Having a car dealer license has pluses and minuses like most things in life. You’ll instantly join the used vehicle dealers club and benefit from all the same advantages as the big boys.
Learning about the right way to obtain the license and how to protect your assets from troubles that can arise is very important. This is not something to jump into without some research. And to be honest take a lot of effort in some States.
However, my opinion is, the rewards out weigh the work required. I want you to think about all the car lots in your area. These places make money or they wouldn’t still be there. The way to make reliable money is to find a business that works and copy the best model of that business.
Why Get a Car Dealer License
You can get into private wholesale automotive auctions only dealers are allowed to attend. These are the same auctions that most used car dealers get their cars from, including mega-used car dealerships like the Max place.
You can go directly to new-car dealerships to buy wholesale cars with closed bids. There’s no State limit to how many cars you can sell per year. If you go with private sale the limit is usually around 3 per year.
You can also cancel your personal registration and insurance and drive around in inventory cars with dealer license plates. There is another advantage most people don’t think about. Indulge a hobby and add some classic cars or boats to the selection of vehicles for sale.
A license makes this a business entitling you to corporate credit, small-business loans and other fringe benefits. These also include some tax advantages. Write-off anything going into the business including gas receipts and auto repair costs. Make tax-free purchases from other car dealers and part stores.
Buy wholesale cars for friends and family. Without a car dealer license you’re missing out on all these benefits and losing dollars. When most dealers buy a car to sell at retail the goal is to make at least $1,000 profit on every car. A one man operation could sell 10 a month.
A dealer with a medium size lot on a good location can sell twice that amount per month. That’s 20 cars, or $240,000 per year. If you find yourself behind for the month try selling on E-Bay and Craig list. Internet sales can often keep the ball rolling through slow periods like Christmas.
A full-time operation with a large lot at a good location in high traffic areas sells more cars. Most dealers I talk to doing high retail volume sell 50-100 cars per month. 100 cars per month is $1.2 million dollars per year. Keep in mind, this kind of money requires many employees and a full-service operation.
Another advantage to being a licensed business is once things get rolling you can offer financing on the entire inventory. This completely removes a big barrier from selling automobiles. Most people want to buy but do not have the cash in hand.
If they walk off the lot and find financing on their own you will probably never see them again. When you offer in house financing you are giving buyers the chance to leave your dealership behind the wheel of a car. Another huge advantage of having the buyer finance in house is that lenders often offer points to the dealership for sending them a customer. Points are a nice way of saying kick back.
Car Dealer License Rules
Below are some examples of the laws and rules involved in obtaining a used vehicle dealers license. Remember the laws are different from state to state.
Car dealer license Requirements State of Colorado Application: Submit original application and addendum. All requested information must be provided including all boxes marked “yes” or “no”.
All “yes” answers require an explanation. The initial application must be signed by the owner, corporate officer or LLC member in charge. Credit Bureau report: A credit bureau report will be obtained on every applicant.
This report is an indicator of an applicant’s financial fitness to operate. The Dealer Board requires an empirical score of at least 600. It is suggested that if you are not sure of your score that you contact Trans Union to run your own credit report.
If derogatory information appears, it must be resolved or explained in an attachment to your application. Background check: A background check will be done on every applicant.
If the applicant has ever been arrested, charged with, convicted of or pleaded no contest to any felony or misdemeanor crime in the past ten years, excluding traffic violations, supporting court documents must be included with the application.
Place of business affidavit: Complete the appropriate sections and sign. Place of business for dealers must satisfy the following requirements. Permanent enclosed office with electrical service and restroom. Space to display one or more vehicles.
Open to public a minimum of 12 hours a week. In compliance with local zoning. Used exclusively for the dealer business or incidental businesses, such as parts, repair, etc. Sharing the site with another business owned by another person is NOT permitted.
A permanent sign displaying the car dealer license and business name, clearly visible on premises owned or leased by dealer. Wholesalers are not required to meet the place of business requirements, but must maintain an office in which all vehicle records are kept.
A Written examination or Mastery Exam that is an open-book exam must be passed. Each owner or corporate member must have completed and submitted the “Mastery Test Results” or currently licensed as a dealer.
Business Documents. If filing as a corporation or an LLC a copy of the stamped articles of incorporation/LLC filed with the Colorado Secretary of State must be submitted. If the corporation is out-of-state a copy of the Certificate of Authority is required. If filing as a partnership a signed copy of the partnership agreement is required.
Franchise agreement: If applying as a franchised dealer please ensure that the manufacturer is licensed to do business in Colorado. You may ask for a copy of their license. If the manufacturer is licensed you will need to obtain a letter from them stating that you are authorized to sell their product line.
Dealer plate affidavit: Application for dealer demonstration and full-use plates must be completed and signed. Please download a Dealer Plate Affidavit Colorado Sales Tax License. (Colorado Business Form) – Copy of the sales tax license or a copy of the sales tax application stamped with Dept of Revenue’s “received” stamp as well as proof of trade name registration.
All required checks must be payable to Department of Revenue. See the fee schedule for current amounts required. Bond: $30,000 surety bond in legal name and D.B.A. Bond must be signed by owner or partner, corporate officer of LLC member.
How to get a New Jersey Dealer License. All new and used car dealers, leasing companies and Auto Body Repair facilities must be licensed. Applications for license are submitted to the Dealer’s Unit, Business License Compliance Bureau.
Dealer plates and registrations are available only from Trenton. New car dealers must be franchised to sell new cars. A special license is required for used car dealers. Application packages include the application form, affidavit, signature card, security check authorization waiver form, and supplemental application form.
Dealer License Fees: $100.00 for automobile dealers $350.00 for a two-year Auto Body Repair license fee CALL: 609-292-4517 Or go to your states official web site and search for used vehicle dealers license requirements.
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I worked at a used car lot that was so successful that it unfortunately crushed the owner. Read about this unique used car business plan.
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