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Learn the insider secrets of the used car bizand make money selling cars for a profit.

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Having a California Car Dealer License opens up more opportunities and privileges

Car Dealer Licensing

Have you ever flipped a car?

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You can take car buying and selling to the next level with a California Car Dealer License. There are many privileges to having it.

  • You can buy and sell as many cars as you want.
  • You get special dealers license plates which allow you to drive any of the vehicles in your inventory for business, and pleasure.
  • If you have a California Car Dealer License, a smog certificate is good for two years. A smog certificate for a private party is only good for three months.
  • Dealer auctions are the best auto auctions, and you'll have access to all of them. Dealer auto auction prices are way lower than any auction open to the public.
  • If you have a car that’s registration expired while in your inventory, when you sell it you wont have to pay the penalty fees.
  • You get wholesale prices from Mechanics, Body Shops, Parts Stores, etc. and you don't have to pay taxes on any of them.
  • You have the prestige of owning your own business. You will reap all the benefits for your hard work!

Dealer license requirements vary from state to state. My license is a California auto dealer license. Check with your local DMV to see your states requirements.

The Two Types of Dealers

There are New car dealers, and Used car dealers. New car dealers are allowed to sell new, and used vehicles. New car dealers are franchised by the automaker and follow that particular company's operational policies. Used car dealers are only allowed to sell used cars.

Dealer license requirements

If you want to get a used California Car Dealer License you first have to attend a training program. You get a packet, and review everything you need to know in order to pass the DMV test. The test is basically to educate you on all the rules, and regulations of running a used car dealership. The class is six hours long and is usually on a Saturday. The answers are all in the packet. You take a practice test at the dealer training program to prepare you for the DMV test. You then go to the DMV and take the official test. These rules apply to getting your dealers license in California.

  • Schedule an appointment with the DMV to take the test.
  • Test has 40 Multiple choice questions.
  • You have to at least get 70% to pass.
  • You have to bring the following:
  1. Check or money order for $16
  2. Your class certificate from your dealer training program.
  3. CA drivers license, or CA identification.

After you have completed the training program, and passed the test, you need to file an application. You file your application with your local DMV inspector.

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In California it's the dealer's responsibility to collect sales tax, if the car is going to be registered in California. I pay the sales tax I've collected every year to the State Board of Equalization. Thirty percent of the time customers ask me to write a smaller amount on the invoice so they can pay fewer taxes on the purchase price but I don't. I usually set my price on a vehicle as a package deal. For example I'll sell a 1995 Honda Civic for $3000 which includes tax, plates (if the car is missing a front plate, I order new plates for the customer), tags (I'll renew the customer’s tags), a smog fee, registration service fee, and a document preparation fee, etc.

If you find a location that you think would be good to sell your cars, you have to check with the city to see if it meets zoning requirements. The city will only allow certain types of businesses in certain areas. Don't put a deposit down on any location unless the city first approves it for used car auto sales. Download a property use verification form from the DMV website, and bring it to the city planning department to sign off. If you want to get a wholesale license the office is your only requirement. If you want to get a retail license you have to have an office, and a display area.

Set up your office with all the required postings:

  1. Business license
  2. Seller's Permit
  3. Check with the DMV, and the City/State of any other required signs.
  4. If you're applying for a retail license, you'll have to set up your display area, and your main sign.

Come up with a business name, and get a fictitious name statement from the county recorder office.

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You must get a bond. You must have a $50,000 bond for retail, and a $10,000 bond for wholesales who sell less than 25 cars per year.

You will then need to get the following

  1. City business license.
  2. Fingerprints.
  3. Sellers permit.

Complete your dealer application. You will have to take multiple photographs of your office, and display area.

  • Dealer plated are $41
  • The application fee is $150

You then have to wait for the DMV inspector to approve you. They'll come and inspect your office, and sign. If everything is in order they'll issue you your license.

The DMV inspector will give you the following:

  1. Temporary dealer plate
  2. Temporary dealer license
  3. Retail reports of sale
  4. Wholesale reports of sale
  5. You'll have to download the dealer handbook off of the DMV website, and print it.

Check out the auctions that are open to the public

It’s not good to have a high overhead on your car lot when your starting out. I know when I started I was making a lot of mistakes. If I didn't have a low overhead I don't think I would have lasted. Some dealers give up early because their paying all this overhead on a big lot and losing money or breaking even. They haven't found their niche yet. They get frustrated because their not making much money, and just give up. If you keep your overhead low, especially starting out early, you'll make big money selling cars. I pay only $350 a month on rent for my lot. Let me say that again $350. I can teach you the steps to getting your California Car Dealer License with little start up money

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Do all your advertising & sales over the internet, without the expense of having a huge lot.

Illegal Dealer Activities:

  • Employing unlicensed salespersons
  • Misusing report of sales, or dealer plates
  • Not displaying the federal buyers guide in the dealer display area. The buyer must sign, and receive a copy of it.
  • Failure to transfer the title within 30 days.

Dealer smog requirements

  • Dealer must smog the car prior to sale
  • Dealers are allowed to charge $58.25 for the smog test, and certificate
  • The smog is good for two years as long as it stays in dealer inventory

A dealer must disclose vehicle history in writing if the vehicle has frame damage, fire, flood, salvage title, lemon law buyback, or odometer discrepancies.

Hi -Visited your web page and had some questions. My local college is offering a DMV approvedcourse for a dealers licence. The blurb implies you can get a wholesale licence but sellat retail. Is it possible to get a licence and sell at retail with a 'home office"?

thanks -

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I don't know how it works in other states, but in California, no. What a lot of guys do is get a retail license at some office somewhere but never go there. They then sell out of their house. It's a little strange because if your retailing cars it should be done at a car lot. By law a dealer is supposed to charge sales tax, and pay the state board of equalization annually, quarterly, or monthly. It's weird to ask a customer for sales tax, and license for a car when your selling out of your home. It's unprofessional, and makes customers weary of you. If you know someone, who already has a dealer's license you can get a salesperson license under their dealership. You don't have to pay any overhead on a lot, nor be bonded. You get dealer privileges with a salesperson license. You would be able to attend dealer auctions, use dealer plates, etc. The problem is finding a dealer willing to trust you with this privilege, since they’re held liable if you do something illegal.

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