Setting up a used car business means following more rules than most people expect. There is no single “dealer licence” in the UK. Instead, the law you need to follow depends on what you do: how you trade, whether you offer finance, how you advertise, where you keep your cars and how customers pay you. This guide works through each area as a checklist, with a link to the official source for every rule.

This is general guidance based on published UK government, regulator and legislation sources as of September 2026, not legal advice. Rules change, and your situation may be different, so check anything you are unsure about with a solicitor, accountant or the regulator concerned.

The checklist at a glance

  • Register your business (sole trader, partnership or limited company)
  • Register for VAT once turnover goes over £90,000
  • Get FCA authorisation before you introduce customers to finance
  • Sell cars that meet the Consumer Rights Act 2015, and honour the 14-day cancellation right on distance sales
  • Describe and advertise cars truthfully, including mileage, history and the full price
  • Only sell roadworthy cars for use on the road
  • Get motor trade insurance, employers' liability insurance if you have staff, and trade plates if you need them
  • Pay the ICO data protection fee and follow UK GDPR
  • Register with HMRC as a high value dealer if you accept cash of €10,000 or more
  • Check planning permission for your site and tell DVLA about the cars you buy and sell

Planning a new dealership? Our free dealer startup cost calculator helps you budget for stock, premises, insurance and the registrations below.

1. Choose a business structure and register it

You can trade as a sole trader, a partnership or a limited company. Each has different tax and liability consequences, so it is worth talking to an accountant before you choose.

  • Sole trader: you must register for Self Assessment with HMRC if you earn more than £1,000 from self-employment in a tax year (GOV.UK: set up as a sole trader).
  • Limited company: you register the company with Companies House before you start trading, appoint at least one director and pay Corporation Tax on its profits (GOV.UK: set up a limited company).

Whichever you choose, keep proper records of every car you buy and sell from day one. You will need them for tax, VAT and consumer complaints. If you are still at the planning stage, our step-by-step guide on how to start a used car dealership covers budget, premises, stock and funding.

2. VAT registration

You must register for VAT if your VAT taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days alone. You must register within 30 days of the end of the month in which you went over the threshold (GOV.UK: register for VAT).

For a car dealer, turnover means your total sales, not your profit. A handful of cars a month can take you over the threshold much sooner than you might expect.

Once registered, most used cars bought from private sellers and non-VAT-registered businesses can be sold under the VAT margin scheme, so you pay VAT only on your margin. Our guide to the VAT margin scheme for used cars covers eligibility, the calculation and the stock book records HMRC expects.

3. FCA authorisation for car finance

If you introduce customers to a finance company or lender so they can buy a car from you, that is credit broking, and you need to be authorised by the Financial Conduct Authority (FCA) before you do it (FCA: motor dealers).

  • Limited permission: where selling cars is your main business and broking is secondary, helping customers finance the cars you sell, you can usually apply for limited permission (FCA: secondary credit brokers).
  • Full permission: if you introduce customers to finance for anything other than buying or leasing the vehicles you sell, some of your broking falls outside limited permission and you need full permission.
  • Appointed representative: some dealers carry out credit broking as an appointed representative of a firm that is directly authorised (the “principal”). The principal is responsible for making sure you comply with the FCA’s rules (FCA: principals and appointed representatives).

When you apply, the FCA expects a business plan showing your customer journey from start to finish, a financial promotions policy that makes it clear you are a broker and not a lender, and details of the lenders you work with and the commission you receive. As a regulated firm you also have to follow the FCA’s Consumer Duty and deliver good outcomes for customers (FCA: Consumer Duty letter to credit brokers).

Once you are authorised, our finance tools put a finance calculator and online application on your website and send applications straight to your lenders.

4. Consumer Rights Act 2015: what you owe every buyer

When you sell a car to a consumer, the Consumer Rights Act 2015 says the car must be:

  • of satisfactory quality (section 9), taking into account its age, mileage and price
  • fit for purpose (section 10), including any purpose the customer told you about
  • as described (section 11), so the advert, the listing and what you say must all match the car

If a car does not meet these standards, the customer has these remedies:

WhenCustomer's rightSource
Within 30 days of taking ownership and deliveryShort-term right to reject for a full refundSection 22
After 30 days, or instead of rejectingRepair or replacement, within a reasonable time and without significant inconvenienceSection 23
After one failed repair or replacementFinal right to reject, or a price reductionSection 24

Three points catch dealers out:

  • The six-month rule. If a fault appears within six months of delivery, it is assumed to have been there when the car was delivered unless you can show otherwise (section 19(14)).
  • Deduction for use. For most goods no deduction for use is allowed on a final rejection in the first six months, but motor vehicles are an exception, so you can make a deduction to reflect the use the customer has had (section 24).
  • “Sold as seen” does not work. A term that tries to exclude your liability for quality, fitness or description is not binding on a consumer (section 31). Calling a retail sale a “trade sale” does not change this.

5. Consumer Contracts Regulations: online and distance sales

If you sell a car at a distance, for example online or over the phone with no face-to-face visit, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 give the customer extra rights (Business Companion: distance sales):

  • Before the contract, you must give specific information, including your business address, the total price, your complaints process and the customer’s cancellation rights.
  • The customer can cancel for any reason within 14 days, starting from the day they take physical possession of the car.
  • You must refund the customer without undue delay and within 14 days of being told they are cancelling, normally using the same payment method.
  • The customer pays to return the car only if you told them they would have to. If you did not, you pay.

These rules also cover contracts made away from your premises, such as at the customer’s home. If you sell remotely, our electronic signatures let customers sign order forms and invoices on their phone, so the paperwork and pre-contract information are recorded in one place.

6. Unfair trading: the DMCC Act 2024

Since 6 April 2025, the unfair trading rules are in Part 4, Chapter 1 of the Digital Markets, Competition and Consumers Act 2024 (DMCC Act), which replaced the Consumer Protection from Unfair Trading Regulations 2008. It bans misleading actions, misleading omissions, aggressive practices and 32 practices that are always unfair. The Competition and Markets Authority can now fine businesses directly, up to the higher of £300,000 or 10% of worldwide turnover, and most banned practices are also criminal offences (CMA207: unfair commercial practices).

Trading Standards guidance for used car dealers (Business Companion: selling used vehicles) highlights:

  • Mileage. Giving false information about mileage, or altering an odometer reading, is prohibited. Check the mileage when you buy (get the seller to sign to say whether it is correct), compare it with the service history and the MOT history, and use a “mileage unverified” disclaimer only as a last resort after you have made those checks (Business Companion: mileage of used vehicles).
  • History. Failing to tell buyers a car is a previous insurance write-off, has mileage discrepancies or has had its diesel particulate filter removed can be a misleading omission.
  • Being a trader. Falsely claiming or implying you are a private seller is a banned practice.
  • Prices. Advertised prices must include all non-optional charges, such as a compulsory admin fee.

7. Advertising your cars

Your adverts on your website, AutoTrader, social media and anywhere else must follow the DMCC Act rules above and the UK Code of Non-broadcast Advertising (the CAP Code), which the Advertising Standards Authority (ASA) enforces. The CAP Code’s motoring section says ads must not condone or encourage irresponsible or dangerous driving, including in how they refer to speed and acceleration (CAP Code section 19: motoring).

In practice, only describe a car as “HPI clear”, “full service history”, “one owner” or “no accidents” if you have checked it and can back it up. The history check company’s name is not a guarantee, and a claim you cannot prove is a misleading action. Finance adverts must also meet the FCA’s financial promotion rules.

8. Roadworthiness and MOTs

Under section 75 of the Road Traffic Act 1988 it is an offence to supply a vehicle in an unroadworthy condition, and “supply” includes offering to sell and exposing for sale. There is a defence if you had reasonable cause to believe the car would not be used on the road until it had been made roadworthy, but as a trader you must also prove you took all reasonable steps to make sure buyers knew about its condition.

A current MOT is not proof that a car is roadworthy today. Trading Standards recommend having a qualified person inspect each car before sale, only letting customers test drive cars that have been safety-checked, and clearly marking and separating any car that is being sold for spares or repair (Business Companion: car traders practical checklist).

9. Write-offs and salvage

Insurers put written-off vehicles into four categories (GOV.UK: insurance write-offs):

  • Category A: cannot be repaired, and the whole vehicle must be crushed.
  • Category B: cannot be repaired, and the body shell must be crushed, but parts can be salvaged.
  • Category S: can be repaired after structural damage.
  • Category N: can be repaired after non-structural damage.

Category S and N vehicles can go back on the road once repaired to a roadworthy condition, and DVLA records the category in the log book. Always tell buyers about a write-off history, in writing. Our guide to Cat S and Cat N write-off categories explains what each category means and what to check before you buy one.

If your business is wholly or mainly buying written-off vehicles and repairing and reselling them, or you strip vehicles for parts and scrap the rest, you count as a motor salvage operator under the Scrap Metal Dealers Act 2013, and you need a scrap metal dealer licence from your local council.

10. Trade plates and motor trade insurance

Trade licence plates let you, your staff and your customers drive vehicles your business has for purposes such as selling, repairing or testing, including customer test drives, without registering and taxing each one (GOV.UK: trade licence plates). You apply to DVLA on form VTL301 and must include a copy of your motor trade insurance certificate. Other types of insurance are not accepted (GOV.UK: apply for a trade licence).

When you use trade plates you can only use them for the purposes on your application, the vehicle must be roadworthy and insured, and the plates must be on the outside of the vehicle, front and back, and readable from 20 metres (GOV.UK: rules for using trade plates).

On insurance more generally:

  • Motor insurance. It is an offence to use a vehicle on a road without insurance (Road Traffic Act 1988, section 143). A motor trade (road risks) policy covers you to drive vehicles in your stock. Check it covers your staff and customer test drives.
  • Employers’ liability. As soon as you employ someone you need employers’ liability insurance of at least £5 million from an authorised insurer. You can be fined £2,500 for every day you are not properly insured (GOV.UK: employers’ liability insurance).

11. Data protection

Every dealer holds personal data: customer names and addresses, driving licences, finance applications and enquiries. Organisations, including sole traders, that use personal information must pay the ICO data protection fee unless they are exempt (ICO: data protection fee). The fee depends on your size, and the ICO can fine businesses that should pay and do not.

You also need to follow UK GDPR: tell customers what you do with their data in a privacy notice, keep it secure and only keep it as long as you need it. For marketing emails and texts, you need the person’s specific consent, unless they are an existing customer who bought or negotiated to buy something similar from you and you gave them a simple way to opt out at the time and in every message (ICO: electronic mail marketing).

12. Money laundering: cash payments of €10,000 or more

If you accept cash payments of €10,000 or more for a car, whether in one payment, several payments for the same deal, or payments that appear to have been split up, you must register with HMRC as a high value dealer before you do (GOV.UK: high value dealer registration). Cash includes notes, coins and traveller’s cheques, and a customer paying cash straight into your bank account counts.

Registered high value dealers must carry out customer due diligence, keep records and have anti-money laundering policies in place. If you do not want that responsibility, set a clear limit on the cash you accept below the threshold and stick to it.

13. Planning permission for your premises

Under the Town and Country Planning (Use Classes) Order 1987, using land or buildings for the sale or display for sale of motor vehicles does not fall into any use class. It is “sui generis” (of its own kind), so changing a site to car sales generally needs planning permission from your local council. That applies to a forecourt, a unit on an industrial estate or displaying cars for sale at home. Check with your council’s planning team before you sign a lease, and check the lease itself allows car sales.

14. DVLA: V5C and keeper changes

When you buy a vehicle into stock, DVLA must be told it has been sold into the motor trade. You can do this online on the seller’s behalf, or the seller or you can fill in the yellow V5C/3 slip and post it to DVLA (GOV.UK: tell DVLA you’ve sold, transferred or bought a vehicle). When you sell a car to a customer, make sure DVLA is told about the new keeper and the customer gets the green new keeper slip. Our guide on how to put a car into the trade walks through the online service and the V5C/3 slip step by step.

Before you buy any car, check it is not recorded as stolen, has no outstanding finance and has not been written off, and keep records of those checks with the vehicle.

How Haswent helps you stay on top of it

Most of these rules come down to good records: what you paid, what you said about the car, what you checked, what the customer signed and when. Haswent keeps it with each vehicle:

  • Invoices and VAT. Our car sales invoicing raises margin scheme and standard VAT invoices for each car and keeps the records your accountant needs.
  • Finance. The finance hub puts a finance calculator and application on your website and sends applications to your lenders.
  • Signed paperwork. Electronic signatures let customers sign order forms, invoices and disclosures remotely, with a record of who signed what.

For more on keeping sales paperwork in order, see our guide to dealer invoice management, and our dealership software guide explains what else to look for in a system.

Starting out? Work through your numbers with our free startup cost calculator, or contact us for a demo.

Sources

Frequently asked questions

Do you need a licence to sell used cars in the UK?

There is no single car dealer licence in the UK. Instead you need the registrations that match what you do: registering your business with HMRC or Companies House, VAT registration once your turnover goes over £90,000, FCA authorisation if you introduce customers to finance, a trade licence from DVLA if you want trade plates, the ICO data protection fee, and high value dealer registration with HMRC if you accept cash of €10,000 or more. Your premises may also need planning permission.

Do I need FCA authorisation to offer car finance?

Yes, if you introduce customers to a finance company or lender you are credit broking, which needs FCA authorisation. Dealers who only broke finance for the vehicles they sell can usually apply for limited permission. Some dealers instead become an appointed representative of an FCA-authorised principal firm, which takes responsibility for their credit broking.

Can a customer return a used car bought from a dealer?

Yes, if the car is faulty. Under the Consumer Rights Act 2015 a customer who buys from a dealer can reject a car that is not of satisfactory quality, fit for purpose or as described within 30 days for a full refund. After that you normally get one chance to repair or replace it, and if that fails the customer can reject it or ask for a price reduction. For cars, you can make a deduction for the use the customer has had. If the customer bought at a distance, such as online with no visit, they can also cancel within 14 days of getting the car, even if nothing is wrong with it.

Does "sold as seen" or "trade sale" protect a dealer?

No. When you sell to a consumer, a term that tries to exclude your liability for satisfactory quality, fitness for purpose or the car matching its description is not binding on them under section 31 of the Consumer Rights Act 2015. Pretending to be a private seller is also a banned practice.

Is it illegal to sell an unroadworthy car?

Yes. Section 75 of the Road Traffic Act 1988 makes it an offence to supply, offer to sell or expose for sale a vehicle in an unroadworthy condition. There is a defence if you had reasonable cause to believe it would not be used on the road until it was repaired, but a dealer must also show they took all reasonable steps to make sure buyers knew about its condition.

When does a car dealer have to register for VAT?

When your VAT taxable turnover goes over £90,000 in the last 12 months, or you expect it to go over £90,000 in the next 30 days. For a car dealer that is your total sales, not your margin. Once registered, most used cars can be sold under the VAT margin scheme.