A California motor vehicle dealer license allows an individual or business to legally sell vehicles as a way to earn income in the state of California. Its purpose is to protect the general public from dealers violating the law. Selling vehicles without a license as a business has serious legal implications, so it is best to obtain your license.
Yes, if you are selling any new or used vehicle for non-personal purposes, then you need to obtain a vehicle dealer license. However, if you are only selling your own used car, you don’t need a license.
TIP: some times, non-dealer professionals may also obtain motor vehicle dealer license in order to access dealer only auctions. You can reference this article for details
In California, there are mainly three types of auto dealer licenses and an add-on in the state of California
As listed above, there are three different types of dealer license and an add-on in California. You need to decide what license you are applying for based on the type of dealer operations you hope to run.
A 6 Hour Pre-Licensing Training Course is required of California Dealers before they can obtain a dealer license. The course has to be approved by the California Department of Motor Vehicles. The licensing course covers topics such as the following:
This course is entirely online through learning management systems, and completed, you will be awarded a Certificate of Completion.
There are many schools where you can take the course, including: Dealer 101, Dealer Training, Redline Dealer Education, all approved by the California DMV. This is a list of all approved dealer education providers.
Once you complete the course, you will receive a certificate of completion. Then, you will need to schedule and pass the dealer license Test.
The test has 40 multiple-choice questions. Applicants need to score at least 70% (28/40) to pass. If you don’t pass the test on your first try, you can retake it as many times as you wish. However, if the applicant fails to pass the test for the third time, they would need to retake the dealer education program again and then the testing process starts from zero with another 3 attempts.
An example question on the test is:
Pick One Option:
The “Car Buyer Bill of Rights” limits a Dealer’s compensation from an institution financing the purchase of a vehicle to:
You can check out a practice test here.
You can schedule your test through your DMV account. You will then take the test at your local DMV Occupational Licensing Office.
There are many options for your business: Limited Liability Company (LLC), S Corporations, and Sole Proprietorships. We list the pros and cons of each below:
Limited Liability Corp (LLC)
S Corporation
Sole Proprietorship
Here is a link with more information on each business type.
There are various documents that you will need to complete based on the type of business you decide to register.
Limited Liability Corp (LLC)
S Corporation
Sole Proprietorship
If your business is anything other than sole proprietorship or partnership, you would need to apply for a Federal Employer Identification Number. A federal EIN is an unique nine-digit tax identification number assigned by the Internal Revenue Service (IRS) to identify businesses operating in the United States. It is used for a variety of purposes, including filing federal tax returns, opening business bank accounts, paying payroll taxes, applying for business licenses, etc.
You can apply for a federal employer identification number on the official IRS website. The application can be completed within one session and a Federal EIN number will be provided to the applicant upon completion.
If your business is a sole proprietorship or partnership, you can submit the following identification in place of a federal EIN: A state driver’s license/person ID or a valid US passport.
California's DMV mandates that car dealers must establish a new bank account using the dealership's specific name. Below are some well-known banks that offer services to car dealerships in California.
A seller permit from the California Department of Tax & Fee Administration is required if (1). You operate a business in California (2). Intend to sell or lease tangible personal property that would be subject to sales tax if sold at retail.
Essentially, the permit allows the dealers to purchase cars they intend to sell tax-free. The dealers will collect taxes from customers when they sell.
For details, you can visit here.
The California Secretary of State website is primarily responsible for administering state elections and recording all business entities operating in the state. On the Biz File Online website, you can file business formation documents, receive filing evidence, search for business entities, and obtain entity status.
You will also need to file a Statement of Information (SI 550) or Statement of Information LLC (LLC 12) with the Secretary of State.
The dealership location is where all primary dealer business is performed. Here are some notes about its requirements:
Office
The display lot is a location to showcase the vehicles you are selling. It should meet the following requirements:
One other requirement is that the office needs to have a permanent sign of 2x2 feet with business name, address, and hours of operations posted outside of your office.
Some cities and towns may require you to obtain a Business License. This license may be called a Business License, Certificate of Occupancy or Tax Certificate.
You can use the following link to find a location to apply for a Business License in your local jurisdiction.
A surety bond is a financial guarantee made by the surety (insurance company) toward the obligee (California Department of Motor Vehicles) that the principal (auto dealer) won’t violate the provisions of the California Vehicle Code. For example, if the dealers fail to pay their fees or remit sales tax they collect from vehicle sales, a claim can be filed toward the bond.
In terms of bond amounts, California retail dealers need one-year term $50,000 dealer surety bonds, which cost around $500 per year if you have a good credit. On the other hand, California Wholesale dealers need a one-year term $10,000 bond, which costs around $150 per year if you have a good credit.
To get a dealer bond, generally you need to provide basic information such as business name, owner name, address as well as social security number for a soft credit check.
If you don’t want to get a surety bond, you can also apply for an irrevocable letter of credit prescribed by Section 320.27(10), F.S., in the amount of $50,000 for retail dealers and $10,000 for wholesale dealers. This letter of credit must be from a bank authorized to do business in California. An irrevocable letter of credit is essentially a promise by the bank of the applicant to pay California Department of Motor Vehicles under certain conditions (i.e. if the dealer applicant broke the law).
You need to complete the correct auto dealer application from the California DMV website. You will need to start by creating a MyDMV account and then use the account to apply for your license online.
If you have questions, you may call California DMV at 1-800-777-0133.
In the online application, you may need to submit many of the following documents.
Each individual on the license needs to attend the fingerprinting appointment to check for any criminal record for the past 10 years. You can bring the Request for Live Scan Clearance (receipt) (DMV 8016) to your Live Scan appointment.
More details can be found on the official California DMV fingerprinting requirement page. Here is a list of Live Scan locations.
After the appointment, the applicant should submit the Request for Live Scan Clearance (receipt) (DMV 8016) as a part of the application. The purpose of the fingerprinting is to determine if you have been found guilty of a felony. If you have been found guilty, then the California DMV will require an explanation. In such circumstances, we highly recommend you consult a professional attorney to maximize your chances of approval.
You can check your Live Scan status here.
After you submit your application, you can then schedule your inspection of your dealership location. The inspector wants will inspect your dealership to evaluate the following:
After the inspector approved your dealership, you will receive a temporary dealer license.
Once the California DMV approves your application, the DMV will mail your license at the address you provided in your application. Now, you are a licensed motor vehicle dealer and go open a bottle of champagne to celebrate!
It could take 8-9 weeks for you to obtain your California dealer license after the California DMV received your application. In the case your application is incomplete, the state will send you a letter requesting the missing information. This process will delay the approval time. Therefore, you want to make sure that your application is complete before initial submission to prevent unnecessary delay.
It is easier to get a DMV approved location. If you can’t find it, you will need to search through craigslist and find a location zoned for a used car dealership. You can get a warehouse location with a small office setup. A real estate agent can also help you with your search.
Yes, the California Auto Dealer License expires at the end of every year. Applicants should submit a renewal application after receiving a 90-day notice of expiration from the DMV.
Every two years, the DMV requires you to take continuing education classes to renew the dealer license.
Retail Dealer License Cost:
Wholesale-Only License Cost:
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