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How to Start a Used Car Sales Business?

Posted by businessplanconsultancy on July 29th, 2020

The used car trade is distinguished in two activities: the sale or consignment shop. Important investments such as the choice of large premises and a market study will be necessary. A specific diploma is not required to start a used car sales business, but real technical and human qualities will be essential for the success of your business. Regarding the legal status, you have the choice between the company, the sole proprietorship, and even the status of auto-entrepreneur. There are three tax systems: the micro-tax system, the real-simplified system, and the real profit system, all three distinguished by different turnover thresholds and more or less complex systems. The administrative formalities to create a used car sales company are classic, pay the sums requested for registration, and publish a legal advertisement. Finally, there are specific regulations for this activity, which require registration in the register of retailers of used movable objects and the keeping of a police register indicating the origin and destination of used cars.

Used car sale or consignment?

You can start a business selling or company Consignment of used cars. In the first case, you acquire the property from an individual and then resell it. In the second case, you work as an intermediary by earning a commission on the transaction carried out between the seller and the buyer.

Investments: premises for cars and market research

You would need to locate a spot to park the vehicles in all situations. Try carrying out a market study in the geographical region you plan to create, to assess the amount of rivals already existing, to evaluate the competition, and to confirm the value of your activities.

Do not neglect the investments to fit out the premises: repair equipment, various furniture to welcome buyers.

Next, you will need to attract car dealers and buyers. Think about communication costs: flyers, business cards, websites, etc.

Diplomas To Start A Used Car Sales Business

Becoming a used car salesman cannot be improvised.

Indeed, you will be required to:

  • Validate the technical aspects,
  • Repair and change certain parts of a vehicle,
  • Evaluate a sale price,
  • Negotiate with your customers,
  • Optimize your cash flow.

No diploma is required, but the competition being tough in this sector, you will have to differentiate yourself by your professionalism and an adequate price positioning. The mechanics should have no secrets for you!

In addition, a good salesperson must be able to advise his client in his choices or even offer him additional services (financing, extended warranty, maintenance contract). Being at ease in sales and knowing how to negotiate prices with complementary partners (insurance companies, banks, etc.) is a plus in attracting customers.

The Legal Status Of A Used Car Sales Company

You can create a used car sales or consignment business in the legal form of your choice:

  • In society:  SARL, SAS.
  • Insole proprietorship
  • In self-employment.

The most suitable legal role is decided by the strategy and desires of the client. This is necessary to inquire whether you want to separate your preferences from that of the business, or whether you choose to discriminate between stakeholders and managers’ privileges and obligations in compliance with the legal procedure. Other factors, such as capital spending, the initial worth of the investment, and the tax risk that you have should be taken into account.

The Tax System Of A Used Car Sales Company

The tax regime will depend on certain turnover thresholds and your legal status.

There are three main tax regimes :

  • The micro-fiscal regime (that of the auto-entrepreneur ),
  • The real simplified regime,
  • The real profit regime.

In addition, there are two types of tax to which a company may be subject:

Corporation tax (IS) at 33.1 / 3 % of total accounting revenue

The INCOME TAX on income (IR), the progressive rate of income tax.

A company is theoretically taxed with corporation tax (IS). However, there is an income tax option for the family LLC.

We recommend that you turn to a business plan consultant to help you define an economic model through the realization of a business plan and to help you choose the appropriate legal form and tax regime.

Registration Formalities For A Used Car Sales Company

To create a business for the sale or consignment of used cars, you must register at the registry of the commercial court whose raises your activity.

The cost of registration will depend on the legal status chosen. It varies from $ 0 ( self-employed ) to around $ 250 for a company. In the latter case, consider writing your articles of association and publishing a legal notice. These steps generate an additional cost.

Note that the release of the share capital is generally done within a maximum period of 5 years.

Regulations specific to the sale of used cars

If you are a reseller or the supplier of a truck for second-hand cars, your company is subject to specific laws on the selling of moving items used. You will make a filing for registration in the retailers’ list of movable items, submitted to the prefecture of your company’s place of deployment.

You will also have to keep a police register, called a “flea market register,” initialed before the start of the activity by the police commissioner or the mayor of the municipality where you are located.

The register must contain:

Description and provenance of cars offered for sale. They must be able to be identified,

The names and contact details of the original owners of the cars offered for sale as well as the date of issue of their identity document and the authority which issued them,

The classic mandatory information found on your sales invoices (in the case of consignment, the market value of the property must appear).

Also See: Car Sales, Sales Company, Sales Business, Legal Status, Tax, Sales, Legal

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