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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-only dealers the opportunity to get lower limit auto dealer bonds. As a result, wholesale dealers save themselves some money. 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.
I'm a Wholesale-Only Dealer and only want to buy from auction at a discount?
This is very common for businesses that make their money from the vehicles they own will tend to see the benefit of obtaining a wholesale-only license. They get the same auction access and have very little overhead due since they are not dealing with the general public. The trick is not to cut any corners. Again, if you buy a vehicle under the dealer license then that vehicle should be sold to your other business. This allows the BOE to get paid on your profit and the DMV to get paid on the registration of that vehicle. That said, auto dealer bonds will still need to be purchased for $10,000 for those wholesale dealers and will need to be upgraded to a $50,000 bond before they sell that 25th vehicle.
I want to get a Wholesale-Only License to buy cars at auction but don't really want to sell cars?
Again, keep in mind the point of view of the Board of Equalization 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 BOE needs to get paid on your profit and the DMV needs to get paid on the registration of that car (or truck). A good approach is to hold whatever car you like for 6 - 8 months and then sell it. With any luck, you will 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, insurance, and maintenance associated with that vehicle be a business expense before selling it for a profit. Then rinse and repeat!
As a Wholesale-Only Dealer I sell less than 25 vehicles per year. Does it matter how many vehicles I buy?
No. The DMV is tracking the number of sales you are making here to determine the limit of the auto dealer bonds for wholesalers. The number of cars you purchased is not factored in. That said, if you are buying too many cars and not selling them, eventually the Board of Equalization (BOE) may start poking around to find out why. Why the BOE you ask? That vehicle was likely was purchased by you (the Wholesale-Only Dealer) and the BOE usually assumes that you will make a profit on the sale of that vehicle. If that vehicle was never sold, the Board of Equalization never gets to collect a tax on the profit you made on the auto sale.
How about a Wholesale-Only Dealer with an Auto Broker Endorsement?
Although the California DMV may be doing away with the Auto Broker designation altogether, Auto Brokers are still mandated to obtain a $50K auto dealer bond. the next question that most Auto Brokers have for me next is simply, why? While I agree that Auto Brokers never buy or sell a car as a Retail Auto Dealer would, they are still materially involved if they helped arrange a sales transaction and got paid for it.
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. 

For the more seasoned dealers that may have some questions, this section is for you!

Your auto dealer bond is in place and now you are at the point where you are going to buy insurance.

It doesn't matter what the reason is, the most important thing is that you finally decided to protect your business. Some dealers wait until the auction or their lender mandates insurance from them to make the move. Others won't make the move until their wife or business partner complains about it one too many times. Several other dealers won't be able to sleep at night and won't be able to stand it. And others need something bad to happen like get a vehicle impounded for not having a dealer insurance policy and then it really costs them. And even that scenario is much cheaper than having an uninsured auto claim. For dealers that are a little more short-sided, this is what needs to happen in order for them to buy their used auto dealer insurance.

You've done so much work to get to this point in your business development, don't try to cut corners just to try to exploit a loophole. Since the California DMV doesn't require dealer insurance to get your license or renew it for that matter, some dealers will think that is an immediate reason to never purchase insurance. Don't fall for the trick! Sleep better, think like a professional and find different ways to leverage your dealer insurance to make you more money instead of looking at this as just a business expense. Get a quote on your Auto Dealer Insurance today! It's probably a lot less expensive than you think.

Besides a low-cost auto dealer bond, we can also help you establish your brand in a variety of ways.

YCDB Quicktips #101 is to create a logo. When I say create a logo I mean, have one professionally developed for you if you are not a designer. Don't be cheap or short-sided with this step. Think about it this way, how do you want your prospective buyers to think about you and your dealership? Let's play a little game. What word pops into your mind when you read the word K-Mart. If I'm not mistaken, it's either cheap or some variation of that word. Let's try a different word now. How about Cadillac? Unless you've been living on another planet for the last thousand years, you probably have an image in your mind of something luxurious or something very close. You probably understand the importance of developing a beautiful logo and why it's #1 on our list of YCDB Quicktips to help used car dealers take their sales to the next level.

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