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
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.