apply for trade plates

Once you’ve decided how to trade and what to sell, you need to register your business officially. If you buy and sell vehicles with the intention of making money, you’re classed as a motor trader and must follow the rules.

Here’s what you need to do:

• Step 1: Register the business, as covered in Step 1.
• Step 2: Apply for motor trade insurance
• Step 3: Apply for trade licence plates (These are special number plates you can transfer between cars. They let you move and test drive untaxed vehicles without registering them individually.)

5. Know the legal rules when selling cars to the public

Once you start selling cars, you take on certain legal responsibilities. The most important thing is to ensure that every vehicle you sell is “as described,” roadworthy, and compliant with all relevant laws.

Key legal responsibilities:

• Consumer Rights Act 2015: Buyers have the right to return a vehicle within 30 days if it has a major fault or is misrepresented. After 30 days, they can still ask for repairs or partial refunds.
• Accurate descriptions: You must not hide faults or mislead customers. If a car has had accident damage or a gearbox issue, you need to say so.
• MOT and roadworthiness: If a vehicle doesn’t have a valid MOT or is not safe to drive, you must state this clearly in writing. Selling unroadworthy vehicles without disclosure is a criminal offence.
• Distance selling rules: If you sell a car online and deliver it to the buyer without them seeing it first, they may be entitled to a 14-day cooling-off period under the Consumer Contracts Regulations.

✅ Example: You sell a car with a minor oil leak and mention this in the advert. The buyer is made fully aware and accepts the condition. You’ve met your duty. But if you fail to mention it, they could return the car and request a full refund, even weeks later.

📌 Steps to follow to make sure you’re compliant:

• Give every buyer a written invoice with the sale terms and vehicle condition.
• Keep records of all inspections, checks, and correspondence.
• If you collect personal details (names, addresses, payment info), register with the Information Commissioner’s Office (ICO) for data protection.

💡Pro tip: ANNA makes invoicing quick and stress-free. You can create and send professional invoices directly from the app, add your business logo, and even set up repeating invoices for regular clients.

ANNA automatically matches payments to the right invoices and sends polite reminders when payments are overdue, so you stay on top of your cash flow without lifting a finger.

You can even generate invoices just by messaging the app, making billing as easy as a quick chat.

6. Create car listings that actually sell

Once you’ve got stock ready, you need to advertise each car properly. A poor listing wastes time and puts off buyers. A well-prepared ad helps you sell faster and often at a better price.

Every listing should include the following:

✅ Photos:

• Take at least 10 to 12 clear images
• Include front, back, both sides, dashboard, interior, and engine bay
• Avoid cluttered backgrounds (clean driveway or car park is fine)

✅ Description:

• Include year, mileage, MOT expiry date, service history, and number of previous owners
• Mention key features (air con, parking sensors, Bluetooth)
• Be upfront about faults or minor issues

✅ Example:

“2015 Ford Focus 1.6 Zetec, 87,000 miles, full service history, MOT until April 2026. Drives well. Bodywork tidy for the age. Some light scratches on the bumper. Ideal first car or commuter. ULEZ compliant. Two keys.”

7. Track all your finances properly as a car trader

Once you start trading, you need to keep accurate records of everything: every car you buy and sell, any repair costs, advertising spend, insurance, and business expenses.

This isn’t just for tax purposes. Good recordkeeping also shows you how profitable each deal was, what type of cars work best, and where you’re overspending.

You can use simple tools like:

• Spreadsheets: Create a tracker for every vehicle: purchase date, cost, repairs, sale price, profit
• Accounting software: ANNA, QuickBooks, FreeAgent, and Xero all work for car traders
• Receipt apps: Tools like Dext or AutoEntry let you scan fuel, repair, and auction invoices

What you need to track:

• Vehicle purchase and sale invoices
• Repair bills and reconditioning costs
• Advertising and platform fees
• Insurance and trade plate fees
• End-of-year income and profit

✅ Example: You bought three cars in your first two months. One made £1,200 profit, one broke even, and one lost £300 due to unexpected repairs. Without records, you’d think you were ahead. With records, you can adjust your buying strategy before making the same mistake again.

8. Decide if you’ll go independent or join a franchise

Most new car traders start out independently, but it’s worth knowing that joining a car sales franchise is another option. Some franchises provide the cars, business setup, marketing, and even office systems. In return, you usually pay a joining fee and a share of your profits.

🔸Going independent:

• Full control over what you buy, sell, and how you work
• Lower startup costs
• You keep all the profit, but carry all the risk

🔸Joining a franchise

• You get brand recognition, training, and support
• Stock sourcing may be easier through the franchise’s network
• Less control over pricing and branding

✅ Example: Some popular UK car franchises include Kia, Ford, Hyundai, and smaller resale brands like Autovaletdirect or ChipsAway. In 2024, Kia ranked highest in the National Franchised Dealers Association for dealer satisfaction.

📍If you're just starting out and want full flexibility, trading independently is usually more suitable. But if you want to scale quickly and value brand support, a franchise might help you grow faster.

9. Avoid the common mistakes new car traders make

Plenty of new car traders lose money not because they bought bad cars, but because they missed simple steps or rushed into the trade without preparation.

Here are some of the most common errors when starting as a car trader in the UK and how to avoid them:

Mistake 1: Trading without insurance or trade plates

You’re not allowed to move untaxed vehicles on public roads unless you have both. So, this is one of the quickest ways to get fined and damage your credibility.

Mistake 2: Not doing history checks

Buying a car without checking for write-offs, stolen alerts, or finance agreements is a huge risk. You could lose money or face legal issues.

Mistake 3: Overpaying for stock

If you don’t know your local market, it’s easy to buy a car at auction that you can’t resell without losing money. Learn your price limits and stick to them.

Mistake 4: Poor recordkeeping

HMRC requires you to keep all income and expense records. Inaccurate books can lead to penalties or a failed tax inspection.

💡How ANNA +Taxes can help you become a car trader

ANNA keeps everything in one place. You don’t need spreadsheets, paperwork, or guesswork. It’s designed for small business owners who want reliable tools to stay organised and tax compliant.

✅ Example: A beginner buys a £3,000 car with finance still outstanding. The buyer reports it, and the finance company reclaims the car. The trader loses everything. A £10 HPI check would have prevented the loss.

📌 Steps to follow:

• Use a checklist before buying: MOT history, mileage, HPI report, visual inspection
• Set a maximum price for each vehicle category
• Keep a log of every car you buy, including costs and outcome
• Stay up to date with consumer laws and trading standards

Starting a car trading business: What to remember

Becoming a car trader in 2025 is achievable even if you start small. You can begin from home with just a few vehicles, a trade plate, and proper insurance.

What matters is that you follow the rules, understand the market, and build trust with buyers.

The steps covered in this How to become a car trader guide help you avoid legal trouble, reduce your risk, and focus on profitable vehicles.

If you stay organised, keep learning, and treat it like a proper business, you can grow steadily and succeed in one of the UK’s most active resale industries.

For everything else, rely on ANNA! 👇