A career as a car dealer can be interesting, secure, and lucrative too. But if you want to become a car dealer in any of the 50 states, you will first need to obtain a license. Anyone who sells more than a few vehicles – as little as 3 or 4 in some states – will need to become a licensed motor vehicle dealer to continue selling vehicles. It’s illegal to sell vehicles without an auto dealer license and subject to strict penalties, including being restricted from ever getting a license in the future. Therefore, anyone who hopes to start a career as a car dealer needs to make getting a license their first priority. This simple guide walks you through the basic steps in all states.
Contact State and Local Officials
Step one is determining if you actually need a license, and if so, which one you need. People who own car dealerships will need a license, but anyone who works for those dealerships selling cars may not. Furthermore, states often require different car dealer’s licenses based on what kind of motor vehicle the license holder sells: cars, boats, RVs, etc.
The best way to determine your exact auto dealer license requirements is by reaching out to the local office of the state Department of Motor Vehicles (DMV) or the Department of Licenses (in some states). Officials at the DMV will be able to provide the most complete, up-to-date, and accurate license requirements, along with any paperwork necessary to get a license. These officials can also answer your questions about exactly how to get a dealer’s license. This is great information for making sure you check all the necessary boxes, so don’t wait to get in touch with your local DMV.
Complete the Minimum Requirements
Every state has different requirements for how to get a car dealer’s license. Those requirements are more extensive in some states than others, but there are minimum requirements that every aspiring car dealer should prepare to meet. These include:
- Registering your business with the relevant state agency.
- Finding a place to set up a car dealership that meets all local zoning requirements.
- Attending a pre-license seminar or completing specialized courses.
- Having the minimum required insurance coverage.
- Passing a background check.
Keep in mind that some states require car dealers to meet additional requirements before getting a license. They may have to pass a test about state laws and codes of ethics. If there is a repair shop on site, they may also need the number of a hazardous waste generator. This is another argument in favor of contacting the DMV because they can walk you through all the steps involved with getting a license.
Acquire a Motor Vehicle Dealer Bond
While you are meeting other requirements for getting a car dealer’s license, work on getting a motor vehicle dealer surety bond (or meeting any other surety bond requirements). Many states require car dealers to have a specialized surety bond before granting them a car dealer license.
How does a surety bond work? It makes one party (in this case the motor vehicle dealer) liable to another party (the DMV or vehicle buyer) for any misconduct leading to damages. The victim of that misconduct may file a claim against the bond for compensation equal to the damages. For example, if a car dealer sold someone a vehicle with the odometer rolled back (which is illegal), the buyer could file a claim for the vehicle price.
The bondholder has liability for all claims. But if the motor vehicle dealer can’t or won’t pay a claim, the surety company that issues and underwrites the bond guarantees the claimant a full settlement. The bondholder must then repay the surety the settlement amount, along with interest and fees. Motor vehicle dealer bonds are essentially a way to incentivize car dealers to follow state and local laws, and hold them accountable when they don’t.
Acquiring a bond will involve completing a bond application and submitting to a credit check – plus providing any documents the surety asks for. You will need to pay a premium to activate bond coverage that will cost a small percentage of the bond’s total size. The final cost of a surety bond amount depends on the bond seeker’s credit. After paying the premium, the surety provides a document proving you have met the surety bond requirements for a car dealer’s license.
Apply for a Motor Vehicle Dealer License
The final step will be filling out the paperwork involved with the motor vehicle dealer license and providing whatever documentation goes along with it (like proof of bond coverage). There may be fees involved as well, sometimes substantial ones. The DMV will then review all your application documents and either grant or deny you an auto dealer license.
Once you receive your license, you’ll want to be prepared to renew it on an annual basis. Prepare to renew your motor vehicle dealer bond as well. Bond coverage expires after 12 months, and failure to renew it can lead to a suspended car dealer’s license. Renewal involves an updated credit check that underwriters will use to adjust the premium price up or down. Licenses and bond coverage go hand in hand, so it’s advisable to make the renewal process for both a scheduled item on the annual business calendar.
Viking Bond Service – Serving Car Dealers Everywhere
Surety bonds are a fact of life for car dealers. That doesn’t mean they have to be a hassle, however. It all depends on having the right bond partner. Working with the right surety agency makes it quick, easy, and confident to obtain the bond required for getting a car dealer license. That agency can also make keeping bond coverage stress-free for years to come.
Viking Bond Service has been that partner for car dealers across the country. We issue motor vehicle dealer bonds (and most others) in all 50 states. When you’re ready to pursue a bond, request a quote from us. It costs nothing – no strings attached – and gets you a price to consider in under 24 hours.
We can answer all your questions too. Contact us in writing or call 1-888-2-SURETY (1-888-278-7389).