Thousands of people just like you have considered getting a dealer license in California to access auctions and wholesale deals that would otherwise be closed to them. But finding out exactly how to get a car dealer’s license in California can be a challenge. If you plan to sell cars and make money, you’ll need a dealer license. The law is pretty clear on this “…only the Registered Owner shall sell or offer for sale a vehicle of a type required to be registered” I have been a licensed dealer for 20 years and put together this step-by-step guide to help you get your dealer’s license in California. We cover all of these topics (and more), during our online course.
1. Take a California DMV-Approved Dealer Training Class
California requires you to take a “Pre-Licensing Class” from a DMV approved training company such as ours at Dealer101.com. This training requirement applies to all California Dealer license types. Dealer 101® is licensed by The California DMV (Department of Motor Vehicles) to provide dealer training. We recommend taking this training first as you will gain an understanding of what it means to be a dealer and each step required to get your License. After completing the course, you will receive a DMV Certificate of Completion – required when you apply for your dealer license. *The DMV has authorized us to hold these instructor-led classes entirely online due to the Coronavirus outbreak.
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2. Decide on a Dealer License Type
California has two types of Dealer licenses for selling pre-owned vehicle; Retail and Wholesale. A Retail Dealer License permits you to sell vehicles to the public, other Dealers or at auctions. Retail Dealers are required to have an approved office and “car lot” where they are allowed to display vehicles for sale. A Wholesale Dealer License permits you to sell to other Dealers or auction but not to the public, in California. The DMV allows Wholesale Dealers to operate their business from a residence and are not required to have a commercial office or “car lot”. Some Wholesale Dealers work in partnership with a Retail Dealer who has already met the State’s requirements. Essentially you would be working as a Dealer under a Dealer to sell through to consumers. Both Retail and Wholesale Dealers may buy vehicles from any source including Dealer-only auctions.
3. Decide – Corporation or Sole Proprietorship?
You can apply for your Dealer License as a Corporation (S-Corp or LLC) or as a Sole Proprietorship (a private individual). If you decide to set up your Dealership as a Corporation, you need to supply the DMV with a copy of your Articles of Incorporation and other documents showing Officers that will be active in the operation of your Dealership.
4. Name Your Business
You will need a business name for your license, bank account, and various permits. Consider something that explains what you do, like “ABC Wholesale Auto Sales” or something similar. If you plan to operate your Dealership using a name other than your Corporation or personal name, you must file a Fictitious Name Statement at your local County Recorder’s office.
5. Get a Business License
If required in your area, you must obtain a Business License at your local city or town office’s Tax or License division. In your area, this license may be called a Business License, Certificate of Occupancy License, or Tax Certificate.
6. Get a Seller’s Permit from the CDTFA
Both Retail and Wholesale California Auto Dealers must have a Sellers Permit from CDTFA. To obtain a Sellers Permit, you can walk in your local CDTFA office (California Department of Tax & Fee Administration) to obtain a Sellers permit, which allows you to collect taxes. You can learn more and apply online here.
7. Open a Bank Account
Retail and Wholesale Dealers must open and maintain a bank account in the name of the dealership. You must give the DMV permission to confirm your bank account by signing the DMV’s “Authorization to Release Financial Information” form in the Application Package.
8. Secure a Location
Retail and Wholesale licenses both require a physical place of business that houses your accounting and business records. A Wholesale Dealer’s office may be located in a residence or commercial location. The office must be accessible from the street, on the ground floor. For example, walking through the kitchen to reach the office would be unacceptable. Retail Dealers are required to have an office dedicated to your dealer business, a two-foot square sign with your name and address posted permanently outside, and a display area. The display area must be large enough for at least one vehicle and reserved as a “Display Area Only”. A representative from the California DMV may inspect a potential Wholesale location. They will definitely visit a Retail location prior to conducting an inspection.
9. Get a Dealer Bond
Each Dealer applicant must provide a valid Dealer Surety Bond that protects consumers and the State of California from Dealers should fail to pay their DMV fees or remit sales taxes they collected. Retail Dealers must obtain a $50,000 bond. Wholesale, motorcycle and ATV Dealers require a $10,000 Bond. The cost of the bond typically ranges based on your personal credit score. You can obtain a no-obligation Bond Quote here
10. Get a Live Scan
“Live Scan” is a fingerprinting service where your fingerprints are sent to the Department of Justice for a criminal background check. The DMV requires this scan to uncover past criminal activities that may preclude you from obtaining a license. If you’re unsure if your background check will pass DMV standards, you can submit an Abbreviated Application for DMV review.
11. Take the DMV Test
The California DMV requires that one member of the dealership passes a 40 question test at the DMV office with a score of 70% or higher (28 correct answers from 40 multiple-choice questions). You are allowed 3 attempts to pass. We have an excellent (and free) practice test for our students to ensure they’re ready to visit the DMV. We’re proud of our 100% student pass rate!
12. Prepare & Submit Your Application
For either type, you’ll need to complete a “Used Dealer Application”, included in a handy forms package provided by the DMV. The DMV put together a great Checklist that details everything you need to include with your application. We recommend that you drop off your completed application in person at your nearest DMV Occupational Licensing Office. You’ll meet your local DMV Inspector(s) there and can set up an appointment for your location inspection.
13. Host the DMV inspection
After reviewing your application, your Inspector will contact you to coordinate a meeting with you to inspect the premises. The Inspection usually takes only a few minutes. When the Inspector approves your location, they will hand you a Temporary Dealer License.
As you can see, it’s not difficult to get a car Dealers License in California. It’s a process that we have helped many people navigate to obtain their licenses and start their own business. Ready to get started? Register for one of our online, instructor led, DMV Authorized, Dealer Pre-License courses. Questions? Contact Us