Becoming an auto dealer could be a good career move if you have a passion for all things automotive and a flair for sales. Auto sales in recent years 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 entirely straightforward and that there are steps one needs to take. There will also be some state-specific differences. Below we provide a broad-strokes guide on how to get a dealer's 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 is that one needs a license to legally sell cars. And yet, anyone who has sold their car privately before through Craigslist or a similar platform will know they didn't seem to need a car dealer license. The laws generally say that selling your own vehicle is fine, but you might need a dealer license if you sell multiple cars in a year and buy cars to resell.
Most states impose a numerical limit on the number of cars one can sell each year privately before things get official. In Washington state and Texas , for example, the threshold is four vehicles before an auto dealer's license is required. There are rules about the titling of sold cars. Some states say you're only allowed to sell vehicles titled in your name, which is accompanied by fees and taxes. It's not the most efficient way to conduct business.
A car dealer license allows the legal sale of vehicles not titled in an individual's name. Therefore, it's safe to say that a dealer license is necessary if you want to seriously sell cars for a profit and make a living.
Types of Car Dealer Licenses
If you're now resolved to get a dealer license, the next thing to confirm is what kind of license to acquire. Below is a list of the common types of licenses. You can obtain a permit 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 (building and selling your own cars)
- Distributor or vehicle importer
- Dismantler/Recycler (handling vehicles for scrapping, dismantling, and salvaging)
These are the various licenses, but not every state offers permits in each category. Some types may be combined, such as a single license allowing the sale of new and used vehicles. In the step-by-step guide below, we'll focus on getting a basic new and/or used vehicle dealer license since this is the most likely direction people will pursue.
How to Get a Car Dealer License: Step by Step
So, you've decided to become a car dealer. Please don't listen to the negative stereotypes; it's a perfectly noble and fulfilling career, especially in modern times when cars are exciting and full of new technology. The following steps should help you start the journey toward a new livelihood.
Step 1: Market Research
While this guide focuses on new and/or used car sales, the fact is that it might not be the best strategy in your local market. For example, if there are already many used car dealerships, you might need a more specialized approach, such as becoming a recreational vehicle dealer or a car dismantler. Market research should focus on what your particular business will do, what market gap it will fill, and what demand it will meet. Find the niche!
Step 2: Contact Your State DMV and/or Department of Licensing
Since what you're doing pertains to the DMV and/or department of licensing (agency names vary by state), contact the appropriate entity to get a handle on the precise licensing requirements in your state. These particulars will detail the tasks required to obtain the license you're looking for.
Step 3: Look at the State Requirements
With the requirements from the local authority in hand, it's time to start putting things into motion. Some might see this as putting the cart before the horse, but you need to have the main structural points of your business in place before receiving a car dealer license. For example, you'll need to have a registered company and confirm that you've secured an adequately zoned location for selling cars.
Other requirements are attending a pre-licensing seminar to learn about the ins and outs of being an auto dealer, what's required, legal pointers, and more. Participating in the workshop is essential for ticking a box to meet a state-mandated requirement and demonstrates your seriousness about the profession. Some states require a test, but that's always the case.
Besides seminar attendance, you'll also need proof of insurance and pass a background check. If your history reveals something serious, like a past felony, you can still get your license, but the process will be more complex. If the issue in question was automotive-related (such as title forgery, odometer tampering, or car theft), then your chances of getting approved are slim to none. If the crime was unrelated and non-violent, you might be under additional scrutiny, but nothing else should stand in the way.
Step 4: Get Your Auto Dealer Bond
Before preparing and submitting an application, you'll need to first obtain an auto dealer bond. An auto dealer bond is a legal contract designed to protect customers if you fail to follow regulations. For example, if a licensed dealer tampers with an odometer and falsely adds badging to raise a vehicle's price, a wronged customer can make a claim against the bond and the dealer.
Acquiring an auto dealer bond begins by completing an application (here's an online form , but other channels exist, too) and waiting for a quote, usually valid for 30 to 90 days.
So, you can confirm the price and other details when you're ready to make the purchase later on (within this timeframe). Most states require a dealer bond, 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 ready to submit a formal application to become an auto dealer. The best thing to do is go in person to the DMV, get the application, and read it through. While you're there, if there are parts of the form you don't understand, ask a customer service representative to review the area with you.
Providing incorrect information on the application can cause delays, which only extends the already-long licensing process. Therefore, resolve any points of confusion before you fill the forms in. And ideally, have the DMV agent review the document before submission. They'll be able to spot any trouble areas.
With the form reviewed and double-checked, submit the application, and you're on the way! Keep in mind that a rejected application is nothing unusual. If this happens, review the reasons and undertake a plan to fix the problems. A little patience and persistence may be required before submitting a revised application.
Conclusion: Is Getting a Car Dealer License Worth It?
While it may seem like a lot of bureaucratic nonsense, completing the above steps and getting a car dealer license can be a ticket to a whole new life and livelihood. A dealer license demonstrates that you're a respectable, credible, and well-organized businessperson ready to contribute to the community.
The work can be lucrative, especially if you've done market research and found the right competitive niche. Having a dealer license isn't just about getting a piece of paper but securing a ticket into a new world.