Buzz
Wholesale car dealers function by procuring vehicles and then redistributing them to other dealerships or through wholesale auctions. They abstain from direct sales to the general public. Similar to other states, acquiring the necessary certification to operate as a wholesale dealer in California is a manageable process if you adhere to the prescribed steps outlined by the Department of Motor Vehicles. Whether you aspire to establish a thriving wholesale enterprise or are considering a transition to retail in the future, follow the steps below to become a wholesale car dealer in California.
Procedure
Fulfilling the Criteria
Review the DMV's application checklist. The DMV offers a convenient, editable checklist PDF to guide you through the dealer application process. It delineates the requisite documents to be completed and submitted prior to obtaining your dealer license.
- If you encounter any ambiguities during the application process, refer to the checklist's embedded links or consult the DMV's application guide (OL 248).
Ensure possession of a valid California driver's license. While the checklist doesn't explicitly state the necessity of a California driver's license, it's imperative for obtaining legal dealership status. Beware of online offers claiming to facilitate out-of-state dealer licensing, as these are typically fraudulent. Ensure your California driver's license is current.
Secure a business location through lease or purchase. Aspiring wholesale dealers must secure a business premises. A car lot or physical storefront isn't mandatory; however, a designated space for vehicle storage and business operations is essential. Your residential address cannot serve as your business location. Once secured, prepare the following:
- A lease agreement, rental contract, or property deed for your business premises.
- A photograph of your business location, as specified in the dealer application guide (OL 248).
- Your business premises will undergo inspection during the application process. Ensure compliance with all additional requirements outlined under 'place of business inspection'.
Choose a name for your enterprise. Select a distinctive name for your business during the licensing and registration process. Opt for a name that reflects your business nature, such as 'Johnson Wholesale Auto Traders' or similar. This facilitates customer recognition and clarifies your business purpose. File your business name using a Fictitious Name Statement, which must be submitted to your state before applying for your dealer license.
Acquire a resale permit. Request an Equalization Resale permit from your local Board of Equalization office, enabling you to collect taxes. The application is cost-free, although a deposit may be required based on your business circumstances. Maintaining this permit is essential for obtaining and retaining your wholesale dealer license.
Procure a business license. Obtain a city and/or county business license to establish your wholesale dealership. Contact your local city or county chamber of commerce to initiate the application process. Submission of either the license copy or a letter confirming non-issuance of business licenses by your county is mandatory for wholesale dealer license issuance.
Secure a surety bond. A surety bond acts as a safeguard ensuring dealer compliance with state and local regulations. It indemnifies aggrieved parties in cases of dealer misconduct, with a $10,000 bond requirement for wholesale dealers. However, the bond cost is proportional to your creditworthiness, as follows:
- Dealers with excellent credit (above 680) pay approximately $100.
- Dealers with fair credit (600-680) anticipate payments ranging from $100 to $500.
- Dealers with poor credit (below 600) may face costs exceeding $300.
License Application Process
Complete the Dealer Education Program. To proceed with your application, enroll in and complete the Dealer Education Program, obtaining a certificate of completion. This program is accessible at various locations across the state.
Pass the Used Dealer Test. Upon finishing the education program, visit your local DMV to take the Used Dealer Test, assessing your comprehension of the Dealer Education Program. A $16 fee is payable for each test attempt, with successful completion being a prerequisite for finalizing your dealer application.
Submit the requisite forms and applications. The wholesale dealer application checklist specifies several mandatory forms. Refer back to the checklist and utilize provided links or search for forms by number on the CA DMV website. Ensure thorough and accurate completion of each application.
Submit the required documents. Ensure all documents listed in the checklist are attached to your completed application forms. Verify document order if specified by the checklist, particularly for proof of business operations and location.
Review your application for completeness. Given the complexity of the application process and the multitude of required forms, thoroughly review your completed application to ensure all sections are present and accurate. Any inaccuracies may necessitate payment of the application fee for resubmission.
Submit your application and fee. Deliver your completed application to the nearest DMV Occupational Licensing Inspections Office. Find office locations on the CA DMV website. Submit your documents and pay the application fee. Await notification of application acceptance or rejection.
- An application fee of $176 is non-refundable.
Running Your Business
Procure vehicles for resale. Wholesale dealers have various sources for vehicle procurement. Attend wholesale auctions in California or neighboring states for bulk purchases. Engage with new and used car dealerships to bid on surplus vehicles. Alternatively, acquire vehicles from other wholesale dealers. Stay vigilant for lucrative deals and seize opportunities promptly.
Establish an online presence for your enterprise. In today's business landscape, online operations are indispensable. Develop a professional-looking and functional website showcasing your inventory and facilitating easy communication. Treat your website as a virtual extension of your physical establishment. Additionally, explore car procurement opportunities on other wholesaler or auction platforms.
Negotiate agreements with buyers. Building and nurturing relationships with purchasing dealers is paramount for wholesale dealers. Aim to be recognized as a fair negotiator offering accurate assessments of vehicle conditions. Even if some deals yield minimal profit, preserving your reputation is crucial for sustained business. Some wholesalers also integrate transportation costs into car prices, streamlining the purchasing process for customers.
Evaluate license modification possibilities. Many wholesale dealers eventually venture into retail car sales, which can yield higher profits. Retail dealers retain wholesale privileges, allowing seamless business expansion. Modifying your license to retail incurs a $70 fee.
