To legally operate as a dealer in the state of California, you must obtain a dealer's license. While the process may seem daunting, this guide will provide you with the step-by-step instructions to help you navigate through the requirements and procedures of obtaining a dealer's license in California.

7 Steps to Getting a California Auto Dealer’s License

1. Determine the Type of California Dealer License

California offers different types of dealer licenses, including new motor vehicle dealer, used motor vehicle dealer, motorcycle dealer, wholesale-only dealer, and auto broker. Each license type has specific requirements and restrictions, so it's important to choose the one that aligns with your business model. Two of the most common dealerships are the following: 

• Used Motor Vehicle Dealer: Allows you to access dealer-only auctions, conduct sales to fellow dealers, as well as sell vehicles to the general public.
• Wholesale Dealers: can access dealer-only auctions and sell to other dealers, but are unable to sell to the public.

2. Fulfill the Prerequisites

Before applying for a California dealer's license, ensure you meet the following prerequisites:

• Be at least 18 years old
• Possess a valid California driver's license
• Have a permanent place of business with a commercial location 
• Obtain zoning approval from the city or county where your business will be located
• Obtain a sales tax permit from the California Department of Tax and Fee Administration
• Register your business with the California Secretary of State

3. Complete the Pre-Licensing Education 

California requires aspiring dealers to complete a pre-licensing education course from a DMV-approved provider. The course covers important topics, such as dealer regulations, sales techniques, advertising requirements, and record-keeping. Completion of this course demonstrates your understanding of the industry and your commitment to compliance.

4. Obtain a Permanent Business Location

For both Retail and Wholesale licenses, you need to establish a physical business location where your accounting and business records are kept. The California DMV Inspector may conduct on-site visits to ensure compliance with DMV requirements: 

• Retail Dealers must have a dedicated commercial office space solely for their dealer operations.
• Wholesale Dealers must maintain an office, and they have the flexibility to have it in either a residential or commercial location.

5.Obtain a Surety Bond

California mandates that all licensed dealers obtain a surety bond or a certificate of deposit. A surety bond safeguards consumers and the State of California in the event of DMV fee non-payment or failure to remit collected sales taxes. The bond amount varies based on the type of license you are applying for. Currently, the bond requirement for a used car dealer is $50,000, while it is $10,000 for a wholesale-only dealer.

6. Submit Application & Fees

Once you have fulfilled the prerequisites, it's time to submit your license application to the California Department of Motor Vehicles (DMV). Along with the application form, you will need to provide the following information:

• Proof of completion of the pre-licensing education course
• Proof of insurance coverage
• Fingerprinting and criminal background check clearance
• Proof of a permanent business location
• Completed dealer license plate application, if applicable

These are the fees associated with the process:

• $175 non-refundable application fee
• $1 family support program fee
• $70 fee for each branch location (if applicable)
• $90 fee for each dealer plate (plus county fees if applicable)
• $94 fee for each motorcycle plate (plus county fees if applicable)
• $300 new motor vehicle board fee, per location (new automobile, commercial, motorcycle, ATV, motorhome, and recreational trailer dealers only)
• $100 auto broker endorsement fee
• $16 examination fee 

Once you have completed the mandatory forms and collected all required documents, find the nearest local Occupational Listening Inspection Office to set an appointment to submit your paperwork and fees. 

*Dealer plates are optional

7.  Pass the DMV Inspection 

After submitting your application, the DMV will schedule an inspection of your business premises. The purpose of the inspection is to ensure compliance with the DMV's requirements, such as having a designated office space, a proper display area for vehicles, and adequate record-keeping facilities.

It is crucial to ensure compliance with California's regulations and provide accurate information throughout the process. By following this guide and working closely with the California DMV, you'll be on your way to obtaining your dealer's license and launching your business in the state of California.

This is not intended as legal advice. If you have questions about dealer licensing requirements, please seek the assistance of legal counsel.

Unlock the Benefits of ACV Auctions Membership with Your California Dealer License

ACV Auctions can help you source your used car inventory in California when you become a dealer. We have inventory from all over California, spanning from San Diego and Los Angeles to San Jose, and Sacramento. What's better if you need specific inventory you can’t find in California, you can always broaden your search filters to find inventory nationwide. 

After obtaining your California Dealer License, sign up with ACV. Enjoy the benefits of a low buy fees, and leverage our transparent vehicle condition reports that empower dealers to bid on inventory with confidence.

Sources

Bryant, T. (2023, February 20). How to get a car wholesale dealer license in California?. Surety Bonds Blog. https://www.bryantsuretybonds.com/blog/car-wholesale-dealer-license-in-california 

Vehicle Dealer License. California DMV. (2023, May 25). https://www.dmv.ca.gov/portal/vehicle-industry-services/occupational-licensing/occupational-licenses/vehicle-dealer-license/