How to Become a Car Dealer in California

May 2023 ยท 5 minute read

There are three ways to can buy and sell cars in California. You can operate as a wholesaler, who purchases cars from auctions and sells them to car dealers. You can operate as a retailer, who buys cars from auctions and dealers and sells...

Method 1 of 7:

Getting Started

  • Picture 1 of How to Become a Car Dealer in California Decide if you need a license. If you're just selling your own used car you don't need a license. However, if you're going to be buying and selling cars for the purpose of making a profit, you'll need a license from the DMV. Selling cars for profit without a license in CA is illegal. This activity is called 'curbstoning' and can involved hefty fines if you're caught.[1]
  • If you're unsure of whether your situation requires a license, contact the DMV. CA has been cracking down on curbstoners in the last few years.[2]
  • Picture 2 of How to Become a Car Dealer in California Decide if you want to be a wholesale dealer or a retail dealer. The main distinctions are whether you will be selling cars directly to the public and whether you need to have retail space. The same paperwork is required for obtaining a wholesale dealer license or a retail dealer license.[3]
  • A wholesale dealer is able to buy cars directly from other dealer and sell them to other dealers. A wholesale dealer may also export cars to other countries. However, a wholesale dealer may not sell directly to the public. A wholesale dealer needs to have an office but doesn't need to have a sign or a space for displaying vehicles. [4]
  • A retail dealer can buy cars directly from dealers and sell them to other dealers and to the public. A retail dealer may also export cars to other countries. A retail detail needs an office, a sign, and a space for displaying vehicles. [5]
  • Picture 3 of How to Become a Car Dealer in California Decide if you want to add an auto broker endorsement to your license. An auto-broker endorsement allows you act as a middleman between buyers and sellers. You can add an auto-broker endorsement to either a wholesale dealer license or a retail dealer license.[6]
  • As a wholesaler dealer, having an auto broker endorsement is the only way to sell directly to the public.[7]
  • No additional paperwork is required to get an auto-broker endorsement. You just have a check a box on your licensing application.[8]

    • Method 3 of 7:

    Setting Up Your Business

  • Picture 9 of How to Become a Car Dealer in California

    Create a fictitious business name. Unless you'll be doing business under your own name, you need to create and register a name for your business. Go to your local County Recorder's office to file the paperwork. The fee is $100.[15]

  • Picture 10 of How to Become a Car Dealer in California Apply for a business license. Go to your local Town Hall and ask to speak with the tax and license division. Using your own name or the fictitious business name you created, register your business with the city.
  • There many options for registering your business. You can register an LLC, a corporation, a partnership, or any number of other business entities. It's best to talk to a lawyer before deciding what kind of entity you want your business to be.
  • The cost of your business license will vary by city, what kind of entity you set up, and your annual revenue.[16]
  • Picture 11 of How to Become a Car Dealer in California Get a surety bond. Find a bonding company in California and purchase the required $50,000 surety bond.[17]
  • A surety bond ensures that you will meet your obligations as a car dealer.
  • The cost of surety bonds depends on your credit, but you can expect to pay around $1,000 to $15,000 per year.[18]

    • Method 4 of 7:

    Setting Up to Be a Wholesale Dealer

  • Picture 12 of How to Become a Car Dealer in California

    Decide if you want to work out of your home or another space. A wholesale dealership can be run entirely from your home. However, if you don't have space for an office in your home you'll need to lease or purchase a space.

  • Picture 13 of How to Become a Car Dealer in California Set up an office. Remember, it's OK for it to be a home office.[19]
  • You don't need a sign or space for a car to be a wholesale dealer.[20]
  • Picture 14 of How to Become a Car Dealer in California

    Obtain a copy of your lease. You'll need a copy of your lease if you rent your office. If you own your office, a copy of your mortgage is required.[21]

    • Method 5 of 7:

    Setting Up to Be a Retail Dealer

  • Picture 15 of How to Become a Car Dealer in California

    Set up an office. It's OK for it to be a home office. However, since you also need a retail space to be a retail dealer, it makes more sense for the office and retail space to be in the same location.[22]

  • Picture 16 of How to Become a Car Dealer in California

    Get a sign that is at least two square feet. Since you'll be selling to the public, the DMV requires you to have a sign that advertises yourself as a car dealer.[23]

  • Picture 17 of How to Become a Car Dealer in California

    Have a space that is big enough for at least two cars. Since you're going to be selling cars directly to the public, you need a space to keep the cars. The DMV requires you to have enough space for at least two cars, but of course you can have much more space than that.[24]

  • Picture 18 of How to Become a Car Dealer in California

    Obtain a copy of your lease. You'll need a copy of your lease if you rent your space. If you own your space, a copy of your mortgage is required.[25]

    • Method 6 of 7:

    Setting Up to Be An Auto Broker

  • Picture 19 of How to Become a Car Dealer in California

    Obtain either a wholesale dealer license or a retail dealer license. An auto broker endorsement is an add-on to your license, so you need a license before you can become a broker.[26]

  • Picture 20 of How to Become a Car Dealer in California

    Set up an office. If you're adding the broker endorsement to your wholesale dealer license you can use a home office.[27]

  • Picture 21 of How to Become a Car Dealer in California

    Get a sign that is at least two square feet. If you're adding the broker endorsement to your retail dealer license, you'll need a retail space that can fit at least two cars.[28]

    • Kareem Winters Kareem Winters

    Update 24 March 2020

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