If you’re looking to start a business as a car dealer in the state of Tennessee, you’ll need to follow a thorough application process to make sure you’re abiding by state guidelines and set up for success. This is a multi-step process with many requirements, so we’ve compiled a list of everything you need to know to get it right on the first try.

Your Complete Guide to Getting a Tennessee Dealer License

1. Identify Which Dealer License to Get

If you are looking to sell five or more vehicles, you are required by the state of Tennessee to get licensed. They offer two license types¹: 

• Franchised motor dealers: Allows you to sell new or used vehicles. 
• Used motor vehicle dealers: Selling only used. 

Either of these licenses can be obtained through the Motor Vehicles Commission. 

2. Establish a Permanent Business Location

Just like in almost every other state in the country, the first step you need to take toward getting your dealer license is to actually obtain a location to operate your business. In order to meet all qualifications and standards (and in order to pass this license application), be sure that your location has the following qualities that are required by the state: 

• The location cannot be used for any other purpose; it must be exclusively a dealership. This means it must be separate from other businesses and cannot be attached to a residence of any kind. It must be a commercial space. 
• There must be functioning restrooms that your employees and customers can use.
• It must be at least 288 sq. ft. 
• There must be a landline, as well as a directory-listed phone number and sign. 
• The hours of operation must be at least 3 days a week, 12 hours total (at least 8 of those hours must fall between Monday-Friday). 
• There must be a lot outside the building that can accommodate 15 cars, in addition to 3 spaces for customer parking. 
• This lot cannot be grass—it must be compacted gravel, stone, or other similar materials. 
• The business must feature a sign that has letters at least 8 inches tall.

3. Get an Auto Dealer Bond and Liability Insurance 

The bond amount required in Tennessee is $50,000². If you have previously opened dealerships in other states, you will notice that this amount varies from state to state. As always, the amount you pay will only be a portion of this total number and will be calculated by your personal financial credentials.²

In addition to a bond, the state of Tennessee requires you to get liability insurance with minimum coverage of $300,000.

4. Gather the Paperwork  

Before you reach the end of the application process, you have to gather documents and proof. Use this checklist to verify that you have everything you need, and always reference the state’s website to be sure no policies have been changed or modified. 

Here are the papers you will need to include in your application:

• Photos of the business location that feature all of the factors listed in step 2. 
• Proof of zoning approval to show you have met all regulations. 
• A business tax license issued by the county and city. 
• Certificate of registration for sales tax that shows your number and name. 
• Financial background disclosure filled out by the owner(s) or partners. 
• Financial statement from a CPA that proves you have a net worth of at least $10,000 with a letter of authenticity from the CPA office. 
• Conviction record. 
• Proof of a service agreement with a repair garage nearby if you don’t have an on-site repair service. 
• Franchise agreements. 
• Salesperson license for all sales employees ($35 fee per license). 

5. Submit the Dealer License Application

Along with your full application, the fees are $400 per line make for franchise dealers and $400 total for used motor vehicle dealers. 

The full application, including all documentation from step 4, can be sent to: 

Tennessee Motor Vehicle Commission 
500 James Robertson Parkway 
Nashville, TN 37243

6. Undergo an Inspection 

Once you have sent in your application, you will get your business location inspected. If you do not pass and have to get re-inspected, you will be charged a $400 fee. 

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

Find Used Car Inventory in Tennessee with ACV Auctions

Once you’re licensed and ready to get going with your business, our team at ACV Auctions can help you find used car inventory from Tennessee and across the country.. We offer an online auctioning platform that offers you high-quality used vehicles with thorough inspection reports. With our platform, you can feel confident in every bid you place. Contact us today to get started.

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Sources

1. JW Surety Bonds. “Tennessee Auto Dealer License Guide.” Retrieved October 23, 2023. https://www.jwsuretybonds.com/states/tennessee/auto-dealer-license 
2. Bryant Surety Bonds. “Your guide to getting a Tennessee dealer license.” Retrieved October 23, 2023. https://www.bryantsuretybonds.com/blog/tennessee-dealer-license-guide