Starting a used car business in UAE can be a lucrative venture and an incredibly rewarding experience. The Complete Guide on How to Start a Used Car Business in UAE is the perfect resource for anyone wanting to start their own small business in this area.
With this guide’s comprehensive advice and clear explanations of each step, any entrepreneur becomes an expert in setting up their own used car business in UAEand a used car dealership.
Which license do you need for the used car business in UAE?
If you want to start a used car business in UAE, you’ll also need to obtain an appropriate license from the Department of Economic Development (DED).
You have three options to choose from:
- Commercial
- Industrial
- Professional
As you have chosen the activity “used car dealership or trading” for your business type, the accurate trading license for your business would be a commercial business license.
The DED licenses used car businesses as “trading companies” and require that the company has at least two partners or dealers in order to operate.
Also, note that the license you acquire should be granted by the authorities that are in charge of Dubai Automotive Zone (DAZ) activities. The license of the second-hand car business in Dubai will be valid for one year only. You have to renew it before the expiry date to run the business smoothly.
With the trading license option, you also have to decide on the right location and office space for your used car business in UAE.
Also read: How to Start a Car Wash Business in Dubai
Free zone
Opening a used car business in UAE free zone gives you complete 100% ownership of your business setup. However, you can go to used car sales only in free zones of Dubai and UAE.
Mainland
Launching a used car business in UAE mainland gives you an opportunity to do business locally as well as internationally. You can open your used car trading store in the Dubai expo 2020 zone.
Offshore
An offshore business setup lets you do business only internationally. However, it is not the right type of location or jurisdiction for your used car business.
If you are interested in opening a taxi business in Dubai, then we also have a complete guide to help you.
With that, any person involved in the used car business in UAE must pass background checks and credit checks.
The capital requirements to start a used car dealership in Dubai include a minimum capital of AED 200,000.
It is important to note that there may be extra requirements depending on the type of cars being sold or auctioned. Once you have obtained your trading license, you will be able to legally conduct a successfully used car business in UAE.
Key points to start a used car business in UAE
User car dealership business plan
Starting a used car business in UAE requires careful planning and market research. After choosing the license type, now you have to understand the user car market. Make a strategic business plan including all the goals, mission, business activities, and products.
Legal structure
As you have a commercial business license for your used car business in UAE. To run a commercial business, you need a UAE local sponsor for your business. The local sponsor will have 51% shares of the company.
A commercial trading license for used cars allows you to have a minimum of 2 to till 50 shareholders for your used vehicle business in Dubai.
Trade name
Many used car dealers already have occupied different business names. Your task is to use a business name that is unique but also indicates your type of business of used car selling and is legally compliant.
Relations with suppliers and dealers
It is also important to identify and assess potential suppliers, as well as to decide on your targets for sales volume, customer base in the used car market, and profit margins.
Website and marketing
You need to set up a functional website with an online showroom that allows customers to browse through your selection of cars. Since the used car industry is very competitive, you need to use different social media platforms to attract new customers and use ads in local newspapers for more business opportunities.
Care for the product
You must ensure that all of your cars are properly maintained and serviced before being sold. By taking the time to plan and prepare properly before launching a used car business in UAE, you can ensure the best possible start for your venture.
Other than the used car business in UAE, you can also start a car wash business in Dubai as well.
Also read: How to Start Taxi Business in Dubai
The steps to launch a used car business in UAE
Launching a used car business in UAE can be a rewarding and lucrative venture, provided that it is done right.
Licensing requirements
The first step would be to register the business with the Department of Economic Development (DED) in Dubai. This will require submitting the relevant documents and information, such as an application form, proof of ownership or rental agreement of the premises, and other related documents.
License Acquiring
After submission, you will obtain a trade license from the DED so that you are legally allowed to operate your business in Dubai.
RTA approval
You will need to obtain approval from the Roads & Transport Authority (RTA) for your vehicles and make sure they comply with UAE regulations.
VAT payment
You need to register for Value Added Tax (VAT) and pay any relevant fees associated with this if the threshold is above AED 3,50,000.
Supply chain arrangement
You will need to select suitable suppliers of used cars and arrange for their delivery to your business premises in Dubai. With these steps taken care of, you will be ready to launch your used car business in UAE
Open bank account
It is an absolute necessity to establish a banking account in Dubai in order to correctly document all expenditures and sources of income. This is an integral part of getting a clear picture of a business’s financial well-being. Keeping an organized and accurate record will make VAT registration and filing simpler.
Rent car business in Dubai is also one of the promising business setups in Dubai as the population in leading cities is increasing each day.
Also read: Is Starting a Rent a Car Business In Dubai Worth It?
Final words on the used car business in UAE
Setting up a business in Dubai is a straightforward process that grants foreign nationals complete ownership. Moreover, the Dubai Auto Zone (DAZ), a duty-free zone that has a favorable tax system, is also open for the establishment of automobile-selling businesses. Note that only cars and not spare parts can be sold in the DAZ. Finally, joint ventures and free zone companies can also be used to facilitate the sale of vehicles in Dubai.
So, if you really want to open your used car business in UAE, consult Vigor’s business setup to get an updated guide on the registration process and other legal complexities.
