How to Get a Wholesale Dealer License

Category: Auto Dealers News
Published: Sep 1, 2022
How to Get a Wholesale Dealer License

 

A wholesale dealer license allows you to sell cars to other licensed dealers and to buy vehicles at dealer-only auctions. To help you on your journey to becoming a wholesale auto dealer, take a look at our guide on how to get licensed.

What is a Wholesale Auto Dealer License?

A wholesale car dealer license is used to ensure that businesses operating across the industry practice within the law. Put simply, a license shows that a dealer has been vetted to a high standard and that they have a surety bond and insurance in place to minimize the risk of malpractice and fraud.

Unlike new and used car dealers, wholesale dealers don’t sell cars directly to the public. Instead, they sell to other dealers and at auction. Because wholesale dealers don’t sell cars on the retail market, a lot of states enforce fewer licensing requirements.

While you’ll need to check the exact rules in your area with your local DMV (Department of Motor Vehicles), you could have your new wholesale auto dealer business up and running in no time.

How Do I Get a Wholesale Auto Dealer License?

To obtain a wholesale motor vehicle dealer license, you’ll need to submit a completed application to the DMV in the state, or states, where you plan to do business. You’ll also need to ensure you meet all of the licensing requirements in your area.

Generally, these requirements include having a registered business location and a dealer surety bond, and paying your application fees. You can find more information on the requirements for a wholesale dealer license application below.

What Are the General Wholesale Motor Dealer License Requirements?

Licensing requirements for wholesale dealers vary from state to state. The most common requirements are:

  1. Pass a relevant pre-licensing training course
  2. Get a state business registration
  3. Find a location for your dealership and have your place of business approved
  4. Complete your wholesale dealer business license application form
  5. Submit your application and pay fees
  6. Submit an auto dealer surety bond

What Are the Wholesale Dealer License Requirements in My State?

As each state stipulates different licensing requirements for wholesale vehicle dealers, you’ll need to check the rules and regulations in your area before filling out your application form.

Take a look at this list of relevant state DMV websites to find out the rules on opening a wholesale car dealership business in your area.

What Are the Steps to Getting a Wholesale Dealer License?

There are five main steps you’ll need to complete to obtain a dealer license. These include, but are not limited to:

#1 Get a state business registration

Without a doubt, this is the most common requirement you’ll need to fulfill to get a wholesale dealer license. To conduct business in any state, you need to get your business licensed on a government level. Some states also require businesses to be licensed at a local level.

Register your business and trade name with the Secretary of State. If you plan to operate your business across multiple states, you may need to apply for different types of licenses depending on state requirements.

#2 Find a location for your dealership and have it approved

Some states require wholesale dealers to have an established salesroom. However, as wholesale dealers don’t sell vehicles on the retail market, many states don’t require them to have a special business location. For example, wholesale dealers in Arizona can conduct business from their own residence.

If state regulations do require you to have an established office, you probably won’t need to have a display area or lot. The reason for this is that, as a wholesale dealer, you don’t need to provide public access to your vehicles.

However, you may still need to follow local zoning rules, display your dealer license certificate and, if your office is in your residence, provide a separate entrance for customers.

Some states also require your office to be a minimum size. In North Carolina for example, wholesale dealers are required to have an office measuring no less than 96 square feet. You may also need a phone number where customers can reach you during normal business hours.

Check with your state licensing authority or your Department of Motor Vehicles (DMV) to find out what your specific location requirements are.

#3 Complete your wholesale dealer license application

Your dealer license application is the most important part of the licensing process. Usually, dealers are required to provide personal and business information. You may also need to respond to background check questions about both your professional and personal life.

As part of your application, you will probably need to provide a surety bond and pass a dealer training course and an exam. See the next section for more information on wholesale dealer bond requirements.

While dealers of new and used vehicles sometimes need to have a designated agent or someone occupying a similar position, wholesale dealers generally don’t need to meet this requirement.

When submitting your application, you may need to show that you have comprehensive liability insurance. You may also need to file articles of incorporation with your Secretary of State before applying for your license.

#4 Apply and receive a wholesale auto dealer surety bond

Like all other auto dealers, wholesale dealers are often required to provide a surety bond when applying to get licensed. To get bonded, wholesale dealers need to pay a bond premium to the surety which issues the bond.

The cost of this premium is determined by the surety and is based on the dealer’s personal credit score. Occasionally, other financial information may also be requested by the surety to better assess an applicant.

The higher an applicant’s credit score, the better their bond rate will be.

Applicants with scores over 700 FICO can expect to get some of the lowest possible rates on their bonds.

#5 Submit your application and pay fees

Some states will require you to pay both application and licensing fees. In others, only one type of fee is required. Typically, once you submit your application and pay the fees, you can expect to have your license issued within 2-3 weeks.

Where do Wholesale Dealers Sell Their Cars?

Wholesale dealers are required to sell their cars to other licensed dealers. They can sell cars directly to dealers they work with or choose to sell their vehicles at exclusive dealer auctions.

Is Your Property Zoned for a Wholesale Car Dealership?

In most states, your business premises will need to meet local zoning ordinances. You’ll need to check with your municipality to find out about the rules and regulations in your area.

How Long Does It Take to Get a Wholesale Auto Dealer License?

The time it takes you to get a wholesale auto dealer license will depend on your existing qualifications and the state in which you apply.

For example, if you are required to pass certain exams or tests, this can add months to your application process. However, if your state doesn’t require a licensing course

You could receive your license in as little as two to three weeks.

How Much Does It Cost to Get a Wholesale Auto Dealer License?

The costs associated with getting your wholesale dealer bond will depend on your specific state and your credit score.

You’ll need to factor in quotes from insurance companies and surety bond agencies, as well as any costs incurred in registering your business and gaining the necessary qualifications.

In general, the application fee for non-retail auto dealers is around $200. Check the exact amount with your local DMV so you can build a business plan that reflects the true cost of your auto dealer license.

You’ll also need to factor in the cost of your dealer plates. The cost of dealer license plates can vary significantly between states, so you’ll need to contact your local authorizing body to find out more.

How Do Wholesale Car Dealers Make Money?

Wholesale car dealers make money by buying cars from auctions and dealers and selling them on to other dealers at a profit. Wholesale car dealers need to build up good contacts with local dealerships and auction houses and really know the local market if they’re going to make a profit.

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Robin Kix

Robin Kix is currently the Renewal Department Manager. Since joining Lance Surety in 2014, she has helped thousands of businesses throughout the nation remain compliant at the federal, state and local level. She has significant experience supporting commercial bond lines, particularly in the automobile, transportation and construction industries. Robin and her team work together to create a positive customer service experience at the time of every policy renewal, whether that be finding the best pricing or offering additional assistance.