How to Get an Alabama Dealer License [2024 Guide]

Obtaining an Alabama dealer license is the first step to launching a successful car sales business in the state. 

You need to go through a complex administrative procedure set by the licensing authorities in the state. Its purpose is to ensure you are adept to conduct dealership activities. Among the requirements that you have to satisfy to get licensed is to obtain an auto dealer bond. 

To get started with your licensing process, you can consult the detailed guide below. 

1. Find out the right auto dealer license type 

The Motor Vehicle Division at the state Department of Revenue issues a list of different Alabama auto dealer licenses. The license types that you can obtain depend on the activities you want to engage in:

• New Vehicle Dealer - new vehicles
• Used Vehicle Dealer - used vehicles
• Wholesaler - wholesale 
• Rebuilder - rebuilding vehicles 

2. Get to know the Alabama dealer license requirements

How to get a dealer’s license in Alabama? Once you know which license type you need, your next step is to acquaint yourself with the criteria set by the Department. You have to provide proof that you fulfill the following requirements:

• Alabama permanent residency documents for the owner
• Personal information about all owners, partners, members, officers, and directors
• Business entity formation documents
• Business location requirements - address and phone
• Photos of your location and business sign (for Alabama used car dealer license and for new dealer license)
• Blanket liability insurance coverage covering all vehicles - at a minimum of $25,000 for bodily injury or accident or $50,000 for combined bodily injury or accident, and $25,000 for property damage or accident or a combined single limit of $75,000 per accident
• Surety bond 

3. Prepare your paperwork

In order to start your licensing, you have to complete the MVTRIP Alabama dealer license application form. 

Besides fulfilling the requirements detailed in the previous section, you also need to obtain the following from other state and federal authorities:

• Employer Identification Number (EIN) from the IRS (for all but individual owners)
• Legal name and/or trade name documents from the Alabama Secretary of State
• Workers compensation insurance from the state Department of Labor (if applicable)
• State sales tax number from the Department of Revenue (for new and used auto dealers only)

4. Obtain the necessary Alabama auto dealer bond 

All applicants for dealer licenses have to post a surety bond. It functions as a safety net that protects your customers, guaranteeing your legal compliance. 

The Alabama auto dealer bond amount is currently $25,000, but will be increased to $50,000 as of October 1st, 2020. The bonding process entails that you cover a small fraction of the required amount, which is your premium. It depends on how strong your overall finances are. If they are in good shape, the rates that you can expect are between 0.75% and 5%. 

5. Apply with your complete document set

Whenever you have compiled your full set of documents, you have to mail them to:

Alabama Department of Revenue
Motor Vehicle Division
50 N. Ripley Street
Montgomery, AL 36104

You also have to cover the licensing fees, which are as follows:

• $25 fee for new vehicle dealer, used vehicle dealer, wholesale and rebuilder licenses
• $5 fee for each extra business location

The Department will assess your application within 7 to 14 business days. If you have satisfied all requirements, it will provide you with your license. 

Once you have been licensed with the Department of Revenue, if you want to operate as a new or used vehicle dealer, you have to apply to become a designated agent. You need to submit the Dealer Application for Designated Agent form and undergo a designated agent training class.

Finally, you will need to obtain a business privilege license from your county’s probate office. You can consult the directory of county probate offices to locate yours. 

When you have passed all these application steps successfully, you can get your dealer plates from the license plate official in your county. Their prices are:

• Dealer: $26.00
• Dealer motorcycle: $18.00
• Dealer transit: $26.00
• Motorcycle dealer transit: $18.00

For a detailed overview of the whole licensing process, you can consult the Dealer License FAQs. 

6. Undergo the Alabama dealer license renewal 

The licensing period ends on September 30th of each year. If you want to prolong your license, you have to undergo the renewal process before that date. This will guarantee you can continue your dealer operations without a break. 

Need further information about your Alabama car dealer license and bonding? You can get in touch with us at 877.514.5146.