How to Get a Wholesale Dealer License

how to get a wholesale dealer license guide

 

If you are planning on becoming a wholesale auto dealer, there are various requirements that you need to be aware of. Unlike new and used car dealers, wholesale dealers do not sell vehicles retail. Wholesale dealers can only sell vehicles to other dealers or, in certain instances, at wholesale car dealer auctions.

In many states, this gives wholesale dealers an advantage because they need to comply with fewer licensing requirements. To obtain their license, most wholesale dealers still need to meet a few important requirements, such as submitting an auto dealer surety bond, possibly passing a training course, and a few others.

So, if you want to sell vehicles as a wholesale dealer, here’s how to get licensed.

Wholesale Dealer License Requirements

Licensing requirements for wholesale dealers vary from state to state. For the sake of comprehensiveness, here are all licensing requirements you may expect to encounter when applying for your wholesale dealer license.

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#1 Get a state business registration

Without a doubt, this is the most common requirement you will face. To conduct business in any state, you need to get your business licensed on a government, and possibly, on a local level.

Typically the business registration is with your Secretary of State and it will make it legal for you to conduct business in the specific state.

#2 Find a location for your dealership and have it approved (if applicable)

This requirement is valid only in SOME states. Since wholesale dealers do not sell vehicles retail, they often do not require a special business location. For example, wholesale dealers in Arizona can conduct business from their own residence.

Alternatively, even if you are required to have an office, you are likely not to required to have a display space (a lot) for your vehicles. Again, the reason for this is that the public does not require access to your vehicles.

Given the different requirements, it is best that you check with your state licensing authority or your Department of Motor Vehicles (DMV) what your specific location requirements are.

#3 Complete your wholesale dealer license application

Your dealer license application is the most important document you need to complete. The license application will usually require you to provide personal and business information. You may also need to respond to background check questions.

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

On the other hand, while new and used dealers sometimes need to have a designated agent or someone occupying a similar position, wholesale dealers frequently do not need to meet such a requirement.

#4 Submit your application and pay fees

Some states will require you to pay both application and licensing fees, whereas 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 time.

Surety Bond Requirement for Wholesale Dealers

How much does the bond cost?

Like all other auto dealers, wholesale dealers must also frequently 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.

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

The lower an applicant’s credit score is, 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.

To get an estimate of your bond cost, try our bond cost calculator below!

Surety bond cost calculator

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Based on your credit score, your expected yearly premium is: $500 - $1000

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Why do wholesale dealers require a bond?

Surety bonds serve as a guarantee that dealers will conduct business in an honest manner. In the case of wholesale dealers, the bond guarantees that in selling vehicles to other dealers or in obtaining them, the dealer will do so in accordance with state laws.

For example, if a wholesale dealer is found to have committed fraud or to have withheld payment from another dealer for the purchase of vehicles, this may be sufficient enough reason for a claim against their bond.

Request a Free Quote on Your Bond

Get a free and exact quote on your auto dealer bond by completing our online bond form! Call us at 877.514.5146 anytime for any bond-related questions.

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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.