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Motor trade insurance
Used car dealer insurance is a motor trade policy that covers driving stock on the road and, on a combined policy, the vehicles, premises and liabilities of a dealership. Dealers carry several risks at once, and a gap in one part of the cover often shows up only when a claim is made.
Part of: Motor trade insurance
In short
A used car dealer usually needs road risks cover for driving stock, and if trading from premises, a combined motor trade policy that adds stock, premises, liability and business interruption. Insurers look closely at stock values, key security, who drives and how test drives are run. Separately, dealers sell under the Consumer Rights Act 2015, which gives buyers rights that a contract cannot exclude, and dealers who introduce customers to finance generally need FCA permission. Insurance does not usually pay for meeting those legal obligations, so they are worth understanding alongside the policy.
Most dealers start with road risks cover, which lets named drivers use vehicles in the trade on public roads. Once you trade from a forecourt, unit or showroom, a combined motor trade policy usually brings the other parts together. The table below is a general guide; what a particular policy includes is subject to the insurer's acceptance and the policy terms.
| Risk | Cover commonly used | What insurers usually ask |
|---|---|---|
| Driving stock and customer cars on the road | Road risks (third party, third party fire and theft, or comprehensive) | Drivers, ages, licences, points, use of trade plates |
| Stock on the forecourt or in a unit | Stock or vehicles in the open / in buildings | Maximum stock value, highest single vehicle value, security, key storage |
| Buildings, contents, tools and equipment | Premises or material damage section | Construction, alarms, fire protection, ownership or lease |
| Injury or damage to the public | Public and products liability | Turnover, activities, visitors, any repair or preparation work |
| Staff | Employers' liability (compulsory if you employ people) | Number of employees and wageroll |
| Lost income after damage | Business interruption | Gross profit and how long it would take to recover |
For more detail on liability and staff cover, see our guides to public liability insurance and employers' liability insurance.
Stock is usually the largest value a dealer holds, and it is where many claims start. Policies commonly set a maximum total stock value and a limit for any one vehicle. If you buy a run of higher-value cars, or stock levels peak before a plate change, tell your broker before the limit is exceeded, not after a loss.
Theft cover for stock is often conditional on how keys are kept. Typical conditions require keys to be held in a locked safe or key cabinet out of hours, and some exclude theft where keys were left in or on the vehicle. Read these conditions carefully, because a claim can fail on a key condition even where the rest of the policy is in order. Our page on forecourt stock theft and key security covers this in more depth.
There is also a DVLA point. GOV.UK says a motor trader does not need to make a SORN for a vehicle that is only temporarily in their possession until sold, kept at their business premises, and where the registered keeper has told DVLA it has been sold or transferred to the trader (GOV.UK: SORN exceptions for motor traders). Stock kept on a public road does not fall within that exception, which matters for both tax and insurance.
Under section 143 of the Road Traffic Act 1988, a person must not use a motor vehicle on a road or other public place, or cause or permit anyone else to, without insurance that meets the Act. When you hand keys to a prospective buyer, you are permitting their use, so your policy needs to cover it.
Motor trade policies usually deal with customer test drives through a specific clause. Common terms include a minimum age, a full licence held for a set period, the driver being accompanied by you or an employee, and the drive being for the purpose of a sale. Unaccompanied drives are often excluded or restricted. You can check a buyer's licence entitlement and points using the GOV.UK check driving information service with the last 8 characters of their licence number and a check code they create. Our page on test drives and demonstration cover sets out a practical checklist.
Trade plates allow a licensed motor trader to use an untaxed vehicle for limited purposes, including a test or trial for the benefit of a prospective purchaser. They do not provide insurance. See trade plates for the rules.
When a dealer sells to a consumer, the Consumer Rights Act 2015 applies. These rights shape what customers can ask of you after a sale:
Separately, section 75 of the Road Traffic Act 1988 makes it an offence to supply a vehicle in an unroadworthy condition, with limited defences such as supply for export. Advertising and sales practices are covered by the unfair commercial practices provisions of the Digital Markets, Competition and Consumers Act 2024, which the CMA says apply from 6 April 2025 and replace the 2008 regulations (CMA guidance CMA207).
A motor trade policy is generally not designed to pay refunds, repairs or price reductions owed to buyers under consumer law. Those are business costs. Liability cover may respond where a defect causes injury or damage to third parties, subject to the policy terms.
Introducing customers to car finance is a regulated activity. The FCA's guidance for motor dealers says a dealer that owns the vehicles it sells meets the FCA's definition of a supplier and can apply for limited permission, usually for secondary credit broking. It adds that debt adjusting and debt counselling permissions may be needed if you take part exchanges with outstanding finance, and that introducing customers to finance for other purposes needs full permission.
This is a regulatory requirement, not an insurance one. A motor trade policy does not provide FCA permission, and it does not usually cover regulatory fines or finance-related complaints. If you broker finance, tell your insurance broker, because it changes the shape of the business being presented.
These are illustrative examples, not real cases. Outcomes always depend on the policy wording and the facts.
A dealer leaves keys in a car while a customer browses. The car is driven off. If the policy has a condition excluding theft where keys are left in the vehicle, the claim may fail even though the dealer has stock cover.
A dealer buys several cars at auction ahead of a busy month and the total value goes above the stock limit on the schedule. A fire damages the forecourt. The insurer may limit what it pays to the stated limit, or apply the policy's terms on underinsurance. A premises fire scenario shows how this can play out.
Apex arranges motor trade insurance for dealers, from road risks to combined policies covering premises, stock, liability and road risks. A broker reads your enquiry and comes back with options, and there is no fee for a quote. Cover is always subject to the insurer's acceptance and the policy terms. To quote, we need what the business does, your address and premises, who drives (ages, licences, points), turnover, vehicle values for your own stock and any customers' vehicles, and your claims history. Start at motor trade insurance.
If you drive stock on public roads, the Road Traffic Act 1988 requires insurance for that use, and a private car policy is not usually written for trading. Whether you are trading at all is a question of fact; our guide on how many cars you can sell before you are a motor trader covers the HMRC and consumer law points.
Usually only if the policy has a demonstration or test drive clause and you meet its terms. Common conditions include a minimum age, a full licence held for a set period, and the driver being accompanied. Unaccompanied drives are often excluded or limited, so check the wording before handing over keys.
Not with consumers. Section 31 of the Consumer Rights Act 2015 makes a term that excludes or restricts the satisfactory quality, fitness for purpose and description rights not binding on the consumer. Faults specifically pointed out to the buyer before the sale are treated differently under section 9(4).
Generally no. Refunds, repairs and price reductions owed under the Consumer Rights Act 2015 are business costs, not insured losses. Liability sections may respond where a defect causes injury or damage to someone else, subject to the policy terms and any exclusions.
If you introduce customers to finance providers, you generally need FCA permission for credit broking. The FCA says dealers that own the vehicles they sell can apply for limited permission. Check the FCA's motor dealers guidance for your exact model.
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.
