How to get your Dealers License in 4 steps
A Dealer License is the thing that you need (issued by a state agency) to fully and legally operate as a Used Car Dealer in most states if you are in the business of buying / selling 3-5+ motor vehicles per year. In this article, I describe to you in 4 steps, how to get your license. But do you need one? If you want to sign your own vehicle titles, and have your own Dealer plates, then you need an Auto Dealer License. If you want to open up a commercial (physical) location in your state (or some other state), you typically need a Dealer License. If you want to sell motor vehicles as business and be able to receive financing from lenders, and/or offer vehicle loans to your customers… you need a Dealer License.
You want to go into this business well-funded, so think about your budget as you choose the location for your Dealership. Some states allow you to have an office based Dealership (like Georgia, Delaware, etc.). Other states require you to have a small car lot location (or lockable warehouse – like Florida) , and other states require you to have a larger car lot that holds 10 cars (Maryland) and be located near a mechanic (or have one on site).
As you know, I have been encouraging people to get their own Dealer License if they can afford it. Because it gives you much more control. You get rid of you biggest headache as a Dealer rep or Agent…. waiting for titles back from the sponsoring Dealership.
So anyway, let’s unpack the 4 simple (but not easy) steps on how to get your Dealer License. Check your state guidelines for specific rules and regulations.
How to get a Car Dealer License 4 step process
First Step: Download License Requirements from your state DMV or DOL
Go to Google and type in the state of the Dealer License you want and Requirement
“Delaware Dealer License Requirements”
Look for the official state .gov website for official state requirements list.
Each state has variances, but they all follow a basic same formula for becoming a used car dealer. You have to show proof in varying ways for the following:
- Prove that you have a Suitable Location
- Prove that you have financial solvency and credit worthiness
- Prove that you have sufficient state level insurance
- Prove you have ability to safeguard your customer’s personal information
- Prove that you are of decent moral character
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Your local DMV (Department of Motor Vehicles) or DOL (Department of Licensing) sets forth, regulates and enforce these requirements, so contacting them is the critical first step.
Many states allow you to operate a Dealer License in that state, without being an actual resident. Your state (or the state of your choice) will familiarize you with what is needed to get your dealer license. Many times they even have a downloadable guide that walks you thru the process.
There are different types of Dealer Licenses which you can apply for:
- Used Vehicle Dealer License
- New Vehicle Dealer License
- Wholesale Vehicle Dealer License
- Salvage Dealer License
- Motorcycle Dealer License
Second Step: Get your Location
Get your location. This is the foundation of your license. So spend the necessary time and due diligence on this step. You may enlist the aid of a local real estate agent to ensure that your location is if fact zoned in your city. You should know what these codes are as well and you can contact your local city clerk for that info. You want to know the minimum size (location) requirement in your state, so you can see and get a good feel for your financial costs. Most states want you to attach pictures of proof to your application itself. Your Dealership signage has to be in place as well.
Third Step: Build a Checklist
There are 5 basic things you need to gather together. 5 Basic requirements no matter what state you live in. Every state requires you to set up a corporation, they type can vary. You will always need a location whether its an office or car lot… you need to know what the required zone codes are within the city (within in your state). Most states want you to demonstrate knowledge of the car business and local state regulation as it pertains to Car Dealers. Typically you have to do some kind of background check , and last but very important…you need proof of insurance and surety bond. Building a checklist helps you to keep track of all requirements as you fulfill them.
Other common requirements include:
- Register your Auto Business (Corporation or LLC set-up)
- Fulfill local zoning requirements
- Attending a class and / or online test-seminar
- Provide proof of surety bond and garage liability insurance
- Successfully pass a national felony background check
Some states might require further steps, like having a auto repair shop nearby, or even having a certain number of bathrooms for your customers on premise
Fourth Step: Fill out and submit your Application
Your local DMV will provide you with the proper car dealer license application for your business.
Make sure you double-check that you filled out all areas and signed in all the necessary places on your application. Have a trusted friend, family member or business colleague to look over your application for any missing information. Send your car dealer license application, car dealer bond, proof of insurance, and all other necessary papers to your local DMV or Auto Dealer Licensing Service Department Application processing usually take 21-45 days or so…more. Now all you do is wait for the results. If you did everything correctly, you should be good.
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