If you have a passion for all things automotive and a flair for sales, becoming an auto dealer could be a good career move for you. Auto sales in 2020 took a hit, there’s no doubt, but they rebounded faster than anyone expected and now the demand for cars is so great that it’s become a big part of the ongoing chip shortage.
Those interested in getting a car dealer license need to know that it’s not completely straightforward and that there are steps one needs to take. There will also be some differences depending on your individual state. Below we provide a broad-strokes guide on how to get a dealers license and start a new career in sales and management.
What is a Car Dealer License? Do You Need One?
While the rules vary precisely from state to state, the broad consensus all around is that one needs a license to legally sell cars. And yet, anyone who has sold their own car privately before through Craigslist or a similar platform will know that they didn’t seem to need a car dealer license when they were selling their car. The laws generally say that selling your own vehicle is fine, but if you sell multiple cars in a year, and you’re buying cars to sell them on, then you might need a dealer license.
Most states impose a numerical limit on the number of cars one could sell privately each year before the time came for them. In Washington state, for example, the threshold is 4 vehicles that you can sell without an auto dealers license. There are other rules about titling the vehicles you’re selling, with some states saying you’re only allowed to sell vehicles titled in your name, but of course titling usually incurs fees and sales taxes. Therefore, it’s hardly economical.
A car dealer license allows you to legally sell cars that are not titled to you personally. Therefore, it’s safe to say that if you want to seriously sell vehicles for a profit and make a living, then it’s essential to have a dealer license.
Types of Car Dealer License
If you’re now resolved to getting your dealer license, the next thing to confirm is what kind of license you’re going to get. Below is a list of the common types of licenses that exist. You can get a license to be a:
- New vehicle dealer
- Used vehicle dealer
- Wholesale vehicle dealer - buying and selling to other dealers
- Recreational vehicle dealer - RVs, motorhomes, etc.
- Motorcycle dealer
- Trailer dealer
- Manufacturer - you’re going to build and sell your own cars
- Distributor - imports vehicles
- Dismantler/Recycler - gets vehicles for scrapping, dismantling and salvaging for parts
These are the various licenses that exist, but it’s true that not every state has all these individual licenses. Some may be combined, such as a single license that allows you to sell both new and used vehicles. In the step-by-step guide below we’ll be focusing on how to get a basic new and/or used vehicle dealer license since this is the most likely candidate that people will pursue.
How to Get a Car Dealer License: Step by Step
So, you’ve decided to become a car dealer. Don’t listen to the negative stereotypes, it’s a perfectly noble and fulfilling career, especially in modern times when cars are so exciting and full of new technology and possibilities. The following steps should help you on your way to securing this next step in your career.
Step 1: Market Research
This guide will focus on simple new and/or used car sales, but the fact is that might not be the best thing in your local market. If there are already many used car dealerships, for example, then you might need something a bit more specialized, such as a recreational vehicle dealer or a dismantler license. Your market research should focus on what your particular business is going to do, what market gap it is going to fill, what demand it is going to meet, etc. Find the niche!
Step 2: Contact Your State DMV and/or Department of Licensing
Since what you’re doing pertains to both the DMV and/or Department of Licensing, you should get in touch with them to find out the precise requirements. After reading our guide, you will have a broad-strokes knowledge of how it works, but it’s these specific departments that will have the particulars that you need to get the task done for whatever type of license you are ultimately trying to get.
Step 3: Look to the State Requirements
Once you understand the requirements from your local authority, it’s time to start putting things into motion. Some might see this as putting the cart before the horse, but you actually need to have the main structural points of your business in place before you can be issued with a car dealer license. For example, you’ll need to have a registered business, and you’ll need to confirm that you’ve secured a properly zoned location for selling your cars.
Other common requirements are attending a pre-licensing seminar where you will learn about the ins and outs of being an auto dealer, what’s required of you, legal questions and more. Attending the seminar is important not only for ticking a box and meeting a state-mandated requirement, but also it demonstrates your seriousness as to the profession and commitment to doing the job well. Some states require a test, but it’s not common.
Besides the seminar, you’ll also need proof of insurance and you’ll have to pass a background check as well. If your background check reveals something like a past felony, then you can still get your license but it will be a lot harder. If the felony in question was automotive-related --- title forgery, odometer tampering, car theft, etc. --- then your chances are slim to none, however. If your felony was for something non-violent and non-automotive in nature, then you may be put under additional scrutiny, but nothing should stand in your way.
Step 4: Get Your Auto Dealer Bond
Before you prepare and submit your application, you’ll need to first obtain an auto dealer bond. An auto dealer bond is a legal contract that is designed to protect customers in case you happen not to follow regulations. If you are found to have broken the bond terms --- for example by tampering with odometers, or applying wrong badging to cars to increase prices --- then customers can claim money against your bond which you will then have to pay.
To get the auto dealer bond, there's an online application form to fill out and get a quote (example in the link, but other channels exist too). The quote is typically valid for 30-90 days so if you aren’t quite ready to purchase it you can get the price first and then arrange confirmation and payment within time. Most states have the requirement in place, so you’ll want to look into this and get it done as soon as possible.
Step 5: Prepare and Submit Your Car Dealer License Application
With the above steps complete, you are now ready to submit a formal application for an auto dealer. You can get the application form from your local DMV. The best thing to do is go in person to the DMV and get the form there and read it through. While you’re there, if there are parts of the form that you don’t understand, you can ask a customer service representative before you take the form away to fill it in.
Getting details and information wrong on the application can cause delays, and even when everything is going smoothly, the process can take quite a long time. Therefore, resolve any points of confusion before you fill the forms in, and see if you can get it checked by a DMV customer service representative before officially submitting it. They’ll be able to tell you if anything looks wrong or if there’s any missing information that could cause delays.
Once completed and checked, you submit your application, and you’re on your way! If the application is rejected, take note of the reasons and see if there are things that you can fix. In most cases, a rejection will be repairable with some amendments or further steps taken. So, if you can be patient and steadfast, you can always resubmit an application.
Conclusion: Is Getting a Car Dealer License Worth It?
While it may seem like a lot of stuffy bureaucratic rigmarole, completing the above steps and getting a car dealer license can be your ticket to a whole new life and livelihood. When you get your license, you also show yourself as a respectable, credible and well-organized businessperson who is ready to contribute to the community.
The work itself can also be lucrative if you have done your market research and found a niche in which you can be competitive and provide something that your other competitors are missing, or perhaps a way to provide the same that’s more appealing to your customers! At any rate, getting the license is just getting a bit of paper, but it’s also a ticket into a new world.