Dealer License Types and Requirements - Steps to Becoming a CA Car Dealer License
By: LN on May 10, 2012 04:06:36 PM
Dealer License Types and Requirements

Vehicle Dealer

A vehicle dealer is someone who buys, sells, trades, or arranges the purchase, sale, or trade of vehicles in return for some compensation or benefit. This can be done full or part time. To buy and sell at the dealer auto auctions, you must be a licensed dealer.

Types of Dealer Licenses

Wholesale: A wholesale dealer license allows you to buy at the dealer auctions and from private parties. Wholesale dealers can sell to other dealers, and they can sell/export vehicles to foreign countries. Wholesale dealers cannot sell directly to the public, but they can "broker" sales to the public with the additional DMV-issued Auto Broker Endorsement. See the "Broker" discussion below. There are some additional wholesale dealer sales options and business models which we cover in class. To get your wholesale dealer license DMV requires an office. There is no sign nor display area requirement for wholesale. A home office can, in many cases, qualify as a location for a wholesale dealer license. Wholesale dealers can obtain dealer plates.

Retail: A retail dealer license allows you to buy at the dealer auctions and from private parties. Retail dealers can sell to other dealers and to the general public. They can also sell/export vehicles to foreign countries, and they can broker sales to the public with the Auto Broker Endorsement. See the "Broker" discussion below. The DMV requires retail dealers to have an office, a two foot square sign, and a vehicle display area big enough for two vehicles. Retail dealers can obtain dealer plates.

Broker: The Auto Broker Endorsement (which is an add-on to your dealer license) allows you to arrange the sale of vehicles owned by others and get paid for it. Brokers don't actually own vehicles. They merely arrange a sale between a buyer and a seller. The broker can act on behalf of the seller, helping them sell their vehicle. They can also assist buyers with finding and purchasing vehicles. Brokers are sometimes also called "Auto Buying Services." Brokers can charge the buyer, the seller, or both for their services. You can get the Auto Broker Endorsement from the DMV with your dealer license (wholesale or retail) for an additional $100.00. Only licensed dealers can get the Auto Broker Endorsement. The Auto Broker Endorsement has several nice adavantages, including but not limited to, providing wholesale dealers a way to engage in retail sales. It also provides dealers getting started a way to buy and sell vehicles without having to invest their own money in the vehicles. The paperwork you fill out when brokering is also quite simple. In addition, there is no display area requirement for brokers, which helps keep your overhead low. There are a number of further advantages to brokering which we cover in class. To become a dealer/broker, DMV requires an office, and a two foot square sign, but no display area. Brokers can also obtain dealer plates.

Vehicles That Require a Dealer's License to Sell

For a list of vehicles and products that require you to have a dealer license to sell, and those that do not, see Dealer Vehicle & Product List.

Steps to Becoming a Dealer

1. Complete a live, six hour, DMV Pre-Licensing Class. This class teaches how to become a dealer, how to get into dealer auctions, and how to buy and sell vehicles. It must be taken live, not on-line.

2. Pass a 40 question test with the DMV. The fee is $16.00. The Pre-Licensing Class will prepare you for this test. We will give you a pre-test during our class to insure you are ready. Sample Test Questions

3. Download and complete the Dealer License Application forms. Dealer Application Forms The Application fee is $176.

4. Select a Location for your Dealership & Take Photos To obtain a wholesale dealer license all you need is an office. To obtain a retail dealer license, you will need an office, a display area big enough for two vehicles, and a two foot square sign with your name and address on it, posted permanently outside. Auto Brokers need an office and a sign, but no display area.These location requirements are covered in detail in class, including ways to overcome obstacles, and in some cases, even allowing for home offices.

5. Apply for a Local Business License.You can obtain a business license at your local city or town offices in their tax and license division. Some cities have applications on-line. Fees are often a small percent of your annual gross sales. For example, in Oakland the license fee rates are forty cents ($.40) for each one thousand dollars of gross receipts, or gross payroll, with a minimum fee of $74.00 if total annual gross receipts are less than $ 74,000.00.

6. Apply for a Seller’s Permit. You can do this by filling out an application in person at one of Board of Equalization field offices. You can also download the application beforehand and mail it, or deliver it in person, to a Board Field Office. These permits allow dealers to buy vehicles tax free. Seller’s Permits are usually issued the same day they are submitted. Help in completing the form, if needed, is available at the Field Offices.

7. Get “Live Scan” Fingerprints. “Live Scan” is an inkless electronic fingerprinting process where your fingerprints are electronically transmitted to the Department of Justice for completion of a criminal background check. The costs generally range from $18 to $25.Live Scan Locations

8. Apply for a Fictitious Business Name - If you want one. If the name of your dealership will be something other than your personal name (example: “West Coast Auto Sales”), you will need to file a fictitious business name statement with your local County Recorder’s Office. You can often find your county’s filing procedure and forms by searching for “Fictitious Business Name Filing” on-line and adding the name of your county to the search terms. Basically, you will publish a notice in a local paper for 30 days advising that you are doing business under the name you select. After 30 days you send proof of that publication to the Recorder for filing. Costs are under $100 if you do it yourself, or $175 to have a service do it.

9. Obtain a Surety Bond. DMV requires dealers to get a $50,000 surety bond. The going rates generally range between $1,000 - $2,000 per year for a $50,000 bond. In our current economy these rates have been fluctuating quite a bit, so shop around. If you have very good credit, or purchase a bond for a two or three year period, the rates are less. Established dealers with good credit, no complaints on file with DMV, and no court judgments against them, often pay half these rates or less. Note that motorcycle-only dealers and wholesale dealers selling less than 25 vehicles per year need only a $10,000 bond. Going rates for a $10,000 bonds generally vary between $200 and $350 per year.Bonding Company List

10. Obtain a Signed copy of your Lease, or Rental Agreement. This will be submitted with your dealer license application. If you own the property, proof of ownership may be required. Your local DMV Inspector will let you know.

11. Corporation/Partnership/LLC. If you are one of these types of entities you will need to provide a copy of your articles of incorporation, corporate minutes, or other documents showing officers, shareholders and managers with a 10% or greater interest in the business with your dealer license application. If you are the only owner (sole proprietor) you do not need to do this step.

12. Submit Completed Application for Approval. Give your application to your local DMV Inspector. Then ask them how long it will take for their review and approval. Often it takes between one and two weeks. It can also happen more quickly, or more slowly, depending upon the Inspector’s current workload.

13. Inspection. After reviewing your application, your Inspector will contact you to set up at time to meet you at your location to inspect the premises. The Inspection is not a surprise and only takes a few minutes. This final step is often the easiest because you will have already met the physical location requirements in order to complete your application. When the Inspector has finished looking around, they will hand you a temporary license and you are ready to go! You will receive a formal license in the mail.

 

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