Why do banks hate used car dealers so much? The AI Car Dealership Project Part 3

  • In this week’s episode of The AI Car Dealership Project, we struggle with banks and bureaucracy 
  • Six banks turn us down, with some citing used car dealers as the problem
  • But there’s some hope as AI helps us try to buy our first car for a waiting customer
  • Watch episode three of our special series above

Time 10:02 am, December 15, 2023

This week there have been some highs and lows with my AI Car Dealership Project – actually, that’s pushing it a bit: It’s mostly been lows.

I knew there would be some stumbling blocks on the road to setting up my own used car dealership – even with the help of AI – but I didn’t think they would come so soon and be quite so hard to navigate around.

I’ll start with the highs. I’ve finally settled on a name for my business suggested by ChatGPT – the Clever Car Collection Ltd.

Despite Companies House’s best efforts to thwart my registration, I persevered and it’s now a legal entity. I’ve got a letter to prove it and everything.

Opening a bank account, though, has turned into a rather unexpected saga. 

What I’ve quickly found out is that banks don’t really like used car dealers. In fact, you’d think I’d turned up at their digital branches with a business plan that involved selling crack cocaine outside schools.

I’ve now been turned down by no fewer than six banks. The online-only options – which included Starling, Tide and Monzo – all said no. 

In fact, some said no faster than it took me to download their apps. 

What’s more, the problem with them being digital-only is they don’t really give you any clear reasons as to why they can’t help. A computer-says-no generated email simply says ‘declined’.

It was perhaps telling that one response, though, specifically said it doesn’t offer accounts to car dealers. I also suspect the fact the business is so new and doesn’t have a trading address yet are also issues.

Following these rejections, I turned to ChatGPT for some advice and my helpful assistant suggested I speak to a bank I already have a relationship with – so I tried Car Dealer’s money managers, Lloyds.

This was handy, because I could speak to a human who knew me and my existing business. It all started pretty positively, but overnight turned into an all-too-familiar ‘no’ email. Their problem was that my new firm would be too small.

As it stands, I’m waiting to hear from bank number seven – Barclays – who I seem to be a little further down the line with. By further, I mean it’s four days after I applied and they still haven’t said no. There’s still time yet.

First deal?

While the bank saga rumbles on, I very nearly did my first deal this week. 

A friend of mine has asked me to help her find a Mini estate – a Countryman or Clubman – with a diesel engine and auto gearbox. The budget is around £8k and preferably it’ll be black.

So far, I’ve been set up to buy cars on Carwow and Motorway’s auction platforms and have found them both rather addictive. I am already spending far too long scrolling through their daily listings.

It was during a call with my account manager at Motorway for a little further training that I spotted the perfect Mini. 

The Mini Countryman Cooper SD ALL4 had 67k miles, a decent spec, including sat nav, and was in the right colour.

I spoke to the client and explained what the car was like, sent some pictures and detailed the specification. We agreed on a mates-rates retail price, so all I needed was to win the car.

My first deal! Well, at least I thought it might be.

I worked out the fees and delivery charge, prep costs and added a very slim margin and placed my bid around £500 higher than the reserve, which in itself was just above the Cap Clean price. I then waited for the auction to end.

On Motorway you submit your best and final offer and there’s no way to go back in and increase it if someone outbids you. I find that a little strange as I’m used to auctions, like eBay, where you know if you’ve been outbid and can then redo your sums and bid more if you want to. 

The Motorway system simply automatically bids for you in increments up to your maximum, but if you get outbid you lose. And you only know that when the auction is over.

You guessed it. That’s exactly what happened to me.

The car went for just £300 less than the Cap retail price which is helpfully displayed on the Motorway listing. I really couldn’t get my head around that. How is a dealer going to make a margin on that car with the delivery and buyer’s fees added on? 

Maybe I missed something about the spec that made it more desirable? Maybe the figures listed on the auction page didn’t take into account the specification details that meant it was worth a lot more than I had assumed?

Let’s face it, I’m a little wet behind the ears here, so if someone could explain what I’m missing, it would be much appreciated. 

I was a little deflated by it, if I’m honest, but I went back to my client and explained the situation. I had told them the car was in an auction and that I would make sure it was secured for the price we had agreed and no more. 

When I explained it had gone for more than we talked about they were understanding enough. 

The search for the right car for them continues, but I will take some satisfaction in the knowledge that there’s a first deal there to be done if I can find the right car. 

Meanwhile, I’ve also been looking into trade insurance. The helpful chaps at brokers Howden have been on the case and are currently talking to some insurance companies about my new venture. I’m hoping they’ll manage to sort me something soon.

Next week I’m heading to Used Car Award-winning dealership Car Quay for three days of real-life work experience in the hands of our Dealers’ Dealer of the Year, Jamie Caple. 

I’m hoping to pick up some tips on selling cars, some ideas of how I can deploy AI even further at the Clever Car Collection and, you never know, I might even buy a car at an auction.

The latest episode of The AI Car Dealership Project can be watched below. Subscribe to our YouTube channel for the latest video updates.

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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