How to Become a Car Dealer in California

How to Become a Car Dealer in California

With almost 15 million registered vehicles, California has by far the most vehicles of any state in America. The state with the second most amount of vehicles, Texas, has just over 8 million after all. Given how many cars are being purchased and replaced all the time, The Golden State is an ideal place to set up a car dealership. However, before you do that you must meet some specific obligations, like finding a business location and obtaining a California auto dealer bond. Follow these steps to become a car dealer as soon as possible:

Look Up the Licensure Requirements

You can’t legally sell vehicles until you get a California motor vehicle dealer license. There are several kinds – new or used commercial auto dealers, wholesaler, autobroker, etc. – each with different licensure requirements that are updated regularly. The information in this article will walk you through many of the licensure requirements (like obtaining an auto dealer bond) but the exact requirements may have changed. Don’t do anything else until you look up what the California Department of Motor Vehicles currently requires.

Register Your Business

Your business needs to be registered with a number of agencies before you can proceed with the licensure process. You will need to get an Employer Identification Number from the IRS so that you can properly pay your business tax. Your business must also register with the Secretary of State, Board of Equalization, and Employment Development Department. Finally, all new businesses need a business license from the city and or county where they’re located.

Submit to a Background Check

California does many things to ensure that car dealerships behave ethically, from requiring them to obtain an surety bond to making a background check a mandatory part of the licensing process. Aspiring auto sellers will need to pay a fee of $176 and supply fingerprints through a live scanning process. California also offers an “abbreviated application” for people who are unsure whether past criminal convictions would cause them to fail the background check. The fee is the same, but the application is simpler and the background check is quicker, helping applicants who wouldn’t pass avoid the expense and hassle of the entire licensure process.

Obtain a California Auto Dealer Bond

Like all states, California requires auto dealers to have an active motor vehicle dealer bond that meets a minimum value and is issued by a qualified surety company. Surety bonds protect the public from unscrupulous auto dealers by creating a mechanism for car-buyers to seek compensation if they are wronged in any way (like buying a vehicle with the odometer rolled back, for example). The details and total of the bond vary depending on what kind of car dealership is being established. However, in all cases the actual cost of the surety bond is a small percentage of the total value, usually in the range of 3-5% depending on the bond holder’s credit score. To obtain an auto dealer bond, you need to find a qualified surety, submit an application, and pay the premium. You’re also required to renew the bond, typically every 12 months, to comply with the licensure requirements. Since it’s illegal to run a car dealership without a bond, you need to plan to keep it active and in good standing.

Find a Business Location

You can’t get a license until you have a property to store and sell vehicles. Find a place that meets your requirements in terms of space, facilities, price, and location. According to state rules, it also needs an office with direct entry from the outside, and a display sign that is at least 2 sq-ft and meets all California state standards. You will need to supply photos of the dealership as part of your license application to prove it’s an adequate place of business. An Occupational Licensing inspector will also visit the site.

Organize All the Details

Once you’re ready to submit your application, take some time to organize all the required documents because there are a lot of them. Many dealers work with a lawyer or someone who knows the applications process well enough to ensure that they’re checking off every requirement on the list. Helpfully, the California Department of Motor Vehicles created checklists for both new and used dealers. There is a $175 non-refundable application fee, as well as other small costs related to the specific type of licensure, so you have a financial incentive to apply correctly the first time.

Viking Bond Service is a nationwide surety company that makes it easy to obtain a California auto dealer bond that meets all the state requirements. Rely on our team for expert information, then fill out our easy bond application. You will receive a quote in 1-2 days, and we work hard to get everyone approved for affordable premiums regardless of their financial history. Once your premium is paid, you’re one important step closer to becoming a fully-licensed car dealer. Apply at any time, and if you have questions about why surety bonds are important for everyone involved, explore this free resource all about surety bonds.