There are several profitable business paths individuals in the auto industry can take, all which provide various opportunities and challenges. Becoming a licensed auto dealer is one of those options. Auto dealers help others purchase and sell vehicles, new or used, both in-person and online. The ability to move vehicle inventory can be a profitable endeavor, but it requires an understanding of the licensing requirements necessary to do things the right way.
What is an Auto Dealer License?
To be a successful auto dealer, you are required to have an auto dealer license in the state where your dealership or business is located. Your auto dealer license allows you to sell new or used vehicles to customers, either on a physical car lot or through an online business model. Getting your license requires you to comply with your state’s guidelines for being an auto dealer, including completing an application that covers your personal and business information.
An auto dealer license application may also involve a background check, compliance with auto dealer training, and insurance and bonding requirements for your business. It is important to check with your state’s Department of Licensing or Department of Motor Vehicles to determine what’s necessary in filling out and submitting your auto dealer license application
When an Auto Dealer License is Required
While some believe that an auto dealer license is not a necessity in order to conduct vehicle sales, especially if sales are limited to friends and family, that may not be the case. Those who must have a valid license to do business as an auto dealer include:
- Anyone who wishes to participate in the process of buying and selling vehicles for a profit
- Anyone who sells vehicles that are not titled in their name
Some states do allow some exemptions, however. For instance, a state may give individuals the ability to sell between two and six vehicles each year without requiring an auto dealer license. In most cases, though, the vehicles sold within this threshold must be titled in your name to avoid getting an auto dealer license. The bottom line is if you want to create a business selling vehicles, you need your dealer license to do so successfully.
Other Considerations as an Auto Dealer
When you determine that an auto dealer license is required for your business, you’ll need to take additional steps above and beyond submitting the licensing application. Nearly all states require auto dealers to have a surety bond in place as part of their business. A surety bond offers a degree of protection to your customers buying and selling vehicles, essentially ensuring that you will operate in-line with state and federal laws for the car industry. This auto dealer bond is a necessary step in staying compliant with your dealership operations.
In addition to your auto dealer bond, you may also have to meet certain requirements for the dealership location you select. You will want to check with your city or state to determine what criteria must be met in terms of the size of your dealership, the inventory you can hold there, and the location. Some states also require an inspection of the dealership before you can begin to sell vehicles to customers.
Taking the time to understand your responsibilities as an auto dealer will put you in the best position to have a successful career. Know what it means to have your auto dealer license, and follow through with the requirements imposed by your state. Be sure to get the right auto dealer bond in the process, so that your customers are protected as they do business with you and your dealership. These small but powerful steps ensure your car-selling business is ready to be profitable.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.
