A car dealers license is required for anyone in the business
of buying, selling, or brokering vehicles. This applies to new and used cars,
motorcycles, motorhomes, and trailers over a certain weight – pretty much any
vehicle that requires a title.
You do not, however, need a dealers license to sell the
family car to the neighbor down the street. An auto dealers license only
applies to selling vehicles in bulk. Most states use five cars in 12 months as
the gauge. Some states go as high as 12 vehicles in a calendar year.
Types of Car Dealer Licenses
There are five classes of dealer licenses to consider:
- Independent Dealer: For the selling of used cars only.
- Franchise Dealer: For the selling of new vehicles under an agreement with a manufacturer. The licensee also has the option to sell used cars.
- Wholesale Dealer: For the buying and selling of vehicles with other licensed dealers at wholesale.
- Auctions: For the selling, by bid, of vehicles on behalf of licensed dealers.
- Salvage: For the selling of salvage or wrecked vehicles and/or parts.
Auto Dealers License Application Process
Car dealer laws and guidelines vary by state (refer to your
state’s Dealer Handbook), usually governed by the Department of Motor Vehicles
(DMV), but overall auto dealer license requirements are stringent. There’s
more to it than completing an application and owning a string of colorful
triangle flag banners.
The application process takes time, planning, and money.
Most states, for example, in conjunction with submitting a dealers license
application, require providing proof of owning or leasing a building for
conducting business.
Why the Strict Requirements for a Dealers License?
The strict license application process serves as protection
for the consumer. It proves to the state that you’re not opening a fly-by-night
operation; that you have the resources to back the vehicles you sell.
Without tight dealership regulations, consumers would have
no recourse against unscrupulous owners. For more on auto dealer-related
information, check out our section titled Dealers & Auto Industry.
Article Credit: www.dmv.org
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