Howdy, Driver? Of course, it is possible to get a dealers license without a lot.
We have various categories of vehicle dealership licenses mandatory if you intend to sell multiple vehicles yearly, but a private seller can sell a regulated number of vehicles in their jurisdiction without a dealer’s license, typically 3-6 vehicles a year.
Following the state laws, it is not mandatory to have a storage lot if you have a wholesale dealer license permits.
To become a licensed dealer without a lot, obtain a wholesale-only dealer license from the list of the licenses in your state. An auto dealership is not as complicated as it seems and all you need is the dealer license and a well-organized business plan to sell beyond the regulated number of vehicles legally.
Typically, you can sell to the auction and other dealers only because you possess the wholesale license that does not allow you to sell to the public directly.
Types of Dealer Licenses
According to FLHSMV, below are the dealership licenses that may be available in your state:
Auction Dealer License
An auction dealer license permits you to sell motor vehicles and recreational vehicles to other licensed dealers through the process of bidding.
Franchise Dealer License
With a franchised dealer license, you can sell new cars under an established agreement with a manufacturer.
Independent Dealer License
An independent dealer is normally a used car dealer that does not affiliate with any automobile manufacturer, and they can deal with new cars too. Three examples of independent dealers are CarMax Inc., AutoNation Inc., and Penske Automotive Group Inc. As an independent dealer, you can sell any kind of used vehicles regardless of the manufacturer.
Wholesale Dealer License
RedLine Dealer Education describes a wholesale-only dealer as a dealer that buys and sells vehicles to other dealers. Note that a wholesale dealer cannot advertise sell cars to the public directly and does not require a storage lot to qualify for the dealer’s license.
Salvage Dealer License
A salvage dealer license allows you to acquire salvage, wrecked, or junk cars to resell them for parts or as a whole.
A service facility license allows you to operate a service and repair facility. However, you cannot sell cars, new or used, with a service facility license.
How to Get a Dealers License Without a Lot
To obtain a dealer license without a lot is not difficult and a bit of focus would help you complete the paperwork faster.
In this section, I disclose the steps to get a dealer’s license with some reference to the State of California DMV.
I have experience with the entire registration process that I am sharing in this article.
Below are the steps to get a dealer license without a lot:
Obtain the Application Checklist
To obtain the application checklist, contact the office of your local DMV or refer to their website for the requirements. I have included appropriate links to the various DMVs and their dealership license requirements. So, when you finish reading this article, click the link with the name of your state (listed alphabetically) to redirect to your DMVs site to obtain the downloadable forms and other requirements as I list below.
Complete an Automotive Training Program
You have to register for a dealership education program with any of the automotive management institutes online. Below are some of the best platforms to complete the dealer education program.
A dealership education certifies and trains you on how to manage the business.
A training program costs between $600 and $3,000 depending on the institute and the training package you select. Dealership programs take a few hours to a month to complete depending on the package, especially if you sign up for an online course. Note that you must pass the dealer test to be certified.
Get a Surety Bond
Following Surety Bonds Direct, it is essential to obtain a surety bond whether you have a storage lot or not. I have assessed each of the state’s DMV requirements and a surety bond is a requirement.
Concerning the dealership, a surety bond is a guarantee that will not engage in conduct that is not lawful. Unlawful conducts include avoiding sales tax on a car, misrepresenting the condition of a vehicle (changing the odometer, issuing fake titles, jumping titles, washing car titles, etc.), being insincere to other dealers, etc.
The cost of a surety bond can be anything between $10,000 and $100,000; your financial prowess and the state laws determine how much your bond covers. In most states, you are expected to pay a percentage of the bond upfront to the surety and then file a certification with your application for a dealership license.
Register Your Business Name
You need to register the name of your business with the secretary of state. The unit responsible for the registration of your business name is the business division of the secretary of state. If you intend to operate under a name that is not yours, you need a fictitious name application.
Apply for a Sales Tax Number
Contact the Department of Revenue in your state to complete the application for a sales tax number. A sales tax number allows you to charge and collect sales tax on vehicles from the auction or other dealers since you would be operating as a wholesale dealer without a storage lot. Note that you will pay the sales tax to your state.
Get a Federal Tax Identification Number
Contact the Internal Revenue Service (IRS) to complete your application for the federal tax identification number. You may visit the IRS website to download the SS-4 form and learn about other requirements.
Obtain Liability Insurance
All categories of dealer licenses, including the wholesale, auction, and salvage dealer license have the option to provide a certificate garage liability insurance an insurance policy for general liability that covers an automobile business.
Submit Your Application
Complete the paperwork and submit the required documents above to your state. Note, however, that you may undergo a background check and your financial history assessed. Send your application or contact the office directly with your applications and the stipulated fees and notarizations (as required by the local or state laws).
At the time of submitting your application, your fingerprint will be processed through the Department of Law Enforcement and the Federal Bureau of Investigation.
Since you have no lot, if you intend to display the cars in your home, there may be limitations on where and how you display them; check your local laws.
Establishing a Profitable Inventory
An inventory is important for the business; create an inventory of easy-to-sell vehicles that are easy to main.
As a wholesale auto dealer, you are allowed to source cars from public and dealer-only auctions. You may also source for vehicles from platforms such as Facebook Market Place, OfferUp, and Craigslist.
It is not just about acquiring the vehicles, but they must pass the reconditioning stages that may include the following:
- Obtaining the vehicle history report
- Making sure that the vehicle complies with the emission regulations
- Running a thorough mechanical inspection on the vehicle
- Vehicle detailing and enhancement
How Does a Wholesale Dealer without a Lot Make Money?
A licensed wholesale dealer cannot sell to the public but you can partner with the used car retailers to sell from your inventory to the public directly. A retail dealer can buy and sell to the public directly and they have a storage lot. Find one or more retail dealers near you to strike a deal.
You will agree on a commission that applies to each vehicle sold and that is dependent on the condition of the vehicle. The retail dealer will be responsible for entering your cars in their inventory, advertisements, and sales.
Upon selling the vehicle, the retail dealer is also responsible for the titling procedure and other applicable procedures to transfer ownership to the buyer that puts a car in their name. You will receive payment after each sale and remember that the retail dealer is the umbrella you operate under.
Requirements for Getting a Car Dealership License Without a Lot – All States
New Mexico (Search online)
North Carolina (search online)
North Dakota (https://www.dot.nd.gov/forms/sfn02932.pdf)
Rhode Island (http://www.dmv.ri.gov/documents/forms/business/FirstApplicationForDealership.pdf)
Tennessee (Tennessee does not have a wholesale dealer license)
Regardless of not having a lot, you need to list a place during the registrations. It could be your home or a sizeable office, which is where you will keep your records.
Note that a dealership license is subject to renewals. Your state may require proof of continuing education, the Renewal Application form, and a specified renewal fee. If you are renewing all the plates, you will also submit a Report or Replace Lost, Stolen or Surrendered Occupational License Plates.