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Home / What Can You Do With a Used Car Dealers License in California

What Can You Do With a Used Car Dealers License in California

Become a Dealer License For $1,400

used car dealer license in california

Did you know that your budget may ascertain the type of auto dealer license you can get in California? Go along reading and we will testify you how to start your business with a upkeep under $ane,400.

What Types of Car Dealer Licenses are in California?

First and foremost, permit'due south start reviewing what are the options you take. All vehicle dealers in California are licensed through the DMV (California Department of Motor Vehicles). The DMV issues four types of vehicle dealer licenses:

  1. New/Used Franchise Car Dealer: is allowed to sell new or used vehicles directly to the public and/or other dealers. You tin can think of this equally the franchise dealer such every bit Ford, GMC, Honda or Toyota. Interested applicants must first get franchise approval before obtaining a license through DMV.
  2. Used Car Dealer: as its names imply, is immune to sell used vehicles to the public and/or other dealers.
    1. Auto broker: formally speaking, brokers are not 'dealers' nevertheless they need a license to assist, negotiate, or suit purchases of new or used vehicles for individuals. This endorsement is but bachelor to used automobile dealer licensees.
  3. Wholesale-only Car Dealer: this license just allows y'all to sell vehicles to other licensed dealers, auctions or licensed entities (such as junkyards) in other words, yous cannot sell vehicles directly to the public.

The beginning ii licenses are also known as 'retail' car dealers since they allow selling vehicles to the public. Our focus on this article will be comparing the used car dealer and wholesale-merely car dealer licenses.

Deciding Betwixt California Wholesale Only or Retail Automobile Dealer Licenses

The power to sell vehicles to the public is without any doubt a big plus for used retail auto dealers. Nevertheless, that advantage comes at a toll. Literally. Below yous will encounter a summary of the principal costs associated with retail and wholesale car dealers.

Dealer Bond

The California DMV requires you to purchase a surety bail to get licensed as an auto dealer. Depending on the type of dealer you have to purchase one of the following bonds:

  • A $50,000 bond if you are applying for a used retail motorcar dealer license (DMV form OL 25)
  • A $10,000 bond in instance you are opting to obtain a license for a motorbike dealer, motorcycle lessor-retailer, all-terrain vehicle dealer, or wholesale-only dealer selling less than 25 vehicles a year (DMV form OL 25B)

Before you commencement worrying about the cost of the surety bond y'all should know that you will end up paying only a small per centum of its face value. The verbal percent will depend on your credit score and how many years of feel yous have in the automotive industry.

For your peace of mind, there are literally dozens of institutions offering auto dealer bonds at depression rates starting at $500 for retail dealers and $100 for the residual including wholesale-only dealers. Realistically speaking though, yous should expect to pay between $1500-3000 a year for retail dealerships and $300-500 a year for wholesale-but dealers.

Dealer Insurance

Insurance price is arguably one of the trickiest to approximate. Since most startups count with a limited upkeep they commonly cutting down costs in sure areas, one of them is insurance. Nevertheless, information technology'due south crucial to keep in mind that running a dealer is very circuitous and may include specific aspects that may require additional insurance coverage. A perfect example is retail dealers offer maintenance & repair services.

To give you an thought about how intricate dealer insurances could be, beneath are listed a few kinds of coverages that you may need:

  • Garage liability
  • Inventory (open up lot coverage)
  • Garage keepers legal liability
  • Personal injury
  • Truth-in-lending errors and omissions
  • Odometer errors and omissions
  • Medical payment coverage
  • Fire legal coverage
  • Building coverage
  • Collision coverage

The list goes on and on. Minor to medium-sized retail dealers insurance may cost around $two,800 a year (or $233 monthly). Bigger dealerships, as well as smaller ones with many services, can hands pay well above that amount.

In that regard, wholesale machine dealers take a huge advantage over their retail counterparts. Since you can start your dealer from home, their simplicity decreases the associated risk of operation and thus, the insurance policy volition be considerably cheaper.

City Business License

Business organisation license price will depend on the jurisdiction where yous are opening the dealership. Well-nigh cities charge between $75-$200 for modest business licenses. Fortunately, this is i of the smallest fees to start a new car dealer.

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California DMV fees

Regardless of the used car dealership allow you are applying for, you volition need to pay the post-obit fees:

Retail Used dealer & wholesale-but dealers (you can check updated fees direct on DMV form OL 248U, Used Dealer, Dealer-Wholesale Only Awarding Checklist)

  • Livescan fingerprinting fees $42 for each person submitting ADM 1316 fingerprint carte du jour
  • Awarding licensing fee $175
  • Brach fee $70 each (if applicable)
  • Dealer plates autos $87/each, motorcycles $89/each (plus county fees)
  • Autobroker endorsement fee $150 (not applicable for wholesale only license)
  • Family unit support program $1
  • Examination $16

Other costs

Last but not least you may incur in boosted costs, some of them are listed beneath:

  • DMV Pre-Licensing Certificate. This course is a alive in-person seminar designed to help aspiring dealer with the application process, cover rules and regulations and all-time practices to succeed every bit a used car dealer. Courses are offered through Redline Dealer Education for $120.
  • Fictitious business concern registration. Y'all may opt to add together a 'dba' (doing business equally) and you tin file here for all counties in California. An example of needing this would be: John Doe LLC dba Doe Auto Sales. The clerk recorder'south office will charge $40-50 for filing a dba.
  • Business organisation location. This toll may vary greatly depending on the size of the property and its location. For your reference, a small-scale dealer lot may easily cost you $i,200+ a calendar month. Once once more, wholesale dealers have an edge since they tin can be operated from home.
  • Inventory. How many vehicles will you first with? This is an important question since retail car dealers will need bigger inventories than wholesalers.
  • Miscellaneous costs. There are many other costs to consider such every bit furniture, dealer management platforms, advertisement, website design, shop equipment (in instance you plan to offer repair services), legal consultations, accountant fees, and more than. Every bit usual, the bigger the dealer the college these costs might be.

Which to Choose?

What is the ideal used car dealer license? From a price perspective, wholesale-only auto dealers take a clear advantage closely related to its simpler infrastructure and starting time up costs as low as $1,400. The possibility of getting a dealer license without a auto lot is appealing likewise, no doubt. Yet, the disability to sell vehicles directly to the public may pose a major obstacle to people without experience in the automotive industry or without strong networking with other dealers and auto brokers. Our proffer is evaluating all aspects before deciding which option ameliorate fit your needs and goals.

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Source: https://redlinedealereducation.com/get-a-dealer-license-with-budget-under-1400/