It always seems like there are a few different names that probably leap to mind when you think of the type of business we are focusing on here. Motor Vehicle Dealer, Retail Auto Dealer, Used Car Dealer, Non-Franchised Auto Dealer are just a few that that leap to mind. Regardless what we call them, each state has their own licensing process. In this post, you will find comprehensive and super helpful resource if you have made the decision to pursue your California Car Dealer License. The segment of the government that licenses car dealers is the Department of Motor Vehicles (DMV).
What are the steps to obtaining a California Car Dealer License in 2018?
- DMV Licensing Paperwork. Here’s a great DMV link that explains how to complete the DMV Dealer Application paperwork.
- Pre-Licensing Education. Spend your money here and don’t try to hurry out of class because you haven’t set aside the right amount of time to get educated on your business.
- Pass the DMV test. You will be taking this test at an Occupational Licensing DMV location
- Background Check (Livescans)
- City Business License. You won’t need this if your business location is in an unincorporated area of your city.
- Fictitious Name Statement which is issued by the County Clerk’s desk. You won’t need this if you are forming a Corporation of LLC.
- Car Dealer Bond ($10K or $50K). Wholesale-only dealers that sell less than 25 vehicles per year can get a $10K bond. There is also a carve-out in the law that allows a $10K bond for motorcycle-only retail dealers. All other wholesale, auto broker, or retail dealers need a $50K bond.
- Signing a lease on Business Location.
- Resale Permit from the Board of Equalization (BOE).
- Checkbook in the Business Name.
- Signage. Your outdoor signs have to visible from 50 feet away. Your Business License and are a few other items need to be hanging on your wall where your customers can see them.
- Photos. 8 – 12 photos are required depending on if you are getting your wholesale, auto broker, or retail dealer license.
* It is absolutely critical that the business name on each document match identically.
Let’s take a deeper look at Surety Bonds (step 7) of the California Car Dealer License process.
The reason I specifically mention this step is for the individuals that are super excited to hit their first Manheim Auto Auction sometimes lose sight of the steps that could be most problematic for them. To avoid having a dime hold up a dollar, let’s think about the bond sooner rather than later if you have less than perfect credit. Having no credit at all also falls into a category that should take a deeper look at what their bond will cost them. The other type of dealer that should be checking on their bond rate early in the process are the folks that are not U.S. Citizens. Although we have fantastic programs to provide great rates on car dealer bonds for non-citizens, sometimes the rates take a bit longer to get especially if the applicant doesn’t have a Permanent Resident Card (Green Card).
For swift service and great rates on Your California Car Dealer Bond, call 866-357-4405 TODAY! We can even offer payment options on some bonds if the annual premium is over $2,000.
Why are Bonds required to get a California Car Dealer License?
First of all, a bond covers the general public, lenders, the DMV, and other dealers in case an auto dealer isn’t paying their bills. A list of bond claim scenarios is below.
The limits of the bond that the DMV requires will also depend on what state you transact business but leave that all to us. Here are just a few states and their required bond limit set by the Department of Motor Vehicles (DMV):
- California ($50,000 bond limit.)
- Arizona ($100,000 bond limit.)
- North Carolina ($50,000 bond limit.)
- Texas ($50,000 bond limit.)
What protection does a Dealer Insurance Policy provide to a California Car Dealer?
Here are the more common claims or losses covered by a Used Car Dealer Insurance Policy:
- Stolen or vandalized inventory.
- Auto accidents in an inventory vehicle are probably the most common claim. Then the question is who was the driver? Either Minimum Financial Responsibility Limits (15/30/5) would apply or the liability limits on the policy would apply. This would depend on if the driver in the accident is listed on your dealer insurance policy.
- An uninsured motorist injuring you, one of your salespeople, or a test driver while on a test drive. Although prop. 103 requires all California drivers to maintain insurance, about 30% of all drivers or more are not insured at any 1 day of any given year. Although this may just be an opinion, it’s one that is well-formulated and based solely on 18 years of data analytics research.
Below are claims or losses that happen less often but they are covered by a Used Car Dealer Insurance Policy:
- Vandalized or stolen office equipment is less common but still happens.
- A dealer’s potential customer slipping and falling at the business is a nightmare for all involved.
- A fire ruining your inventory vehicles or the building you have purchased or are leasing is rare but costly.
- This is one that is rarely discussed because many insurance agents and even fewer car dealers understand the exposure. The claim occurs when a vehicle is stolen or damaged in any way while in the dealer’s care, custody, or control (Garage Keepers Coverage or GKLL). This sounds like an inventory coverage claim which is already mentioned above but it’s very different? I’m glad you asked why? It’s because inventory coverage will only pay for damages done to a vehicle that you own. Garage Keepers coverage is designed to cover vehicles that you do not own such as ones that you are test driving before you purchase them!
What is the difference between a Dealer Insurance Policy and a Car Dealer Bond?
With a Car Dealer Bond, there is a set limit that has been pre-determined by the DMV. 3 – 4 times per year a savvy dealer will ask me if they can get a bond with slightly more bond coverage. Although it breaks my heart to say it, the bond limit is set by the DMV and cannot be modified in one direction or the other. Again, a surety bond is required in order to get your California Car Dealer License.
An especially relevant difference between a dealer bond and dealer insurance is the deductible that is usually paid by the dealer before the insurance company will start paying their part of the claim. A dealer’s insurance premium might increase at the time of renewal if any claims were paid on their behalf. In California as of April 2018, insurance is not required nor policed by the DMV inspectors. Auctions, lenders, or property owners will mandate insurance to protect their interests. A bond is different in that the bond carrier will pay out the entire claim and then subrogate for 100% of any amount they paid on the dealer’s behalf. Simply put, if they pay a $100 claim, they will send the dealer a bill for $100 + claims administration fees.
Can a Used Car Dealer (Auto Broker, Wholesaler, or Retail Dealer) get away without having a Dealer Bond?
Again, a Car Dealer Bond is a mandatory requirement set by the DMV to obtain or keep their retail dealer, wholesale, or auto broker license regardless of transaction volume or type of vehicles sold. With a bond, all claim payout must be repaid to the surety carrier 100% to prevent the bond and the dealer license from canceling. If the bond cancels at any time, the surety company sends a Notice of Cancellation (NOC) to the Department of Motor Vehicle’s (DMV) headquarters in Sacramento via certified mail.
Once the DMV headquarters processes the NOC, they alert the dealer’s local inspector. (This is the usually the same exact DMV inspector that issued the dealer’s license originally.) This forces that inspector to reach out to the dealer and either get a Notice of Reinstatement (NOR) for that bond or a replacement bond. The dealer typically has 3-4 days to get this situated with the inspector before the California Car Dealer License is suspended.
YCDB Quicktip Series
What Would Trigger a Bond Claim??
(The 4 Potential Claimants)
- The lender or flooring company for the dealer’s inventory. If the dealer doesn’t pay his obligations to the lender, they will file a claim against the surety company and that will trigger an investigation and if justified, the claim will be paid. As a result, the surety company will subrogate against the dealer.
- The DMV also can make claims against a bond for unpaid fees or fines, etc.
- A dealer can make a claim against a dealer if they can prove (typically through a Small Claims Court judgment) that they suffered a loss at the hands of the dealer.
- The public! Again, Small Claims Court generally handles these types of claims.
**Any paid claims will result in the dealer bond being canceled, which would cancel your California Car Dealer License**
Other surety bonds you may need if you are getting a California Car Dealer License in 2018:
DMV Driving School Bonds are required by persons or businesses that offer or provide instruction on traffic safety.
Vehicle Registration Service Bonds is often required by individuals and/or companies who perform vehicle/vessel registration services on behalf of the DMV.
Vehicle VerifierMotor Vehicle Engine/Verifier bonds are often required by persons and/or company’s who verify vehicle/vessel documentation against the physical inspection of the vehicle. This type of bond is also known as a Vin Verifier Bond.
Defective Title Bonds which are required by the DMV if a vehicle title is lost or stolen. The buyer will not be able to get the title issued in their name if they don’t have this bond in place and the title has been misplaced.
YCDB offers a few other services that may really help save a Used Car Dealer Time and Money!
Of course, you need to focus on getting your California Car Dealer License but here’s what next for you
- Logo creation. Every dealer needs a logo and one that was professionally created! Don’t get cheap on this part because this logo is a mirror of your business.
- Business card development. Don’t think you can hand out cheap business cards and expect people to want to buy your $6,000 car!
- Website design and construction. Another must for any retail car dealer in California. A super high-quality website can now be developed for $500 or less so what are you waiting for?
- Used Car Dealer insurance. If you are one of those dealers running around out there without insurance then this one is for you! Not being insured is an easy problem to fix.
- DMS Solutions. Wholesalers and auto brokers don’t have the needs that retail car dealers have so you are off the hook. If you are a retail dealer that sells more than 5 cars per month, a quality DMS will change the way you run your business. Do you feel unorganized? If you don’t have a DMS, that is why!
- Dealer-branded email service. You need to migrate away from your current Free Email Providers like Gmail, Yahoo, or Outlook to an email that has been branded to your business like [email protected] for instance.
Shame on you if you are a getting your Calfornia Car Dealer License in 2018 and you think you are going to get away with any of these lazy methods of doing business:
- not having a professional looking logo created as a cornerstone of your brand. This is step # 1 for every California Car Dealer regardless if retail, wholesale, or auto broker.
- how about not having professional business cards and stationery? Free layouts are free for a reason and they make your business look as cheap as they are. Do your business a favor and give it a chance to succeed in protecting your image.
- sending your email through personal Gmail or AOL email account instead of investing into an email that has been branded to your dealer name.
- the last one is not as bad but not having a fully-developed website to fully illustrate your auto dealer business.
- not having used car dealer insurance. is a ticket to pushing business to your nearest competitor.
Your Car Dealer Bond / Cal-Surety is here to make things easy for you.
Note to the lawmakers or high-level DMV staff out there that read this and do nothing…
It’s a shame that there are laws in place to require the citizens of California to maintain insurance and we cannot renew our vehicle registrations without proof of insurance. Proposition 103 (aka Prop 103) was passed in the late 80’s to mandate insurance of all vehicles traveling on public roads and the implemented across the board for regular people.
Section 11700 of the California Vehicle Code also speaks to several distinct laws that apply to the car dealer industry. That said, nothing in that section of the Code specifically spells out that insurance is required to get a California Car Dealer License. This seems like a no-brainer!
California Used Car Dealers have been abusing this loophole for years and my hope is that by further exposing that this flaw exists, the DMV will start to police it. This could really save the used car dealer industry because the peer-to-peer sales and new car dealers are really taking it to the California market as it stands now.
The DMV needs to require insurance in order to obtain or retain their California Car Dealer License.
Our California used car dealer industry is in trouble without your help. Shame on the Independent Auto Dealer Association of California (IADAC) also. I told them years ago that this loophole exists and they’ve done nothing.
In conclusion, Mike Ramos (the president of Your Car Dealer Bond LLC) has a message for you. If you are getting a California Car Dealer license…we truly appreciate the chance to earn your bond business!
While our dedicated staff delivers quality service with extremely knowledgeable yet down-to-earth people, therefore we are just like you.