If you are having issues receiving your Car Dealer License in California or simply curious about the process, then you are in luck because licensing is one of our specialties!
In this post you will find a comprehensive and strategic resource to move you closer to pursuing your California Auto Dealer License.
The names that may come to mind when thinking of this type of business are Motor Vehicle Dealer, Retail Auto Dealer, Used Car Dealer, or Non-Franchised Auto Dealer. Regardless of what they are called, each state has its own dealer licensing process.
Below is a general summary of the used car dealer license types.
Obtaining a California Car Dealer License
Selecting a used car business model is key to understanding how to obtain a dealer license. This industry is much more than merely acquiring a car dealer license to purchase cars. Knowledge of the entire system is necessary for establishing a successful dealership.
Cause, Effect, and a Proactive Approach
The most common concern we hear from our dealers is regarding the uncertainty surrounding the future of their business. Anyone can sell a few cars to friends and family, but it is in executing a solid business structure and a compelling plan that determines financial success or failure.
Unfortunately, the used car dealer education process administered by the DMV does little to equip dealers with tips to prevent them from making common mistakes. Maintaining a clear vision and a strong sense of direction is vital to avoid feeling overwhelmed.
To help dealers follow the appropriate steps and to focus on overcoming current challenges, visit our free YCDB car dealer education video library.
The California Car Dealer License Process
- DMV Licensing Paperwork. Here’s a useful DMV link that explains how to complete the DMV Dealer Application paperwork.
- Pre-Licensing Education. Spend your time and money here. Resist leaving early from class because in doing so, you will not have dedicated sufficient time to be adequately educated on your business.
- Pass the DMV test. Tests are administered at an Occupational Licensing DMV location.
- Background Check (Livescans).
- City Business License. The DMV seems to be in process of phasing-out this step. You will not need a city business license if your business location is in an unincorporated area of your city.
- Fictitious Name Statement. Issued by the County Clerk’s desk. You will not need this statement if you are forming a Corporation or LLC.
- Car Dealer Bond ($10K or $50K). Wholesale-only dealers who sell less than 25 vehicles per year can obtain a $10K bond. There is also a provision in the law allowing a $10K bond for motorcycle-only retail dealers. All other wholesale, auto broker, or retail dealers need a $50K bond.
- Sign a Lease on Business Location.
- Resale Permit from the Tax Administration Board, previously the Board of Equalization.
- Checkbook in the Business Name.
- Signage. Your outdoor sign must be visible from 50 feet away. Your Business License must be placed on a wall where your customers can view it.
- Photos. 8 – 12 photos are required depending on whether you are receiving a wholesale, auto broker, or retail dealer license.
*NOTE: It is absolutely essential that the business name on each document match identically!*
A Detailed Look at Car Dealer Bond Step 7 of the California Car Dealer License Process
This step is specifically singled-out because it common for dealers to lose sight of important steps of the licensing process in the excitement of attending their first Auto Dealer Auction.
To avoid having a dime hold up a dollar, we should consider the bond sooner rather than later if a dealer’s credit is less than perfect. In addition to less than perfect credit, having no credit also falls into a category that impacts the cost of a dealer bond. Another dealer who should check surety bond rates early in the process is the non-U.S. Citizen.
We are proud to offer fantastic programs that provide great rates on car dealer bonds for non-citizens, yet the rates may take longer to obtain, especially if the applicant does not have a Permanent Resident Card (Green Card).
For exceptional service and affordable rates on your California Car Dealer Bond, call 866-357-4405 TODAY! Payment options may be available on certain bonds if the annual premium is over $1,500.
Why are Bonds Required for a California Car Dealer License?
A bond protects the public, lenders, the DMV, and other dealers when an auto dealer is not fulfilling their financial obligations. A list of bond claim scenarios is located below.
The DMV bond limit requirements are also dependent upon the state in which business is transacted. Here are a few states and their required bond limit set by the DMV:
- California ($10,000 or $50,000 depending on your business operation)
- Arizona ($25,000 or $100,000 depending on your business operation)
- Colorado ($50,000 bond limit)
- Iowa ($75,000 bond limit)
- Louisiana ($50,000 bond limit)
- Minnesota ($50,000 bond limit)
- New Mexico ($50,000 bond limit)
- North Carolina ($50,000 bond limit)
- Texas ($50,000 bond limit)
Can a Used Car Dealer (Auto Broker, Wholesaler, or Retail Dealer) Operate Without a Dealer Bond?
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 pay-outs must be 100% repaid to the surety carrier 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 (DMV) headquarters in Sacramento via certified mail.
Once the DMV headquarters processes the NOC, they alert the dealer’s local inspector, who is usually the same DMV inspector that issued the dealer license originally. This compels the inspector to contact the dealer to obtain either a Notice of Reinstatement (NOR) for the bond or a replacement bond. The dealer typically has 3-4 days to get this settled with the inspector before the California Car Dealer License is suspended.
Avoid These Pitfalls:
- Lacking a professional-looking logo created as a cornerstone of your brand. A professional logo is imperative for every Used Car Dealer whether retail, wholesale, or auto broker.
- Unprofessional business cards and stationery. Inexpensive or free layouts are free for a reason, and they cheapen your business. Do your business a favor by initially investing to promote your image and give it a chance to succeed.
- Sending your email through a personal email account instead of investing in an email that is branded to your car dealer business.
- Lacking a fully developed website to represent your auto dealer business.
- Not having knowledge about the used car dealer industry (YCDB has an excellent, free library to help you achieve a competitive edge).
A Message from Mike Ramos, President of Your Car Dealer Bond LLC
If you decide to pursue a California Car Dealer License, we would genuinely appreciate the opportunity to earn your bond business and welcome you to the YCDB family!
Our dedicated staff of down-to-earth associates are extremely knowledgeable and deliver outstanding customer service. We are available 7 days a week to assist you. Please give us a call at 866-357-4405.
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