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Starting a Motor Trade Business

So you’ve made the bold move to set up as a motor trader, well done! Whilst starting a motor trade business can have its fair share of complications -if done correctly – it can be highly lucrative. I mean, everyone has a vehicle, right?

By now you probably have a business name, a brand, some kind of offer, and now you’re looking for customers. Effective planning is the difference between success and failure when starting out. If done well, a loyal customer base will grow your business and yield huge premiums. But, unfortunately, this can also mean higher insurance premiums!

At 1st Choice, we have motor trade insurance specialists with a wealth of experience. So we decided to offer some advice. In this blog we will outline 3 key considerations all start-up motor traders should bear in mind to reduce insurance premiums.

1. Be specific about exactly what service you offer

Sound obvious? It certainly is, but surprisingly it’s often overlooked. If your business operates in a variety of motor trade services, for example, car sales and HGV repairs, the cost of your motor trade insurance policy will increase. This is because of the increased risk. As a start-up, becoming a specialist will present less risk to an insurer as risks are easier to calculate.

Premiums, in a nutshell, reflect the level of risk a policy holds to an insurer. The risk is determined by two factors. These are the probability of a claim, and the size of the payout in the event of a claim. Risks can be calculated in a number of ways, it could be demographical data, credit scores, the value of assets, types of vehicles, location and personal history, to name a few.

So to give some example, car dealerships who tend to work from one location and typically spend less time driving cars on the road; is considered less risky by insurers. However, motor traders who offer a breakdown service too, typically spend more time on the road, potentially during rush hour would expect to pay a higher premium. This is because the risk of a claim increases.

Our Tip: When starting a motor trade business, we advise traders to specialise and focus on a particular service, at least for the first year. By being very specific about exactly what your business will do, will reduce the risk to, saving you a lot of money on your insurance.

2. Location, Location, Location 

When starting a motor trade business, most overlook the link between location and motor trade insurance premiums. According to, inhabitants of the most crime-ridden or geographically challenged areas will get higher premiums from insurers – or worse still, refusal of cover – even if you have never made a claim in your life!

Typically, more populated areas carry more risk. Urban areas have higher crime rates, more congestion and therefore dangerous roads, and a general history of higher claims. That’s why Birmingham and London are considered high risk and expensive areas for business insurance. Insurance premiums in these locations can be a whopping 5 times higher than premiums in less risky areas such as Cornwall.

Our Tip: Neighbouring towns or even business parks at opposite ends of town can carry different levels of risk, so consider the best location for your business. Always consider choosing a location with good security features. Bolted tool chests, CCTV, steel shutters and fitted alarms can all lower the risk of a claim and will have a positive effect on your premium.

3. Be specific about the types of vehicles you will work on

Finally, one consideration that could save start-up motor traders a small fortune is to decide exactly what vehicles you will work on. For example, standard run of the mill cars tend to attract lower premiums than sports or prestige vehicles, HGV’s or buses. Specialising in certain vehicles types is a great way to lower your insurance premium.

The main difference between the standard run of the mill cars or sports or prestige vehicles, for example, is their value, high-performance nature, and theft attractiveness. More valuable vehicles increase the risk to insurers. That’s why motor traders who work on purely standard run of the mill cars will pay lower insurance premiums than traders who deal with classic, rare, or supercars. Also, compared to cars, buses, large vans, and HGV’s are much larger and tend to be used for commercial reasons. If any service you offer results in any issues such as mechanical failure, the cost and disruption can be much greater. This increases, you guessed it, risk.

Our Tip: When starting a motor trade business, always think about what vehicles you will specialise on. Telling an insurer that you will focus on a particular area of expertise will always present lower risk than a motor trade business who works on all vehicle types.

Talk to 1st Choice

As mentioned earlier, motor trade insurance premiums are calculated by risk. The higher the risk (chance and value of a claim) the higher premium you can expect to pay. Following our 3 tips will give your start-up motor trader business a great place to start from when looking for cheaper motor trade insurance.

Talk to us today about your motor trade insurance policy. We are experts in motor trade and will listen to your needs and help you get the very best quotes from leading insurers. Call our friendly, experienced team on 0800 078 7003 or 0300 600 0603 for a no obligation quotation, or use our Get a Quote Form. For peace of mind, make us your 1stChoice!

Article was written for The Garage & MOT Magazine