I'm just getting a Wholesale Car Dealer License in California. What auto dealer bond limit do I need?
The California DMV has a very specific carve-out in the law for wholesale-only auto dealers. The exception is meant to offer low-volume, wholesale dealers the opportunity to get lower limit auto dealer bonds. As a result, wholesale dealers save themselves some money that can be reinvested into inventory. This is actually a question on the DMV Pre-Licensing test so most dealers already know this rule but it's worth mentioning given how many times I hear this question. Wholesale Dealers that sell less than 25 cars/trucks per year can get away with the $10K surety bond. The only other carve-out exists for Motorcycle-only dealers, regardless of retail or wholesale. Motorcycle-only dealers also have no sales caps in order to still qualify for the $10K bond.
Hundreds of Dealer Licenses have been given to people that use their Auction Access to support other businesses!
It's very common for businesses that make a living from their fleet of vehicles to obtain a wholesale-only license. They get the same auction access and have a less expensive way to purchase their inventory. The trick is not to cut any corners. Again, if you buy a vehicle under the dealer auction license then that vehicle should be sold legitimately to your other business. This allows the CDTFA to get paid on your profit and the CA DMV to get paid on the registration of that vehicle. Just remember that the auto dealer bond rules remain in-tact for the limits required ($10K or $50K).
Some Wholesale-Only Dealers use their Dealer License as an Auction License!
Again, keep in mind the point of view of the California Department of Tax and Fee Administration and the Department of Motor Vehicles. They both need to wet their beaks or they will eventually be banging on your door wondering how you could really be a business if you only buy but never sell vehicles. Remember the CDTFA needs to get paid on your profit and the DMV needs to get paid on the registration of that car, truck, van, etc. A good approach is to hold whatever car you like for 6 - 8 months at most and then sell it. With any luck, you'll even be able to scrape a profit in the process. Most people in a position to do this for fun aren't looking to make massive profits from this business model. They are content with just drive a beautiful car around for 8 months before selling it. Then having reconditioning, dealer insurance, and maintenance associated with that vehicle be a business expense before selling it for a profit. Then rinse and repeat!
As a California Wholesale-Only Dealer, does it matter how many vehicles I buy per year?
No. The DMV is tracking the number of sales transactions to determine your car dealer bond limit. The number of cars you purchase is not factored in. That said, if you are buying too many cars and not selling them, eventually the California Department of Tax and Fee Administration (CDTFA) may start poking around. Why the CDTFA you ask? Vehicles you purchase as a wholesale dealer typically generate a taxable profit. If that vehicle was never sold, the CDTFA would never get to collect a tax on the profit you made on the auto sale.
I'm wondering How to Get a Car Dealer License Without a Lot?
An Auto Broker endorsement used to be the way to go in California but the DMV is trying to eliminate this specific license type. That said, that Auto Broker business model is still alive and well! The next question that most Auto Brokers have for me next is simply, why? Auto Brokers never buy or sell a car as a Retail Auto Dealer would, therefore their funds are never tied up purchasing their inventory. They market the vehicle and connect the prospect with a retail car dealer that has the vehicle they want for it. Auto Brokers are still mandated to obtain a $50K auto dealer bond.
I'm getting a California Retail Auto Dealer License, what bond limit do I need?
Since the only carve-out in the DMV law is for Motorcycle-Only Dealers, you will need a $50K auto dealer bond if you are getting a license to sell vehicles directly to the public. Some of you are searching for the loophole in your mind and there is none. Retail Truck Dealer, Retail RV and Trailer Dealers, and Retail Boat Dealers all need a $50K surety bond.