Business type: buying and selling vehicles

Read Core: applies to everyone first. This file adds the rules that apply only to a vehicle dealer.

Vehicle dealing is one of the most regulated small businesses in South Africa. It has three registration layers that other businesses do not have, and one legal risk that can destroy a small dealer in a single transaction.

Read the Consumer Protection Act section before you buy your first vehicle. It is the part that costs people money.

Quick answer: what you must have

Required, in this order:

1. A registered business, if you want to hold vehicles in a business name (see Register: what you actually need)
2. A Business Register Number Certificate or Traffic Register Number, so vehicles can be registered to the business
3. Registration as a second-hand goods dealer with SAPS (free, but compulsory)
4. A municipal business licence, in most municipalities
5. Correct trading premises zoning
6. A written sale agreement that complies with the Consumer Protection Act
7. Insurance covering stock vehicles and test drives

Optional but often needed:

8. Motor trade numbers, if you drive unregistered stock on public roads
9. VAT registration, which becomes valuable earlier than for most businesses
10. NCR registration, if you ever extend credit yourself
11. An FSP licence, if you sell insurance, warranties, or finance products

Layer 1: SAPS second-hand goods dealer registration

This is compulsory and most small dealers do not know about it.

The Second-Hand Goods Act 6 of 2009 sits under the Minister of Police. Its purpose is to stop trade in stolen goods.

The principal business activities that must register include an Auctioneer, General Dealer, Jeweller, Motor Vehicle Dealer and Scrap metal Dealer. The Act applies to a person who carries on a business of dealing in second-hand goods.

Second-hand goods are items worth over R100 that have been in use by a person other than the manufacturer or producer. Dealers must register with SAPS, keep detailed registers of transactions for five years, verify supplier identities, and report suspected stolen items.

How to register

Obtain the application form from the office of the Designated Police Officer or from the SAPS website at www.saps.gov.za(external link), complete and sign it, and lodge the completed form and all required documents with the office of the Designated Police Officer.

The form is the SAPS 601. No payment is required. Registration is free.

Required documents: two colour ID photos of the applicant no older than 3 months, and a certified copy of the RSA ID document or foreign passport of the applicant and of every person responsible for the day-to-day management of the business.

Any person other than a natural person may only be registered if a natural person who is not disqualified under the Act is appointed to manage the business. For a company, you name yourself as the responsible person.

After considering the application, the National Commissioner may issue a certificate of registration or a temporary registration, depending on the circumstances.

Apply at the SAPS station in the area where your business premises are situated.

The register you must keep

This is the part that gets dealers in trouble during an inspection.

A dealer dealing in second-hand motor vehicles must record in the prescribed register the particulars of every acquisition and disposal of a motor vehicle, including: the vehicle identification number (VIN) and the chassis and engine number; the odometer reading; the exterior and trim colour; and any distinguishing mark or feature, such as microdot particulars.

You also record who you bought from and who you sold to.

A person acquiring or disposing of a motor vehicle from or to a dealer must furnish the dealer with proof of identity. The dealer must obtain and keep a copy of the identity document or passport, and must obtain and keep proof of registration or deregistration. The dealer must retain these copies for not less than five years from the date of the transaction.

Practical rule: never take a vehicle in without a photocopy of the seller's ID and the registration certificate. Never. A vehicle bought from someone who will not show ID is either stolen or about to become your problem.

Keeping your registration valid

The holder of a certificate of registration must notify the National Commissioner in writing within 30 days if there is any change to the information submitted in the application, a change in the control or ownership of the dealer, or any change that affects the dealer's ability to meet the requirements for registration.

If the responsible person recorded on the certificate changes, the dealer must complete a SAPS 604 form and submit it to the SAPS station where the original application was made, even if the certificate has not expired.

If an application for renewal is lodged within the required period, the registration remains valid until the renewal is decided. Diarise your renewal date.

Inspections

A police official may require the dealer or the person in control of the premises to produce the certificate of registration relating to those premises for inspection.

Keep the certificate on the wall at the premises, not in a drawer at home.

Layer 2: getting vehicles registered to the business

A vehicle you hold as stock has to sit somewhere on the national system.

For a dealer, a Traffic Register Number (TRN) or Business Register Number Certificate (BRNC) is worth having. It separates stock vehicles from your personal vehicle on the system, which matters when fines arrive.

If you trade as a company

You need a Business Register Number Certificate (BRNC). Full process, documents, costs, and the proxy rules are in Vehicles and your business.

Short version: eNaTIS identifies every vehicle owner by an identity number. A company does not have one, so the registering authority issues it a business register number the first time it needs to own a vehicle. You apply in person at your local traffic department with form ABR, and you nominate a proxy.

If you trade as a sole proprietor

You have two routes.

Register vehicles against your own ID number. Simple, and legal.

Or apply for a Traffic Register Number. If you are an organisation that serves as a non-legal person, for example a partnership, a one-man business, a church, a trust, or a statutory body, you must apply for a traffic register number to register motor vehicles in South Africa.

A traffic register number lets a trading name appear on the vehicle record rather than only your personal ID. Apply at your registering authority. Bring proof of address, ID photographs, and the prescribed fee.

Layer 3: motor trade numbers

If you drive an unregistered or unlicensed vehicle on a public road as part of your business, you need this.

To drive an unregistered vehicle on a public road in South Africa you must have a motor trade permit and number. A motor trade number is used by registered manufacturers, builders or importers, motor transport contractors, motor dealers or financial institutions to operate an unregistered and unlicensed motor vehicle on a public road in the course of their business.

A motor dealer may use it to deliver, sell, exchange or repair a motor vehicle.

How to apply

Complete the Application for motor trade number (MTN1) form. Indicate why you need trade numbers and how many you need. The application is processed on the same day. Get the fees from your local registering authority.

The applicant must apply for a motor trade number and then license the motor trade number. You need the identification of the company, which is the business registration certificate or traffic register number.

Cost

Fees are set per province. As published by the Western Cape Government:

Application for each motor trade number: R102. Licensing of a motor trade number for a motor vehicle other than a motor cycle, by a motor dealer, manufacturer, builder, importer or deposit-taking institution: R762. Licensing for a motor cycle: R168. Licensing by a motor transport contractor: R168.

Confirm the current figure with your own province. Fees differ.

Do you actually need one

Only if you move unlicensed stock on public roads. If every vehicle you buy is already registered and licensed, and you only move it after transfer, you can trade without trade numbers.

Most working dealers end up needing at least one, because you will buy a vehicle with an expired licence at some point.

The legal risk that matters most: the Consumer Protection Act

This is the section to read twice. Get this wrong once on a R200,000 vehicle and the profit from ten deals disappears.

Voetstoots does not protect you

Section 56 provides an implied six-month warranty of quality, allowing consumers to return defective goods within six months and choose a repair, replacement, or refund. As a result of this implied warranty, dealers can no longer rely on "voetstoots" or "as-is" clauses in CPA-governed sales. Such clauses remain relevant only in private sales under common law.

The Consumer Tribunal has ruled that a voetstoots sale does not apply to any transaction falling under the CPA, and that this kind of sale is also not allowed in terms of section 5 of the CPA.

Section 2(10) provides that no provision of the CPA may be interpreted as excluding a right a consumer would have under the common law, and section 56(4) states that the implied warranty of quality is in addition to any other warranty under common law. So a used car dealer cannot say he already guarantees the car for two years and that the terms of that guarantee apply instead.

Putting "sold voetstoots" on your invoice does nothing. It will not save you.

What the warranty actually says

Section 56 of the CPA provides an implied warranty of quality on all goods sold to a consumer by a supplier in the ordinary course of business. Even though the vehicle is second-hand, it must be reasonably suitable for the purposes for which it is generally intended, of good quality, in good working order, and free of any defects.

If the vehicle fails to meet these standards within six months of delivery, section 56(2) gives the buyer the right to demand, at the buyer's choice, that you repair the vehicle, replace the vehicle, or refund the price paid.

The choice is the customer's, not yours. You cannot insist on repairing when they have asked for a refund.

If defects recur after a repair within three months, the supplier must replace or refund. You get one attempt at a repair.

The one defence that works

The implied warranty does not apply if you specifically informed the buyer of the defects and they expressly or tacitly agreed to accept the goods in that condition. A general "voetstoots" clause is not sufficient. Specific defects must have been disclosed. It also does not apply where the breakdown is due to ordinary wear and tear, having regard to the age and mileage of the vehicle. However, a sudden major mechanical failure typically goes beyond ordinary wear and tear.

So your protection is disclosure, in writing, defect by defect.

Practical system for a small dealer:

Before you list any vehicle, have it inspected. Write down every fault you find. Photograph each one.

Put a defect schedule in your sale agreement. Not "sold as is". A numbered list: "1. Air conditioning does not cool. 2. Driver's door trim is loose. 3. Rear tyres at 3mm and will need replacing within 6 months. 4. Oil weep at the rocker cover gasket."

Have the buyer initial each line and sign the schedule.

Keep the signed schedule for five years alongside your SAPS register entry.

This single document is the difference between a disclosed defect and a section 56 refund claim.

Where disputes go

The Motor Industry Ombudsman of South Africa (MIOSA) provides independent dispute resolution for the motor industry and is free to consumers. Below that, the Small Claims Court needs no lawyer. Its limit is R30,000, determined in Government Gazette 55038, Government Notice 7717 of 20 July 2026, effective 1 August 2026. That replaced the R20,000 limit in place since 2019. Many websites still quote R20,000.

Note which way that runs. If you trade through a company, you cannot bring a claim in the Small Claims Court yourself: only a natural person may institute an action there. Your company can be taken there by a buyer, and a nominated director may appear for it, but to chase a customer who has not paid you will need the magistrates' court and an attorney.

Above that, the magistrates' courts. A district court has civil jurisdiction where the claim is R200,000 or less, and a regional court between R200,000 and R400,000. Larger claims go to the High Court.

A December 2025 Western Cape High Court ruling reinforced that buyers do not have to exhaust ombud or commission processes before approaching a court under the CPA, and that dealerships cannot hide behind voetstoots clauses or limited warranties when selling defective vehicles. The court upheld an order requiring a dealership to refund R175,000 against return of a defective vehicle.

Build the cost of the occasional refund into your margin. A dealer who prices for zero returns is pricing wrong.

VAT: register earlier than other businesses

The general advice in Tax and SARS says do not register for VAT voluntarily. For a vehicle dealer, that advice flips, and the reason is notional input tax.

How notional input tax works

Most of your stock comes from private individuals who are not VAT vendors. They charge you no VAT. Normally that would mean you pay VAT on the full selling price with nothing to claim back.

The VAT Act solves this.

When a non-vendor acquires goods, that non-vendor is the final consumer and bears the VAT. When those goods are later sold as second-hand goods to a vendor, there is a tax element included in the selling price which must be unlocked. The vendor accounts for VAT on the margin, which is the difference between the selling price and the cost of the goods. To achieve this, the vendor is allowed a notional input tax deduction on acquisition of the second-hand goods.

The notional input tax is calculated by multiplying the tax fraction (15/115) by the actual purchase price or the open market value of the goods, whichever is the lesser.

SARS worked example:

X, a non-vendor, sells a second-hand vehicle to a motor dealer and registered VAT vendor for R115,000, which is also the open market value. If the motor dealer paid the full purchase price and meets all conditions, it may claim R15,000 as notional input tax (15/115 × R115,000). If the dealer sells it for R120,000, the dealer's mark-up of R20,000 is correctly taxed at 15%, which is R3,000.

Without this mechanism, VAT on the R120,000 sale would be around R15,650. With it, you pay R3,000. That difference is your entire margin on a small deal.

The conditions you must meet

You must be a VAT-registered vendor, and you must acquire the goods under a non-taxable transaction in the course or furtherance of an enterprise.

SARS requires that the amount must actually be paid, in full or in part, before you can claim. The payment must be traceable and verifiable. Cash deals with no bank trail put the claim at risk.

The dealer is required to be in possession of a completed VAT264 form declaring that the supply of the motor vehicle is not a taxable supply.

The VAT264 form must be completed by both the purchaser and the seller. Get it signed at the same moment you take the vehicle, not later.

SARS publishes a dedicated guide: VAT 420 Guide for Motor Dealers. Read it before you register for VAT. The link is in Sources and verification register.

The decision

Below R2.3 million turnover you are not required to register. But a dealer turning over R900,000 a year buying mostly from private sellers is probably losing money by staying out of the VAT system, because notional input tax is worth more than the compliance cost.

Also understand how fast a dealer reaches the compulsory threshold. Turnover is gross sales, not margin. Sixteen vehicles sold at an average of R150,000 is R2.4 million. A dealer moving two cars a month crosses R2.3 million within the year, and you must register within 21 business days from the date you exceed R2.3 million, or from the date it becomes clear that you will. Track your rolling 12-month sales from month one.

Model it on your actual numbers, or pay a tax practitioner for one hour. This is the single highest-value hour a small dealer can buy.

Turnover tax is almost certainly wrong for a dealer

The core tax file describes turnover tax, with 0% on the first R600,000. It looks attractive. For a vehicle dealer it is usually a mistake, for two reasons.

It taxes turnover, not profit. A car bought for R140,000 and sold for R155,000 adds R155,000 to your turnover and R15,000 to your profit. At 1% on the band above R600,000, you would pay R1,550 in turnover tax on that deal against a R15,000 margin. Under normal tax, with SBC rates starting at 0%, a small dealer's actual profit is often taxed at nothing.

It removes you from the VAT system. Turnover tax replaces income tax, VAT, provisional tax, capital gains tax and dividends tax. That means no notional input tax, which is the single most valuable tax mechanism a used vehicle dealer has.

Stay on normal tax, check whether the company qualifies for SBC rates, and register for VAT when the numbers say so.

Paperwork on every deal

When you buy a vehicle in

• Copy of the seller's ID, kept for five years
• The original registration certificate (RC1)
• Confirm the seller's name on the RC1 matches the ID. If it does not, stop.
• Confirm the title holder. If the vehicle is financed, the title holder will be the financing institution. If the title holder is not the seller named in the paperwork, pause before paying, and ask which documents prove authority to sell. A settlement letter from the bank is required.
• A signed NCO (Notification of Change of Ownership) from the seller
• A signed VAT264, if you are VAT registered
• Your SAPS register entry, with VIN, chassis, engine number, odometer, colour, and distinguishing marks
• Photographs of the vehicle and of every defect

Possession of the keys is not the same as clear title. Never pay before the paperwork matches.

When you sell a vehicle out

• A valid roadworthy certificate. The Department of Transport vehicle registration page says used vehicle registration requires the certificate of roadworthiness if the current certificate is older than 60 days. Western Cape Government says a roadworthy test must be conducted every time a vehicle changes ownership.
• Your NCO, submitted so the vehicle stops being linked to you
• The buyer has 21 days to complete registration by submitting the RLV form with the RC1, roadworthy certificate, certified documentation, and the required fees.
• The signed defect schedule
• Your written sale agreement
• A tax invoice, or a normal invoice if you are not VAT registered (see Documents and templates)
• Copy of the buyer's ID for your SAPS register

Failing to meet the 21-day deadline carries penalties.

Do not hand over keys before the NCO is lodged. A vehicle still linked to you collects fines, e-tolls, and liability that are yours until the record changes.

Two things about stock that surprise new dealers

Unsold vehicles at year end are taxed as trading stock

Income tax is calculated on profit, and profit includes the value of stock you still hold at financial year end. Section 22 of the Income Tax Act requires closing trading stock to be brought into account, generally at cost.

In plain terms: if you bought four vehicles in February and have not sold them by your 28 February year end, their cost is not simply an expense that reduces this year's profit. It is carried as stock and only becomes cost of sales when each vehicle is sold.

This catches dealers who buy heavily before year end expecting a tax deduction. Keep a stock list with cost price per vehicle, dated, and give it to your accountant at year end.

If a bank finances your stock, the bank holds title

Dealers who grow often use floor plan finance, where a lender funds the purchase of stock. On eNaTIS the lender then appears as the title holder and you as the owner. If the vehicle is financed, the title holder will be the financing institution.

You cannot transfer a financed vehicle to a buyer until the lender's interest on that vehicle is settled and the lender releases title. Build the settlement step into your sales process, or a sale will stall at the registering authority with an unhappy buyer waiting.

Holding deposits

Customers will ask to "put down a deposit to hold the car".

Take it, but understand the Consumer Protection Act position. A consumer who makes a booking or reservation may cancel it, and you may charge a reasonable cancellation fee. What is reasonable takes into account the notice given and whether you could have sold the vehicle to someone else in the meantime.

A written deposit receipt stating the amount, the vehicle by VIN, the hold period, and the cancellation terms is what makes the fee enforceable. A WhatsApp saying "deposit non-refundable" is not.

Other registrations that may apply

Municipal business licence and zoning

Vehicle sales premises almost always need zoning approval for motor trade. Residential zoning does not permit a car lot. Check with municipal town planning before you sign a lease, because you cannot fix this afterwards.

Many municipalities also require a trading licence under the Businesses Act 71 of 1991. Ask your Business Licensing Officer.

If you extend credit yourself

If you let a buyer pay you in instalments, you are a credit provider under the National Credit Act.

Any person who is a credit provider under a credit agreement to which the Act applies must register with the National Credit Regulator before extending credit. The number or size of the loans no longer matters.

The old monetary threshold is gone. There is no small-dealer exemption. Registering as a credit provider is a serious undertaking with ongoing reporting duties.

The simple answer for a small dealer: do not offer your own instalment terms. Refer the buyer to a bank or a registered finance house. Take full payment before delivery.

If you sell warranties, insurance, or arrange finance

That is financial services. It requires an FSP licence under FAIS, or you must operate as a representative of a licensed FSP. Selling a service plan or a warranty product off your own bat, unlicensed, is an offence.

Partner with a licensed provider instead. They will appoint you correctly.

Imported vehicles

Imported vehicles bring a separate stack of requirements: SARS customs clearance and proof of duty paid, a SAPS clearance, a letter of authority from the SABS, and correct eNaTIS entry.

If a motor vehicle is registered outside the Republic, you need the registration and licensing documents issued in the country where the vehicle is registered, a South African Police Service clearance of the motor vehicle, and a letter of authority issued by the South African Bureau of Standards. The Customs and Excise Division of SARS provides the required proof of compliance with their regulations.

Do not import as your first move. Learn the local trade first.

Voluntary industry membership

The Retail Motor Industry Organisation (RMI) and its used car division are not compulsory. Membership signals credibility to buyers and gives you access to dispute support and industry guidance. Worth considering once you are established, not on day one.

Dealing from home, with no yard

Many small dealers start this way: stock is advertised online, the conversation happens on WhatsApp, and viewings and test drives happen at an agreed public place. It is a workable model. Three things are different from a dealer with a yard.

Zoning is the sticking point. A home enterprise normally allows a quiet business run by you from a room. The usual conditions include no storage of goods, materials or vehicles on the premises that creates a commercial appearance. Three bakkies for sale on the verge will breach that in most municipalities and will bring a complaint from a neighbour. Options: keep only one or two vehicles at home and rotate; rent a bay at a secure storage yard; or apply for consent use with the municipality. Ask town planning before you buy your first stock, not after the complaint.

Your home becomes the registered premises. Your SAPS second-hand goods registration, your BRNC, and your company address all sit at your home. A police official may inspect the premises and your register there. That is normal. Keep the register and certificate at hand.

Every viewing is a meeting with a stranger. Read Working from home and meeting safely in full. It covers where to meet, what to get from the buyer before the meeting, how to run a test drive without losing the vehicle, why a proof-of-payment screenshot is never enough, how to check cash, and the common scams aimed at sellers. For a dealer, the amounts involved make those habits mandatory, not optional.

The short version for a dealer:

• Licence copy and ID copy received on WhatsApp before you agree to meet
• Meet in daylight at a police station, bank, or busy petrol station car park
• Someone with you; keys in your hand until you are in the passenger seat
• Full payment reflected in your balance before keys, papers or a signed NCO change hands
• Large amounts: immediate payment while you watch, or at a bank counter

Growing beyond vehicles

Most dealers add lines: tyres, servicing, parts, detailing, sometimes an unrelated business under the same company.

Before you do, read Adding new lines of business. It covers trading names, and which documents must still carry the registered company name. It covers what licences each new line needs. And it explains the tax trap that catches people who form a second company: owning shares in more than one company can cost you the lower Small Business Corporation tax rates on both.

The short advice for a dealer: keep one company, use trading names, and only split into a second company for a line whose liability risk is large enough to justify losing SBC rates.

Insurance

This is where small dealers are most often underinsured.

You need cover that a normal motor policy does not give you:

• Stock cover for vehicles you own but have not sold, parked on your premises
• Cover for test drives, including damage caused by a prospective buyer
• Cover for vehicles driven under motor trade numbers
• Public liability for people on your premises
• Theft cover appropriate to how secure the premises actually are

Ask a broker specifically for motor trade insurance. A private vehicle policy will not respond to a claim involving stock.

Your startup checklist

Before your first purchase

Decide sole proprietor or company (Register: what you actually need) Get BRNC or Traffic Register Number (Vehicles and your business) Apply for SAPS second-hand goods dealer registration, form SAPS 601, free Check zoning for your premises, before signing any lease Apply for a municipal business licence if required Get motor trade insurance quotes Work out whether VAT registration pays, given notional input tax, and confirm you are NOT on turnover tax Build your sale agreement and defect schedule template Set up your SAPS acquisition and disposal register Decide your inspection process, and who does it

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Before your first sale

Roadworthy certificate in hand Defect schedule signed and initialled Written sale agreement signed NCO lodged the same day Buyer's ID copied into your register

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Ongoing

SAPS register updated on the day of every transaction VAT264 for every purchase from a non-vendor SAPS registration renewal diarised Five years of records kept for SAPS and SARS Rolling 12-month sales tracked against the R2.3 million VAT threshold Stock list with cost per vehicle, ready for year end If working from home: zoning checked for storing stock, and the meeting-safety habits in Working from home and meeting safely in use on every viewing

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