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 dealers 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 a Dealer or the Registered Owner (individual or business) of record shall sell or offer for sale a vehicle of a type required to be registered”
I’ve been a licensed dealer for 20 years now and put together this step-by-step guide to help you get your dealers license in California.
1. Take a California DMV-Approved Dealer Training Class
California requires you to take a DMV approved, “Pre-Licensing Class” from an approved training company such as Dealer 101. This training requirement applies to all California Dealer license types.
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 Certificate of Completion – required when you apply for your dealer license.
Dealer 101® is certified by The California DMV (Department of Motor Vehicles) to provide dealer training.
The California DMV (Department of Motor Vehicles) has an official website and lists all approved DMV Dealer Education Providers where you can complete your training.
2. Decide on a Dealer License Type
California has two types of Dealer licenses for selling pre-owned vehicle; Retail and Wholesale.
A Retail license permits you to sell vehicles to the public in addition to other Dealers, auctions etc. This type of license requires an approved “car lot” (we’ll cover that later).
Wholesale Dealers may buy vehicles from any source including Dealer-only auctions. They may sell to other Dealers or at auctions but are forbidden by law from selling to the public.
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.
3. Decide – Corporation or Sole Proprietorship?
You can set up your Dealership as an S-Corp, LLC (Limited Liability Corporation) or Sole Proprietorship (as a private individual). Consider getting legal advice or researching this before making a decision.
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, Shareholders and other that have a 10% or more interest in the Corporation.
4. Name Your Business
You will need a business name for your license, bank account, and various permits. Consider something 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. The license may locally 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. You can visit your local CDTFA (California Department of Tax & Fee Administration) to obtain a Sellers permit, which allows you to collect taxes. You can learn more and apply online at:
7. Open a Bank Account
Retail and Wholesale Dealers must open and maintain a bank account in the name of the dealership. The DMV will confirm this is through your “Authorization to Release Financial Information” form.
8. Secure a Location
Retail and Wholesale licenses both require a physical place of business that houses your accounting and business records.
Wholesale Dealers offices 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.
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).
12. Prepare & Submit Your Application
For either type, you’ll need to complete a “Used Dealer Application”, included in a handy forms package you can find here:
The DMV put together a great Checklist that details everything you need to include with your application. You can find that here:
Once complete, we recommend that you drop it off 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 a few minutes.
When the Inspector has finished looking around, they will hand you a Temporary License
As you can see, it’s not difficult to get a car dealers license in California. It’s a process that
It’s really Add Summary, include “we just taught you how to get a dealer license in California”