Do you want to start a new or used car dealership in California? Now is probably the best time to do so.
The $123-billion industry has enjoyed a strong market position in the state for years.
A significant uptick in sales has been seen in the last five years. Experts are attributing the growth to a stronger economy, lower gas prices, and the increasing appetite of consumers for cars.
Below is a quick walkthrough of the important things you need to start a car dealership business in California.
Create a Business Plan
Clarity breeds mastery. Having said that, five pages that clearly outline plans that are specifically created for your own situation is better than 100 pages of vague goals and irrelevant techniques.
Though brief, make sure that your business plan will cover all the bases—from the executive summary down to customer acquisition.
Apply for a California Car Dealer License
There are two types of car dealer license that you can apply for:
- New Car Dealer License – allows the licensee to sell new and used cars.
- Used Car Dealer License – allows the licensee to sell used cars only.
- Download the necessary California Department of Motor Vehicle forms
Before you start filling out the required forms, download the California DMV’s New Car Dealer Application Checklist or Used Car Dealer Application Checklist first.There are several forms that you must complete depending on the type of car dealer license that you are applying for.Instead of looking for the required individual forms (there’s quite a number of them), just simply download the California DMV packet that pertains to your license type by clicking the following links:
- Pay the required fees
- Application fee – $175 plus $70 for each branch
- Autobroker Endorsement – $100
- Dealer plate – $87 per plate
- Family Support Program – $1
- Fingerprint Card for non-resident applicants – $42
- Motorcycle plate – $89 per plate
- New Motor Vehicle Board – $300/branch location. This fee is only applicable to dealers of new automobiles, ATVs, commercial vehicles, motorcycles, motorhomes, and recreational trailers.
- Attend the Dealer Education Program and take the written examination
It’s a pre-licensing requirement that Used Car Dealers and Wholesale-Only Dealers must fulfill. The dealers will be provided with a Certificate of Completion after completing the program. Section 11704 of the California Vehicle Code requires Used Car Dealers and Wholesale-Only Dealers to take and successfully pass the Used Dealer Test administered by the California DMV. There is a $16 fee for the said examination.
- Obtain a California Auto Dealer Bond
A surety bond is an important license requirement for car dealers within the state. An auto dealer bond is a monetary guarantee provided by the license applicant and the surety to the California DMV. An auto dealer bond will cover any fraudulent acts or violations (stated in the relevant section of the California Vehicle Code) that are committed by the Principal. Obtaining a surety bond is a straightforward process. Our easy application process will only take less than 5 minutes of your time. And as long as all the necessary requirements are complete, you can get your California Auto Dealer Bond within a day. To start, apply for your bond HERE.
- Get a Property Use and Zoning Verification
To ensure that the car dealer license applicant’s business location is in compliance with Section 65850 of the Government Code, the license applicant must apply for property use and zoning verification. A DMV inspector will conduct a thorough inspection of the car dealer’s business location in order to determine the following:
- The location is approved for the operation of vehicle retail sales.
- The location is approved for the operation of vehicle dealer wholesale-only, but not retail sales.
- The location is approved for the operation of vehicle autobroker, but not retail sales.
- Not approved for the operation of a vehicle dealer business.
Once you have submitted all the requirements to the California DMV, the next step is to wait for your license approval. You can check the status of your car dealer license application here.
Other Licenses, Permits, and Legalities
- Resale Permit from the Board of Equalization
- Seller’s Permit from the Board of Equalization
- A Business License obtained from the city or county that you will be doing business at
- A Fictitious Occupational License – required of businesses that are operating with DBAs (doing business as). These are businesses with registered names that are different from the owners’ legal names.
- Rental agreement
Creating traction for your car dealership business
Focus on creating traction during the early stages of your business. Better yet, you can create traction even before you formally launch your car dealership business.
Pull in customers by highlighting your brand’s value proposition. Continuously show your customers the benefit that only you can provide them.
Starting a business is tough. Sustaining one is tougher. As Elon Musk so eloquently put it: "Being an entrepreneur is like eating glass and staring into the abyss of death."
The outcome of your hard work will outweigh all that in the end. Good luck with your new endeavor!