How to Become an Auto Dealer

Co-authored by Bryan Hamby and Eric McClure

Last Updated: April 13, 2021

Becoming an auto dealer is a process that requires an investment of time and money, but that can yield high profits. A car dealer may operate in several different modes in order to make money: running a used car lot, buying/selling wholesale cars on an as-needed basis or investing in a franchise branch of an already-established auto dealership. It does not take a formal education to deal cars, but it does take some training. This list describes the steps it takes in order to become an automobile dealer.

Steps

1
Save your money. Almost every step toward becoming a car dealer will cost you money. Depending on the type of business you want to run and the amount of inventory you plan on holding, your costs can run anywhere from $30,000 to $1,000,000 or more.
2
Obtain a dealer's license.^{[1]
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Expert Source

Bryan Hamby
Car Buying Expert
Expert Interview. 11 June 2019.} Each state has its own requirements for auto dealer licensure, which most often include completing a course and sitting for a certification exam.

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3
Brush up on your business acumen. As with running any business, being an automobile dealer requires a certain degree of bookkeeping, inventory, accounting, marketing, management and customer service knowledge. You do not need a business degree, but you should find all the information you can about operating a business at the library or online.
4
Decide how you want to run your business. Because being a car dealer means being self-employed, there are many questions you need to ask yourself before moving on to the next step. These are things you need to consider:^{[2]
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- Would you like to be a one-man show and operate solely through a company website?
- Do you want to sell new or used cars?
- Or would you rather own a lot and hire salespeople?
- How many employees do you need, and what type?
- Are you going to offer in-house financing or require that your customers obtain their own financing?^{[3]
  X
  Expert Source
  
  Bryan Hamby
  Car Buying Expert
  Expert Interview. 11 June 2019.}
- How will you market your business?
- What kind of money do you have to invest, and how much money do you need to make?
5
Create a formal business plan. Once you know exactly what kind of auto dealer you want to be, you should take the time to put every aspect of your business plan down on paper. This will help you stay on track with budget projections and business-building priorities.^{[4]
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6
Choose a location. This may be as simple as keeping a few cars in your backyard and building a website to serve as your business location, or may involve scouting for commercial lots and office space. Whatever your location, you will need to obtain a zoning verification letter in order to move on to the next step.^{[5]
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7
Get your surety bond. Upon verification that your business location is properly zoned for an automobile dealership, you must get a surety bond. The auto dealer bond is given as a guarantee that your dealership will operate in compliance with state regulations. Depending on the state the bond amount can vary from $5,000 to &100,000 but you will have to pay only a percentage of this amount that usually varies between 0,75% and 10%.^{[6]
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8
Register your business name and get a business license at the Division of Motor Vehicles.^{[7]
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9
Build an inventory. As a car dealer, you can attend private wholesale dealer auctions and purchase vehicles at lower than market-rate prices.^{[8]
X
Expert Source

Bryan Hamby
Car Buying Expert
Expert Interview. 11 June 2019.} You can also go into new-car dealerships and buy wholesale with closed-bids.

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Question

Is their anyway that a retail dealer can do business from their own household?

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In most states, if you're going to sell cars with the purpose of making a profit, you can't operate out of your own home. In some states you can sell cars privately from home if you don't sell more than 4 cars a year, though. It really depends on where you live. In general though, no. You cannot operate a dealership out of your home.
Question

Can I open a used car dealership in California with just an office?

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Technically, yes. Your office has to have a few specific characteristics though. First, the office has to be facing the street. Your building must also have large windows, a sign, and access to at least 2 dedicated parking spaces. In California, you're allowed to rent out a desk at a dealership and pay to use some of their parking spaces as well. This can be kind of a costly option though, and the dealership where you're renting the office will usually take a percentage of your profits.
Question

How do I obtain a dealer license without having a lot in Ohio?

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In Ohio, you are required to have a dedicated office to sell cars. You must own or rent an office that has at least 180 square feet. It also has to have a desk, 3 chairs, and 1 filing cabinet. You're also required to have a working landline or a cellular phone that is registered in your business's name. You also need to rent or own at least 3500 square feet of parking, but it doesn't have to be a stereotypical lot. You also have to have a permanent business sign with letters that are at least 6 inches in length, but it doesn't need to be a permanent sign.