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How to Get an Auto Dealer License

how to get an auto dealer license

If you love cars, you may have considered owning an auto dealership. After all, this route would give you an opportunity to talk about cars all day long, geek out about their features, and help people find the vehicle of their dreams. But starting and owning a dealership doesn’t solely hinge on your love for cars. 

In between your idea of creating a business and opening your door lies a lot of paperwork that you have to mow through, and most of that paperwork centers around one thing: getting your auto dealer license. This step is crucial, especially if you want to own a legally operating business in whatever state your dealership is located. 

However, while necessary, most people don’t know how to complete this step, so it’s easy to wonder how to get an auto dealer license. And even though it’d be nice to say this document is easy to acquire, getting a license is actually harder than you might expect. 

Do you need an auto dealership license? 

Before explaining how to get an auto dealer license, first things first. Do you even need one? As mentioned earlier, obtaining this license is necessary if you want your dealership to be a legally operating business. But there are some exceptions to this rule. 

If you don’t want a dealership license but would like to sell a car, the title for that vehicle must be in your name, and you must use that vehicle for personal, family, household, or business purposes. For example, maybe you want to buy a new car, but you need to sell your current one first. In this case, you can do so only if the car title is in your name. 

Every state gives you the power to sell your personal vehicle. But if your name isn’t on a title, you can’t sell the car, or you’ll commit an illegal act called title-jumping, which is a crime in every U.S. state. 

Of course, you may be wondering if you can simply title a car in your name before you sell it, but this loophole doesn’t exist. While you wouldn’t be title-jumping anymore, you’d still have to prove that you used the vehicle for business, family, or household reasons. 

So, if you plan on selling multiple cars—and not a personal vehicle that you own and actively use—you need to get an auto dealer license. Otherwise, you can get in trouble and suffer some consequences. 

Which auto dealer license do you need? 

Once you know whether an auto dealer license is necessary, it’s time to pick out the type of license you should pursue. Ultimately, the path you choose will depend on the kind of dealership you plan to run. 

One of the best things about being an auto dealer is that you can decide which type of vehicles to sell. For example, here are three common options. 

1. An auto dealership with new vehicles

If you plan to operate a dealership with new vehicles on the lot, you’ll likely need to be franchised directly through a manufacturer to operate legally in your state. Once you get that sorted out, you’ll need to pursue a new dealer license. 

2. An auto dealership with used vehicles

Perhaps you only want to sell used vehicles. If that’s the case, you may not need to be franchised directly through an auto manufacturer. But you’ll still need to acquire a used vehicle dealer license. 

3. An auto dealership with new and used vehicles

Owning a dealership with both new and used cars is possible. However, you’ll probably need to get an auto dealer license for each type of car sale you hope to pursue. 

Also, it’s important to keep in mind that a dealership that sells new vehicles can quickly start selling used cars. But for used car dealerships, you can only sell used vehicles, so keep that in mind when you’re deciding which type of dealership to own. 

4. An auto dealership without a lot 

In this digital age, you may consider having a dealership without a lot. This strategy would reduce a lot of startup costs, so it’s understandable if you want to take this route. 

Some states will let you operate your business online, but that doesn’t mean you can avoid licensing. You still need to acquire the right dealer license and follow your state’s laws even though your business is digital. 

Meet the state requirements for licensing

One part of learning how to get an auto dealer license is knowing your state's requirement

Nailing down the type of auto dealer license you want will allow you to take the next step towards legitimizing your business: reviewing your state’s requirements for licensing. Most states will have some of the same guidelines. 

For example, you’ll most likely need to secure a properly zoned location (if you’re getting a lot) and have your location and business approved. Additionally, a few other standard requirements may arise, including the following: 

  • Meeting your zoning requirements 
  • Providing proof of insurance 
  • Registering your business
  • Passing a background check
  • Attending a pre-licensing seminar
  • Arranging a business inspection 

Of course, these requirements are not set in stone. Your state may have some of these guidelines, or they may have a completely different set of criteria. For the best chance of success, research your state’s specific requirements for an auto dealer license. 

Don’t forget to acquire an auto dealer bond

No matter your business location, you’ll likely need to get an auto dealer bond before you apply for a license. A surety bond will protect your customers and allow them to make a claim against you if they believe you’re running an unethical, fraudulent, or unlawful business. 

The cost of the auto dealer bond will only be a small percentage of the total bond amount. However, the bond cost will vary depending on different financial factors like your personal credit. 

Once you’re ready to get an auto dealer bond, it’s best to go through a transportation agency like Barry Risk Management. Acquiring a bond can get tricky if you’re doing it on your own, but it can also be relatively easy if you have help. 

Submit a licensing application

The final step for getting an auto dealer bond is simple: submit your licensing application. This step will be straightforward if you’ve completed everything else, but there will be a lot of paperwork involved. 

For example, when submitting a dealer license application in New York, you have to complete several steps for the Department of Motor Vehicles that require you to either fill out or obtain information. Failure to have all the correct documents will prevent you from applying to get an auto dealer license. 

If you don’t want to face any potential roadblocks, the best solution is to find a transportation agency to handle everything. Companies like Barry Risk Management, which has over 30 years of experience in the DMV industry, can help New York dealerships get their licensing. 

Even better, Barry Risk Management does everything online, so you don’t have to come inside an office and wait for a representative to speak with you. All you need to do is make a phone call, and you’ll get the assistance you need. 

To get your car dealer license in New York, call 1-888-995-TAGS(8247) to speak with a representative at Barry Risk Management. 

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How to Get an Auto Dealer Bond In New York

how to get an auto dealer bond in NYC

If you’re an auto dealer in New York, there are a few things that you know you need. You need a car dealer license, motor vehicles to sell, a decent-sized lot, and a handful of salespeople if you’re just starting out. 

These are obvious necessities for your business. However, there’s something else that’s just as important to have and that states even require: an auto dealer bond. 

In states like New York, you must have an auto dealer bond if you want to operate as a car dealer. But, more often than not, most people know nothing about auto dealer bonds. 

They don’t know what they are, what they cover, how much they cost, or even how to get one. And that’s why this article will clear the smoke, pull back the curtain, and demystify one of the most essential things that every auto dealer in New York needs. 

What is an auto dealer bond?

how to get an auto dealer bond to protect customers

Some people call an auto dealer bond a car bond—and honestly, both terms are correct. They each mean the same thing. Regardless of the phrase you use, this type of bond is a legally binding contract that protects customers, including everyday consumers and state or local agencies.  

This protection allows customers to take recourse when they’re exposed to fraud or misrepresentation during a business transaction. For example, maybe you decide to sell a car that has invalid tags. Whether you knowingly or unknowingly do this, your customer has the right to file a claim on your bond. 

When your customer takes this step, the business that’s backing your bond will pay the costs for your mistake. But the company will only pay up to the amount of the required bond. Then, you’ll have to reimburse the business. You don’t get to walk away scotch free. 

This series of events will occur anytime you don’t follow the applicable regulations and laws that your state has for auto dealers. And the only time you can get away with avoiding a customer’s claim is if the claim on your bond is illegitimate, meaning it’s false.  

Another thing you should keep in mind is that there are different types of auto dealer bonds. The one you choose will depend on your state’s requirements and the types of vehicles you’d like to sell. Some of the most popular bonds include: 

  • Used auto dealer bonds
  • New auto dealer bonds
  • Mobile home dealer bonds
  • Motor vehicle bond
  • Wholesale dealer bond

Each of these bonds is tailored to the type of dealership that you’ll run, so make sure you get the right one for your business. 

What does an auto dealer bond cover? 

While it’s important to know what an auto dealer bond is, you also need to know the ins-and-outs of what it covers. As previously mentioned, an auto dealer bond will protect customers who are exposed to fraud or misrepresentation during a business transaction. But what that fraud or misrepresentation looks like can vary. 

Sometimes, it can look like a deliberate mistake you’ve made, or it can look like a simple error and misunderstanding. For better context, here’s a list of scenarios in which a customer can make a claim on your bond: 

  • Selling stolen motor vehicles
  • Forgetting or avoiding to pay sales tax and fees to the state
  • Not reporting a sale
  • Committing financial fraud
  • Fraudulently representing a motor vehicle during a transaction
  • Withholding vehicle titles
  • Failing to meet warranty obligations
  • Refusing to pay for a trade-in vehicle
  • Forgetting or avoiding to pay lenders
  • Giving a check that’s returned for insufficient funds

Clearly, the list of protections that customers get from an auto dealer bond is vast. And while it might seem like you have to walk a tightrope when you have an auto dealer bond, you don’t have to do that. You just have to follow the law and handle your business responsibly. 

How much does an auto dealer bond cost? 

the costs of an auto dealer bond

As with most things, the price of an auto dealer bond will vary. What you pay in New York will depend on the state’s requirements, especially since the state handles licensing. However, three other primary factors can also influence the cost of your auto dealer bond. 

1. The amount of the bond

If the amount of your bond is significant, your costs will be higher than bonds that cover a lower amount. 

For example, if you have a $200,000 auto dealer bond, then the costs you have to pay will be higher than if you had a $10,000 bond. 

2. Your credit history 

Like it or not, your credit score plays a critical role in determining how much you pay for your auto dealer bond. 

If you have a credit score that’s 700 or higher, you’ll likely pay 1-4% of the total bond amount. If your credit score is 650 or lower, you’ll likely pay 5-20% of the total bond amount. 

3. Your history of losses  

Unfortunately, there are some bonds that have a significant number of losses. And the company backing your bond will take this factor into consideration when determining the cost of your auto dealer bond. 

Bonds with minimal historic losses will come with lower costs than ones with higher historic losses, which will come with a premium price tag. 

How do you get an auto dealer bond? 

Regardless of the costs for your auto dealer bond, you need to get one. It protects your customers, provides necessary coverage, and it’s required. But how do you get an auto dealer bond in New York? 

Luckily, the answer is simple. Use Barry Risk Management, Inc. 

While typically known for their DMV expertise, Barry Risk Management, Inc. has a parent company named Barry Risk Management. This business specializes in helping people discover and buy the best coverage for their everyday needs, including auto dealer bonds. 

With the guidance of Barry Risk Management, you can trust Barry Risk Management, Inc. to get the auto dealer bond that you need in New York. The only thing you have to do is reach out to a representative, and that agent will have the insight and knowledge to ensure they meet your business needs. 

To get your auto dealer bond, contact an agent at Barry Risk Management, Inc. today!