Should You Get Your Auto Dealer’s License?

Posted on August 6, 2011 by Aaron No Comments

If you are planning to sell cars for profit, then you will need a dealer license. A car license is required for anyone selling cars for profit in every state. Some states allow sale of a few cars per year without a license, but some require a license to sell any cars. All require licensing for commercial car dealers.

Having an auto license creates a number of benefits for a dealer. First, the dealer can attend dealer-only auto auctions to buy cars. Sell the cars at retail and earn thousands of dollars per car, or quickly sell them to other dealers and pocket $500 or more per car. You can also buy cars at wholesale from dealerships. Go to a new car dealer and buy trade-ins directly from the dealer at rock bottom prices. Dealers also receive discounts from auto parts stores, auto repairs shops, and auto body shops. You can save thousands of dollars per year on repairs and parts. Car dealers get dealer license plates that can be used to drive cars without individual registration. There will be no need to register cars in your own name. Drive any car in your inventory for business or pleasure. As a licensed dealer, sell as many cars per year as you want to. Sell ten in one month, and a hundred in the next. Being a licensed car dealer also puts you in an excellent tax position. Write off operating expenses and whittle your profit down to just a few bucks.

You can either become a retail dealer or a wholesale dealer. Retail dealers sell cars to final owners. Wholesale dealers sell cars to other dealers. The licensing requirements are different for wholesale and retail dealer licenses, and generally it is less expensive to become a wholesale dealer. Retail dealers are required to have a lot to operate from. The cost of a lot may be $2,000 per month or more. Wholesale dealers are not required to have a lot, and many operate from home. Also, a bond is required to get a dealer license. In most states, a retail dealer must post a $100,000 bond, and a wholesale dealer a $25,000 bond. The cost to buy a bond is a percentage of face value, so the retail bond costs four times as much as the wholesale bond. Credit is also required to buy a bond. Someone with poor credit will pay more for a bond, if one is even available. The effect of credit on the wholesale bond would be less severe.

The car business is very profitable. Used cars are more profitable than new cars. A licensed car dealer has the opportunity to operate a high profit business. Many people become car dealers to start their own businesses, and the businesses become very profitable. Licensing requirements are strict in most states, and becoming a licensed car dealer takes time. Information is available on becoming a car dealer online.

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