From time to time, you’ll spot a top-tier automobile you want to buy or sell on your lot. The only problem? You need a dealer’s license to attend – and bid at – private auto auctions, and that’s where some of the best vehicles are purchased from private collectors.
A dealer's license allows you to sell and purchase new and used vehicles from car manufacturers and auto auctions, especially large-scale ones. Without one, you won't be able to purchase the car that caught your eye at a local private auction. Today, let's break down how to get a dealer's license for auto shows and auctions.
Four Major Requirements for Getting a Dealer’s License
Remember that every state has specialized dealer’s license laws and requirements. Before applying for a dealer’s license in your state, check with your local DMV to determine those requirements. In addition, though, you must meet these four general requirements to get a dealer’s license in any state:
- Background Check
- Established Place of Business
- Registration and Tax ID for Business
No matter what state you live and work in, you’ll first need to submit to a thorough criminal background check. The background check essentially guarantees that you are who you say you are, and it shouldn’t take long for you to get the results. Note that you may need to provide your fingerprint or other identifying information for the background check to complete.
Established Place of Business
You’ll also need an established place of business to qualify for a dealer’s license. You don’t need a dealer’s license to sell a single car on your property; it’s only required if you want to sell vehicles in large numbers, as you do with a business.
You have to prove that you own a business so the state knows how much to tax you (and how much you can charge for sales tax). You'll need to provide the business license, business name, address, financial records, zoning information, and other information (like how long the business has been in operation and whether you own it outright).
Additionally, most states require all car dealers and salespeople to carry dealer insurance. Dealer insurance protects you from liability in certain circumstances, such as if someone steals or breaks many of your vehicles.
You’ll have to show proof of your insurance in your used motor vehicle dealer license application at the DMV or Department of Licensing.
Most states will require you to get a surety bond as well. Surety bonds hold your business accountable for fraudulent actions on your part or the part of one of your employees. In essence, it prevents your business from taking advantage of any customers. Different states have different surety bond amounts you must have to qualify for a dealer’s license.
Registration and Tax ID for Business
Lastly, you’ll need to show your business’ tax ID and registration paperwork to qualify for any type of dealer’s license. You should already have this paperwork on hand, as it’s necessary to acquire insurance, purchase supplies, and do other business operations.
Provide as much information as possible if you don’t already have a business or are trying to buy vehicles to start a dealership/lot. Still, a tax ID and registration paperwork should be among the first things you get when trying to start your business, not a dealer’s license.
Application for a Dealer’s License
Fortunately, you can apply for a dealer’s license at either the Department of Licensing, DMV, or Motor Vehicle Board of your state. During your application, you should provide the above paperwork items and come prepared to spend a couple of hours filling everything out and answering questions (plus paying license fees).
Timeline for Obtaining a Dealer’s License
From start to finish, getting a dealer’s license will usually take anywhere between two weeks and two months, assuming you have all your paperwork organized and ready to go. Try to prepare for your application ahead of time so you don’t have to go back and reapply for a license later down the road.
Dealer’s License: Required Documents
In addition to the above documents, like your business registration paperwork and tax ID information, you’ll need to provide your:
- Driver’s license or other identification
- Social Security card
- Insurance paperwork
- Any other relevant paperwork per your state’s DMV and unique requirements
Dealer’s License Application Fees
On top of providing the required documentation, you'll need to pay specific application fees. Depending on your state and the forms you need to fill out, these can cost anywhere between $100 and $700.
Some states require you to take and pass a training course and dealer’s license test. This is similar to a driver’s license test. It costs an additional $300 or so.
When Do You Need a Dealer’s License?
You only need a dealer’s license when you plan to sell vehicles in significant quantities, such as when you sell cars on a lot or in a dealership. You also need a dealer’s license if you plan to purchase used vehicles from certain private car auctions, as ordinary people cannot attend these events and acquire vehicles in this way.
Furthermore, you need a dealer’s license if you ever plan to purchase a vehicle from a manufacturer’s factory. Many dealers offer factory-order cars thanks to this privilege, allowing their clients to buy vehicles with unique designs or inclusions tailored to their specifications.
Types of Dealer’s Licenses
There are two types of dealer’s licenses you can apply for: retail licenses and wholesaler licenses.
Retail (Public) Dealer License
Retail or public dealer licenses qualify you to sell an unlimited number of vehicles to the public or other dealerships and lots. Furthermore, retail dealership licenses allow you to access dealer-only vehicle options.
If you aren’t yet at the level of a massive car dealership, consider starting with a retail license and moving up to a wholesale license later.
Advantages of a Retail License
Retail licenses allow you to sell cars for a business. Without one, you can only sell up to five vehicles to other people in public.
Plus, retail licenses allow you access to dealer-only vehicle options to buy cheap cars, flip them, and sell them for higher and more profitable prices.
Disadvantages of a Retail License
On the downside, retail licenses require you to undergo the sometimes laborious application process. They also, as noted above, cost several hundred dollars at a minimum and require regular renewal.
Wholesale (Private) Dealer License
Wholesale or private dealer licenses qualify you to sell and buy vehicles with dealerships and auctions. Furthermore, it qualifies you to import and export vehicles from international companies, such as luxury cars. Wholesale dealers with the proper car dealer license need coverage from a particular liability insurance company since the vehicles in their display lots differ from those of retail dealers.
Advantages of a Wholesale License
Wholesale licenses allow you to expand your car offerings, potentially giving you more profit opportunities. On top of that, you can buy and sell vehicles from and to more parties, plus access to even more exclusive private auctions.
Disadvantages of a Wholesale License
However, wholesale licenses take longer to apply for and receive. There are additional paperwork checks and additional requirements. Furthermore, wholesale licenses usually cost more than retail licenses.
Renewing Your Dealer’s License
Each state has different license renewal requirements. For example, dealers can apply for three-year licenses in Oregon (though they have to pay about $1000).
Whenever your state requires you to renew your license, you must prove that you are continuing the dealer’s education classes and pay a fee of a few hundred dollars. Note that you must send your paperwork one or two months before your license becomes invalid.
What To Do Next
Getting your motor vehicle dealer’s license and purchasing a new or used car is just the start. If you ever want to sell the vehicle, you’ll need to transport it safely to your lot or dealership.
Fortunately, you can rely on services like Carvaygo to get your automobiles from place to place without a scratch. Whether you want affordable and economical open car hauling or enclosed car hauling for a luxury set of wheels, we can help. Contact Carvaygo today.
Difference Between a Salesman License & a Dealer's License | Smallbusiness.chron.com
Auto Dealer License | Dealertraining.org
Surety bonds | SBA.gov