Getting your used car dealer license in California is not complicated. However, there are specific requirements you need to handle to make this a smooth and fast process.
In this article let's cover:
- The 7 steps to get your auto dealer license
- How to get your auto dealer license bond
- What an auto dealer license (surety) bond is
- The detailed photo and property requirements
- All the resources you'll need to help complete your license process as quickly as possible.
The 7 Steps To Get Your Used Car Dealer License In California
Step 1: Download The Used Car License Form Pack
California makes it easy to download every form you'll need to obtain your license.
Here're the forms in this pack:
Application for Original Occupational License
This is your license application. Before you fill out this form, make sure you know...
How your business is going to be set up. Are you a sole proprietor or an entity like an LLC or partnership?
The type of dealership activities you'll offer. This is where you'll declare you'll sell used vehicles, plus any additional licenses you'd like to obtain.
For example, many dealers obtain their autobroker endorsement. This comes with an additional fee of $100 and allows you to broker finding and purchasing a car on behalf of a customer.
Other options include:
You will declare your main office address. The main office is where accounting for the business is conducted and all financial records are stored. If you store them electronically, this main office is where your "corporate office" for the business lives.This becomes important later when you need to provide photos to comply with the space and signage license requirements.
Other details required for this application are:
- Request for dealer license plates if you need them
- The financial institution you'll use and address
- Ownership, lease, or rental details of the property you'll use as your dealership
It's a good idea to go through this form line by line. A used car dealer license does not cover all the business activities you may want to conduct. This application will help you get set on all licensing requirements for the business activities you plan partaking in.
Surety Bond Requirement
Auto dealer's, both new and used, in California are required to post a $50,000 surety bond as proof of financial responsibility to the Department of Motor Vehicles.
If you plan on selling motorcycles or all-terrain vehicles, you're required to post a separate $10,000 surety bond.
Taking responsibility means::
- Follow the rules for being a licensed auto dealer in California...
- Serve your customers by not committing any fraudulent acts like selling cars with dirty titles, missing titles, mishandling customer deposits, and more...
If you commit any negligent or fraudulent act, part of or all of this $50,000 can be used to pay for the damages caused if they're deemed ligament.
California allows you to post this $50,000 in a number of ways.
- Cash deposited in an interest-bearing trust account maintained by the Department of Motor Vehicles
- A certificate of deposit
- A savings account or investment certificate
- A share certificate payable to "Department of Motor Vehicles" issued by a credit union
- A surety bond
Every option requires you to have $50,000 cash on hand, except purchasing a surety bond. This is why a surety bond is the most popular choice.
Here're the details...
How Much Does a Surety Bond Cost?
The purchase price is based on:
- Your personal credit history
- Your industry experience
- Prior successful claims (if any) made against your dealership (if you're purchasing a bond for an existing company)
Based on this information a premium rate is determined. Your purchase price is your premium rate multiplied by the $50,000 bond amount.
For example, if your rate ended up being 1.0%... the purchase price of your $50,000 bond would be $500.
Spending $500 vs tying up $50,000 is a huge benefit to getting your dealership business initial cash flow.
What Is a Surety Bond?
An auto dealer surety bond is financial guarantee underwritten through a special insurance company. It includes three main parties.
Party 1: The Principal
You, the use car dealer, are the principal required to purchase the bond.
Party 2: The Obligee
This is the state of California Department of Motor Vehicles. The Obligee is the party legally requiring the $50,000 proof of financial responsibility.
Party 3: The Surety Company
This is the special insurance company writing the $50,000 bond. If legitimate claims are made against you, the Surety guarantees payment for the claim.
As the Principal, you must pay back the Surety for any successful claims paid out on your bond.
Surety Bonds Direct provides surety bonding services for used card dealerships in all 50 states including California. We help you find the best rate possible so you pay the lowest premium for your auto dealer bond. You can request a free quote online or call a bond specialist today (1-800-608-9950) if you'd prefer to speak to someone.
Personal History Questionnaire
You'll need to provide your personal history including:
- Employment history for the previous three years
- Education information
- Background information including any prior occupational licenses you've secured
- Plus any criminal charges
If you have a criminal history, you'll be required to list the details of each charge. Make sure you include all the details because in the next step, you're required to submit fingerprints for a full background check.
Authorization To Release Financial Information
This form gives permission to the state to pull any financial information related to the dealership. This permission is good for 90 days.
Step 2: Fingerprints
Finger prints are required if this is your first occupational license in California.
Step 3: Statement of Information or Statement of Information LLC
This is only required if your dealership will be owned by a company, limited liability company, or limited liability partnership.
Step 4: Dealership Education Program and Exam
Used car dealers in California are required to attend a Dealer Education Program and pass an exam. The DMV has a long list of approved education programs with addresses and if they offer online study.
Topics covered in the program are:
- Retail dealer license requirements
- Wholesale dealer license requirements
- Broker services requirements
- Policies and compliance laws
- Strategies to make money as a full time occupation or to help you supplement your income part time
- Prepare you for the DMV Occupational License exam
Once you obtain your certificate for attending the program, you're required to take the exam. The exam is 40 questions with a passing grade of 70% or 28 or the questions answered correctly. You have three opportunities to pass the exam.
Each exam attempt has a fee of $16. If you fail to pass the exam in one of the three attempts, you'll have to go through another Dealer Education Program before you can get another three attempts.
Step 5: Submit Tax And Fee Administration Resale Permit
All businesses selling tangible personal property that is subject to sales tax are required to get this license.
This includes cars and this permit allows you to collect sales tax from car purchases. Obtaining this permit is easy with California's online registration.
If you have multiple locations, California requires each location to have its own permit.
Step 6: Photograph Requirements
These photos are required before an inspector will come out to your lot and finalize your licensing.
- Photo of the interior of your main business address from the front door to the back door including side walls
- Photo of the interior of your main business address from the back door to the front, including side walls
- The office entrance, including the posted address from outside the building
- If your office entrance is not accessible from the exterior of the building (a suite), you need a photo of the corridor showing the direct entrance to the office
- The location where the books and records are kept. If you keep electronic records, include the location where you will work on the books
- Photo of the sign as it appears on the application
- Photo of the sign permanently affixed to the exterior of the building. The sign must be visible from at least 50 feet. If the address is not visible on the exterior of your building (because you have a suite) the address must appear on the sign
- If the sign is not visible from 50 feet, provide a photo of your sign from the nearest public entrance
- If the sign can't be affixed to your building... One, provide a photo of the lobby or a posted sign directing customers to your office within the building
- A photo of the sign posted on the rear office door if there is one
There are regulations for temporary signs if your permanent sign is on order.
Vehicle Display Area
- Show you have a large enough area for the type of vehicle you're selling. This area is for the exclusive use of displaying vehicles, not parking for customers
- Photo the proximity of the display area or areas to the office. If the display area is not in the immediate adjacent lot, another permanently installed sign is required to identify the business name and main office address
- Separated display lots are required to be inside a 1,000 foot radius of your main office
- A photo that shows the display area signs. If utilizing designated parking spaces, a sign must be permanently installed designating the space exclusively used for dealership purposes
There are a few more photograph requires if you're planning on getting into dismantling, remanufacturing, or other sub-business categories. Remember to use the occupational license to see what must be claimed as a business activity.
Step 7: Call Local Occupational Licensing Office
Call to set an appointment for your property inspection, to submit your application, and pay all fees.
The Occupational License inspector will inspect:
- The main business office
- The books and records pertinent to the business
- The display area for the vehicles you're selling
- All necessary signage
Let's Recap The Steps And Fees Required
Step 1: Fill out all necessary paperwork.
Download the bundle or fill it out online. This includes purchasing your auto dealer bond. This is required and we can help you purchase your bond within days.
Step 2: Fingerprints
Step 3: State of Information or Statement of Information LLC
This is where you'll share your business entity information if applicable.
Step 4: Dealership Education Program and Exam
This is required for used car licenses in California.
Step 5: Tax And Fee Administration Resale Permit
This allows you to collect sales tax.
Step 6: Photograph Requirements
Remember, there are a lot of specific requirements you must meet for your dealership to meet licensing requirements.
Step 7: Schedule Occupational License Inspection
Schedule your inspection and finish off your licensing requirements by submitting all paperwork and fees.
It's possible to obtain a dealer license without a lot. This is a great way to start selling cars without the heavy investment of renting property.
Used Car Dealership Fees
- $175 application feel (non-refundable)
- $70 fee for each branch or lot location (pay again if you change name or address)
- $125 annual renewal of each license held or $250 for two year renewal
- $90 for each dealer vehicle plate (optional)
- $92 for each dealer motorcycle plate (optional)
- $100 autobroker endorsement (optional)
- $1 Family Support Program
- $42 for fingerprint card (out of state applicants only)
- $16 Examination feel... each re-test is an additional $16 fee.
See the full list of fees here.
Get Your Used Car Dealer License And Start Selling!
These are the seven steps you need to follow to get your license in California. The California Department of Motor Vehicles has one of the best government websites. All these steps are laid out although it does require clicking around to find all the details. Refer back to this article for help.
When it comes time for you to purchase your California auto dealer surety bond go request a free quote online. We will have your quote within 24 hours. If you would rather talk with a bond expert, call us today at 1-800-608-9950.