How to Get a Used Car Dealer License

Published: Jan 21, 2019
how to get a used car dealer license

 

Among the various auto dealerships that you can start, one of the most popular options is selling used vehicles. In most states, launching your used car sales business entails undergoing a licensing process.

The requirements that you have to meet vary from state to state. However, there are also repeating criteria, and posting a used car dealer bond is among the most common ones.

To provide you with in-depth information on launching your business, we have created the ebook How to Become an Auto Dealer. It’s a completely free resource that extensively explains the process of starting an auto dealership in the U.S in a step-by-step manner.

how to become used car dealer guide

For specific information about obtaining a used car dealer license, below you can find additional details per state.

The essential steps on how to get a used car dealer license

#1 Meet business registration criteria

As most other types of auto dealers, used vehicle dealers have to first choose a business structure. You then have to register a business entity with the appropriate state authorities. The next step is to obtain an Employer Identification Number (EIN) from the IRS, and in some cases, you may also need a state tax ID.

#2 Comply with business location requirements

Depending on state and local rules, you will need to meet various zoning requirements for your business location. You also have to provide a proof that you own or lease the place, which has to be included together with your license application form.

#3 Obtain mandatory insurance

In most states, you will need a general liability insurance policy in order to get licensed. Typically, it would cover bodily injury, accident and property damage.

#4 Get bonded

Posting a surety bond is one of the common requirements that used car dealers have to satisfy, similarly to other types of dealers. The bond serves as an extra layer of protection for the state and for your customers, guaranteeing your legal compliance. The bond amount that you have to provide varies from state to state, but is often between $10,000 and $50,000. On the basis of this amount, you have to cover a small percentage to get bonded. It is often between 1% and 3% for applicants with stable finances.

#5 Pass the licensing procedure

When you’ve obtained your business entity registration, location documents, insurance, and auto dealer bond, you can move on to comply with the rest of the licensing requirements and submit your complete application form. Make sure that you have met the state criteria regarding your professional training and testing.

You will need to pass a criminal background check, pay applicable licensing fees, and in some cases, undergo an inspection of your business location by state authorities. If you have successfully met all requirements, you will be issued your used auto dealer license.

States with separate used car dealer license requirements

In about half of the states, in order to become a used car dealer, you have to meet a specific set of licensing requirements. It is different from what new (also referred to as franchise) dealers have to comply with.

There is a separate used car dealer license type in the following states:

 

State License type
Arizona Used motor vehicle dealer license
Arkansas Used motor vehicle dealer license
California Used car dealer license
Colorado Used car dealer license
Connecticut Used car dealer license
Delaware Used car dealer license
Florida Independent dealer license
Georgia Used car dealer license
Iowa Used motor vehicle dealer license
Idaho Used car dealer license
Kentucky Used car dealer license
Louisiana Used car dealer license
Maine Used car dealer license
Maryland Used vehicle dealer license
Massachusetts Used car dealer license
Michigan Class B used car dealer license
Minnesota You can choose between a full and limited used car dealer license
Mississippi Used car dealer license
Nebraska Used motor vehicles dealer license
New Mexico Used car dealer license
New York Used motor vehicle dealer license
North Carolina Used vehicle dealer license
North Dakota Used car dealer license
Ohio Used car dealer license
Rhode Island Used car dealer license
Tennessee Used motor vehicle dealer license
Texas Independent motor vehicle dealer license
Virginia Independent car dealer license
Vermont Used car dealer license

States with common license requirements for new and used car dealers

For the other half of the states, the licensing requirements for new and used vehicle dealers converge. In some states, there is no differentiation between dealers of the two types of vehicles. In others, a used car dealer license exists, but it is possible to sell used vehicles when having a franchised license too.

The states are listed below, with explanation what type of license you should obtain.

 

State License type
Alabama Retailers license to sell both new and used vehicles
Alaska There is only one type of a dealership license
Illinois You can get a separate used car dealer license, but when you get a franchised license, you also can sell used vehicles
Indiana You can obtain a new only, a used only, or a new and used car dealer license
Hawaii Motor vehicle dealer license
Kansas There is a new/used vehicle dealer license and a separate used vehicle dealer license
Missouri Franchise dealers can sell both new and used vehicles, but you can also get a separate used vehicle dealer license
Montana Franchise dealers are allowed to work with new and used cars, but there is a used car dealer license as well
Nevada Vehicle dealer license
New Hampshire Vehicle dealer license
New Jersey Vehicle dealer license
Oklahoma There is a separate used car dealer license, but when you obtain a new car dealer license, you are allowed to sell used vehicles as well
Oregon Standard dealer license
Pennsylvania Vehicle dealer license
South Carolina Motor vehicle dealer license
South Dakota There is a used car dealer license type, but new car dealers can also sell used vehicles
Utah Motor vehicle dealer license
Washington Motor vehicle dealer license
West Virginia new car dealers can sell also used vehicles, but there is a separate used dealer license as well
Wisconsin Retail dealer license
Wyoming Motor vehicle dealer license

Do you need more information about getting your used car dealer license and bonding? Our bonding experts are here to assist you. Just call us at 877.514.5146.

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Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.