Becoming a car dealer in California can be a lucrative venture, given the state’s large population and its strong culture of automobile ownership. Whether you’re interested in selling new or used vehicles, the process involves several steps that must be followed to comply with state regulations. This guide provides a detailed overview of the necessary steps to become a licensed car dealer in California.
Step 1: Decide the Type of Dealership First, decide whether you want to sell new or used vehicles, as this will determine the type of license you need:
- New Car Dealer: You must have a franchise agreement with a manufacturer to sell new cars.
- Used Car Dealer: You can buy and sell used cars without manufacturer agreements.
Step 2: Obtain a Permanent Business Location Your dealership must have a permanent business location that meets specific requirements set by the California Department of Motor Vehicles (DMV). This includes a displayed sign with your business name, a designated area for conducting sales, and sufficient space to display vehicles.
Step 3: Attend a Dealer Training Program Prospective used car dealers are required to complete a DMV-approved Dealer Education Program. The course covers topics such as DMV laws and regulations, registration requirements, and consumer protection.
Step 4: Register Your Business You’ll need to register your business with the California Secretary of State. This process includes choosing a business structure (e.g., sole proprietorship, partnership, corporation) and obtaining a federal employer identification number (FEIN) from the IRS if applicable.
Step 5: Obtain a Seller’s Permit Apply for a seller’s permit through the California Department of Tax and Fee Administration (CDTFA). This permit allows you to collect sales tax on vehicle sales.
Step 6: File for a Surety Bond California requires car dealers to file a surety bond with the DMV. The bond amount varies:
- $50,000 for new vehicle dealers.
- $10,000 for used vehicle dealers.
This bond protects consumers against fraudulent or unethical actions by a dealer.
Step 7: Complete the Licensing Application Prepare and submit your dealer license application to the California DMV. The application packet must include:
- Application form OL 248 (New Dealer) or OL 249 (Used Dealer)
- A copy of your lease or proof of property ownership
- Photographs of your business location
- Your approved dealer education course certificate (if applicable)
- A copy of your city or county business license
- Proof of your surety bond
- Live scan fingerprint results for all principals in the business
Step 8: Arrange for an Inspection of Your Business Location After submitting your application, the DMV will schedule an inspection of your dealership to ensure that it meets all necessary requirements.
Step 9: Pay Required Fees You will need to pay several fees associated with the licensing process, including the application fee, license fee, and plate fees if you wish to issue temporary plates from your dealership.
Conclusion: Becoming a licensed car dealer in California requires careful planning and compliance with DMV regulations. By following the steps outlined above, you can establish a dealership that operates legally and successfully in California’s automotive market.
Additional Resources: For more information and specific forms, visit the California Department of Motor Vehicles’ website at dmv.ca.gov. Here, you can find detailed guides and all necessary application forms to ensure your dealership gets off to a good start.
