How to Obtain an Automotive Dealership License

Ambitious entrepreneurs find the car dealership business model extremely rewarding; however, entry is fraught with state and federal regulations. Most of these laws protect consumers from false advertising, dealer fraud, and non-disclosure practices.

Starting a car dealership in the “right direction” is crucial for success. In most states, a surety bond is required before issuing a license. No matter what the size of the dealership is going to be, whether a two-person used lot or a 30-person new car start-up. Bonds are often given specific names tied to the license type the entrepreneur is pursuing. Titles such as used car dealer bonds, auto dealer bonds, or DMV bonds are used.

Costs and Considerations

The dealer bond cost depends on the type of vehicles expected to be sold and the state in which the bond is issued. Any individual who sells more than five vehicles in a calendar year must have a bond or face civil penalties.

Alabama Motor Vehicle Dealer Bond requires used car dealers to file a $10,000 surety bond and new car dealers a $25,000 bond. Anyone selling other vehicles, such as motorcycles, trailers, and wholesale dealers, must have a bond on record.

States such as Alaska, Arizona, Georgia, Michigan, and Ohio keep their bonds at a moderate rate of no more than $10,000 to $45,000. A few states go as high as $100,000; most experts recommend putting in adequate research to know all the costs.

Once the aspiring car dealer pays the initial license bond, other bonds, fees, and state charges must be considered. Much of the costs will depend on how big the dealer hopes to be, financial backing, and lawyer fees thrown in there.

California Motor Vehicle Dealer Surety Bond allows motorcycle, ATV Dealers, and wholesale-only operations. Dealers who sell fewer than 25 vehicles a year will pay a $10,000 surety, while commercial vehicles will pay a surety of $50,000.

Hawaii Motor Vehicle Dealer Bond is the most expensive bond across all product lines. Motorcycle/scooter dealers pay a $10,000 surety, and new vehicles pay a minimum of $50,000 to $200,000+ per product line. Used vehicle dealers have a minimum surety of $25,000 to $100,000 and more.

Acquiring your automotive dealer license is 80% of the workload to start buying and selling cars for a profit. Whether a single person running a small used car lot or a massive dealership group is moving into the market, the industry provides a lot of financial benefits.

In the last few decades, the automotive sector and important industries have produced several new product lines for aggressive entrepreneurs to market. From engine upgrades to plastic and ceramic films on the bumpers, many exciting third-party companies are coming to the forefront of a growing sector

Legal

Two or three decades ago, getting into the car biz was relatively simple, with few forms and legal services needed. Aspiring car dealers and those established in the current market have mounds of legal forms, state and federal, that need to be completed and communicated on time. The most significant advantage a car dealer can have is an excellent legal team. A lot of states have separate automotive departments. Plus, the magnitude of forms and regulations that need to be filed is beyond belief.

States such as California, Florida, and New York have complex zoning and use regulations and, therefore, have added responsibilities.

• Complete a dealer education program and pass a Used Vehicle Exam.
• Obtain the Surety Bond from $10,000 to above $200,000 depending on the type of vehicles sold yearly, employee size, lot dimensions, and zoning. Business licenses and tax registration need to be completed as soon as possible.
• City Business License
• Property use and zoning verifications
• DMV Application

Business Plan

Automotive business plans and licensure requirement forms are on the heavy side when first starting off. The first step to a business plan is to complete all forms, fees, and requirements to get the company off to a good start. No matter the size of your dealership, having a business plan in shape or working on the fundamental ideas is a must. Any dealer can download an app or ask an AI chatbot for the answer. However, the best plans come from a targeted and like-minded group of people brainstorming a terrific idea.

Some of the best attorney groups need to have solid experience in the actionable automotive industry. There are a ton of legal areas that need to be maintained.

Some of the more targeted areas:

• Employment issues
• Government compliance, consumer rights, complaints, and publicity are big issues for any dealership operation.
• Strategic Business Planning means efficiently utilizing finance and accounting, marketing and sales, service and parts.

Retail and Wholesale Dealership License

Buying and selling vehicles at the wholesale level is a great way to make a lot of money just on hustle alone. If the aspiring car dealer is low on investment funds, meaning he’s broke, turn to wholesaling vehicles and start building a hefty cash reserve quickly. Start-up funds are concentrated primarily on bonds needed and state or federal forms required to open for business.

Commercial business plans, costs, and legal obligations: owners should consider purchasing or franchising a truck or RV dealership. These entry methods help to get in on the business quicker but still require a ton of paperwork. A good number of small, quality truck, RV, and commercial operations are always available. Even if the inventory is slanted a specific way, moving to trucks is still a safe bet. Most styles of trucks are easy products to sell in the current market conditions.

There are generally more federal forms to complete than state requirements. Starting any automotive company with eyes toward success must have a law group familiar with start-ups in the automotive sector.

Wholesale dealer licenses offer the aspiring business person several distinct features, such as exporting to any other country. Find the right hardworking industrial truck and start an export business. Importing specific cars and trucks can be lucrative for the right ownership group. Find a shipping company that handles all the forms.

Savvy owners know that with the right dealer license and plates, the full automotive market is open to selling any industrial, commercial, and salvage vehicle. Online vehicle markets have revolutionized the industry and are another excellent way to sell a truck.

Final Word

There is no better industry to start a promising, ethical career than in the automotive world. New technologies and innovations are happening at every level of the sector. Electric energy is revolutionizing the automotive world. EVs are changing how we drive, while bypassing fossil fuel gas stations. Home charging stations have redefined power. Electric trucks power your kid’s bedroom, while everyone is having dinner.

The right dealership license is a great path to success.