Getting An Auto Dealer License In California
Getting An Auto Dealer License In California
Anyone wanting to sell cars on a professional basis in California will need a license from the state. California law is clear in providing that anyone intending to sell cars for profit must be licensed. California is different from many states in that in California, there is no allowance for a certain number of vehicles that can be sold without a license. Before even one vehicle can be sold for profit, the seller must be a licensed car dealer.
There are a few kinds of car dealers in California. There are new car dealers, car dealer license, used car dealers, and wholesale dealers. New card dealers are retail dealers allowed to sell new and used cars both. Used car dealers are retail dealers only allowed to sell used cars. Wholesale dealers are only allowed to sell cars to other dealers. New car dealerships are granted to operators by car manufacturers. These are multi-million dollar businesses which can only be started and run by operators having large sums of operating capital. Used car dealerships are generally smaller, and are independent operations owned by small scale operators. The wholesale dealership is a specialized operation normally run only by highly skilled and experienced operators.
To become a used car dealer in California, it is necessary to complete a multi-step application and qualification process and to gain licensing by the Department of Motor Vehicles (DMV). The process is laid out in DMV regulations which are accessible directly from DMV and online.
The first step in the process is to complete a six hour used car dealer training course. The course is offered statewide by different private providers which are certified by DMV. The cost of the course is generally $100 or more, and it may be offered as a home study course. After successful completion, the new dealer will get a certificate of completion which must be submitted to DMV. Once the certificate of course completion is filed, the would be dealer must pass a 40-question test given by DMV. The passing rate for this test is 70%, meaning that the test taker must answer 70% of the questions on the test correctly. The DMV charge for this test is $16.
After passing the qualification test, the next step will be to file an application with DMV. This is a multi-page application which includes the license application, a release allowing DMV to collect financial records, and a surety bond. The applicant’s business license from city or county and assumed name certificate must also be included. DMV will conduct a background investigation with fingerprints to determine whether the applicant has been convicted of any felonies, financial offenses, or acts of fraud. Fees will amount to $234 for a single dealer plate. The surety bond must be in the amount of $50,000, and must be obtained by the applicant from a surety. The applicant’s personal credit will affect the rate for the bond. An applicant with good credit can expect to pay around 2% of the value of the bond, or $1,000 for a $50,000 bond. An applicant with bad credit will pay substantially more, if a bond is even available. There are sureties that specialize in bad credit bonds, and so one might very well be available, but credit will affect bond availability as well as rate. Unfortunately, the bond can pose a significant impediment for new dealer applicants, but it is required.
Dealer applicants must also provide DMV with a copy of the lease or rental contract for the property where the dealership will be operated. DMV will evaluate zoning and layout of the property to confirm its usability for car sales. Various other items of information about the property will also be required, including photographs to show the main entrance, the required sign, the vehicle display area, and the office. The sign must list the dealer’s name and address, must be not less than two feet square, and must be readable from a distance of 50 feet.
With that, the application is complete! Next, however, DMV will make an onsite inspection at the dealership property, essentially to confirm the contents of the photographs. If DMV is satisfied, then the application will be processed. DMV allows 120 days for processing of dealer applications, although a temporary permit can be issued after 30 days. With that permit in place, the dealer will be in business.