This is the step by step process to become a used car dealer in the state of California.
Once you get your license you can begin to sell as many cars as you like
1. Complete a live, six hour, DMV Pre-Licensing Class. This class teaches how to become a dealer, how to get into dealer auctions, and how to buy and sell vehicles. It must be taken live, not on-line. The fee is $125.00.Classes & Registration
2. Pass a 40 question test with the DMV. The fee is $16.00. The Pre-Licensing Class will prepare you for this test. We will give you a pre-test during our class to insure you are ready. Sample Test Questions
3. Download and complete the Dealer License Application forms. Dealer Application Forms The Application fee is $176.
4. Select a Location for your Dealership & Take Photos To obtain a wholesale dealer license all you need is an office. To obtain a retail dealer license, you will need an office, a display area big enough for two vehicles, and a two foot square sign with your name and address on it, posted permanently outside. Auto Brokers need an office and a sign, but no display area.These location requirements are covered in detail in class, including ways to overcome obstacles, and in some cases, even allowing for home offices.
5. Apply for a Local Business License. You can obtain a business license at your local city or town offices in their tax and license division. Some cities have applications on-line. Fees are often a small percent of your annual gross sales. For example, in Oakland the license fee rates are forty cents ($.40) for each one thousand dollars of gross receipts, or gross payroll, with a minimum fee of $74.00 if total annual gross receipts are less than $ 74,000.00.
6. Apply for a Seller’s Permit. You can do this by filling out an application in person at one of Board of Equalization field offices. You can also download the application beforehand and mail it, or deliver it in person, to a Board Field Office. These permits allow dealers to buy vehicles tax free. Seller’s Permits are usually issued the same day they are submitted. Help in completing the form, if needed, is available at the Field Offices.
7. Get “Live Scan” Fingerprints. “Live Scan” is an inkless electronic fingerprinting process where your fingerprints are electronically transmitted to the Department of Justice for completion of a criminal background check. The costs generally range from $40.00 to $60.00 Live Scan Locations
8. Apply for a Fictitious Business Name – If you want one. If the name of your dealership will be something other than your personal name (example: “West Coast Auto Sales”), you will need to file a fictitious business name statement with your local County Recorder’s Office. You can often find your county’s filing procedure and forms by searching for “Fictitious Business Name Filing” on-line and adding the name of your county to the search terms. Basically, you will publish a notice in a local paper for 30 days advising that you are doing business under the name you select. After 30 days you send proof of that publication to the Recorder for filing. Costs are under $100 if you do it yourself, or $175 to have a service do it.
9. Obtain a Surety Bond. DMV requires dealers to get a $50,000 surety bond. The going rates generally range between $1,000 – $1,500 per year for a $50,000 bond. If you have very good credit, or purchase a bond for a two or three year period, the rates are less. Established dealers with good credit, no complaints on file with DMV, and no court judgments against them, often pay half these rates or less. Note that motorcycle-only dealers and wholesale dealers selling less than 25 vehicles per year need only a $10,000 bond. Going rates for a $10,000 bonds generally vary between $200 and $300 per year. Bonding Company List
10. Obtain a Signed copy of your Lease, or Rental Agreement. This will be submitted with your dealer license application. If you own the property, proof of ownership may be required. Your local DMV Inspector will let you know.
11. Corporation/Partnership/LLC. If you are one of these types of entities you will need to provide a copy of your articles of incorporation, corporate minutes, or other documents showing officers, shareholders and managers with a 10% or greater interest in the business with your dealer license application. If you are the only owner (sole proprietor) you do not need to do this step.
12. Submit Completed Application for Approval. Give your application to your local DMV Inspector. Then ask them how long it will take for their review and approval. Often it takes between one and two weeks. It can also happen more quickly, or more slowly, depending upon the Inspector’s current workload.
13. Inspection. After reviewing your application, your Inspector will contact you to set up at time to meet you at your location to inspect the premises. The Inspection is not a surprise and usually takes five minutes or less. This final step is often the easiest because you will have already met the physical location requirements in order to complete your application. When the Inspector has finished looking around, they will hand you a temporary license and you are ready to go! You will receive a formal license in the mail.
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