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Motor trade insurance
Test drive cover is the part of a motor trade policy that insures a prospective buyer driving your vehicle on the road. It matters because a test drive puts an unknown driver in your stock, and the policy terms decide whether a crash or theft is covered.
Part of: Motor trade insurance
In short
Letting a customer drive a car on a public road means you are permitting their use, so the Road Traffic Act 1988 requires insurance for it. Motor trade policies usually cover test drives only under a specific clause, with conditions such as a minimum age, a full licence held for a set period and an employee in the car. Check the driver's licence with a DVLA check code before the drive, keep a record, and read how your policy treats unaccompanied drives and theft by deception, which are common sources of declined claims.
Section 143 of the Road Traffic Act 1988 says a person must not use a motor vehicle on a road or other public place without insurance that meets the Act, and must not cause or permit anyone else to do so (see compulsory motor insurance). When a dealer hands keys to a customer, the dealer is permitting that use.
If a test driver is not covered by the policy and injures someone, section 151 can still require the insurer to satisfy certain third party judgments. The same section gives the insurer rights to recover what it pays, including from an insured person who caused or permitted the use. In practice, a test drive outside the policy terms can leave the business paying for its own vehicle and facing a recovery claim for third party costs.
Test drives sit within road risks cover, whether bought on its own or as part of a combined motor trade policy.
Wordings vary between insurers. The table shows terms that commonly appear; your schedule and policy wording are what count.
| Term | What it usually means | Why it matters |
|---|---|---|
| Purpose | The drive must be for the purpose of a sale | Lending a car to a friend or customer for other reasons is usually outside the clause |
| Driver age and licence | A minimum age and a full licence held for a stated period | A younger driver or recent licence holder may not be covered at all |
| Accompanied | The policyholder or an employee must be in the car | Unaccompanied drives are often excluded or need agreement |
| Excess | A separate or higher excess for damage during a test drive | Increases your share of every loss |
| Records | Evidence of identity and licence checks | Insurers may ask for these after a claim |
Who else can drive under the policy, such as staff and family members, is covered in our page on who can drive on a motor trade policy.
It is an offence under section 87(2) of the Road Traffic Act 1988 to cause or permit someone to drive a vehicle of a class their licence does not cover. A licence check protects you from that and helps show the insurer that the drive met the policy terms.
DVLA's online service lets a driver create a check code to share their driving record. GOV.UK says the check code is valid for 21 days. To use it, you go to the check driving information service and enter the last 8 characters of the driver's licence number and the code. GOV.UK says each code can only be used once, so a new check needs a new code. The check shows the vehicles the person can drive and any penalty points or disqualifications.
A practical approach is to ask buyers to bring a check code when they book a drive, look at the photocard in person, and keep a dated record of the check alongside the drive.
The highest-risk drive is the one where a customer leaves alone. If the vehicle does not come back, many motor trade policies exclude or limit cover for loss where the vehicle was obtained by deception, for example where someone posing as a buyer uses false identity documents. Some policies also exclude theft where the keys were handed to a person who then drove off. Key and forecourt conditions are covered in our page on forecourt stock theft and key security.
Where unaccompanied drives are allowed, insurers often expect extra checks, such as verified identity, proof of address, a licence check and a signed declaration. Some dealers hold the customer's own car keys during the drive. These are practical steps, not a substitute for reading the wording; if your policy does not cover unaccompanied drives, the steps do not change that. Our demonstration vehicle scenario shows how one of these claims can unfold.
Under Schedule 6 to the Road Vehicles (Registration and Licensing) Regulations 2002, a motor trader can use a vehicle under a trade licence for its test or trial for the benefit of a prospective purchaser, including travel to and from the place of the test. DVLA's VTL301 application form also says vehicles used on trade plates must be roadworthy, insured and have a valid MOT or MOT exemption.
Trade plates are about vehicle tax and registration, not insurance. Some policies restrict cover on trade plates to employees or to the policyholder, so check whether a customer may drive on them. More detail is in our guide to trade plates rules and insurance.
Apex arranges motor trade insurance including road risks and combined policies for dealers and other traders. A broker reads the enquiry and comes back with options, and there is no fee for a quote. Cover is subject to the insurer's acceptance and the policy terms. We need what the business does, the address and any premises, who drives (ages, licences, points), turnover, vehicle values for own stock and customers' vehicles, claims history, and how you run test drives. See motor trade insurance and our used car dealer insurance guide.
Only if your motor trade policy covers test drives and its conditions are met. Many policies include a demonstration clause with limits on age, licence history and whether the driver must be accompanied. Read the clause and schedule before you hand over keys, and keep evidence of the checks you made.
Ask the customer to create a DVLA check code online. You then use GOV.UK's check driving information service with the last 8 characters of their licence number and the code. The code is valid for 21 days and can only be used once.
Only if your policy allows unaccompanied drives, and often only with extra checks such as verified identity and proof of address. Many policies exclude or limit unaccompanied drives, and loss by deception is a common exclusion, so check before agreeing.
The 2002 Regulations allow use under a trade licence for a test or trial for the benefit of a prospective purchaser. The vehicle still needs insurance, and some policies limit who may drive on trade plates. Check your wording.
The insurer may still have to meet certain third party injury and damage claims under section 151 of the Road Traffic Act 1988, then seek to recover the cost, including from the person who permitted the use. Damage to your own vehicle would usually be uninsured.
Tell us what your business does, who drives, your premises and vehicle values. A broker reads every enquiry and comes back with options. No fee for a quote. Or call 0117 325 0027.
Start a motor trade enquiry Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
