In most states, you must obtain an auto dealer license to deal in any vehicles other than those originally acquired for personal use. Even those who buy and sell motor vehicles for third-party clients — commonly referred to as auto brokers — are considered dealers and must obtain a license. Though specific requirements vary from state to state, to obtain a license to operate as an auto broker you must secure an appropriate location, register your business with state authorities and purchase sufficient insurance and bonding.
Identify your state’s motor vehicles licensing authority. Typically, the state motor vehicles department oversees the licensing of dealers and brokers. Visit your local DMV and inquire about licensing procedures. If the motor vehicles office does not administer dealer licensing in your state, a representative will be able to tell you who does. Remember to obtain a dealer license application packet during your visit.
Read the license application and associated documents carefully to familiarize yourself with the licensing procedures and requirements particular to your state.
Find a location for your business. Verify that the location is appropriate for the operation of an auto brokerage. First, compare the location’s physical measurements to the specifications set out in the application packet. In most states, your lot and office must meet minimum size standards. Second, confirm that the location is properly zoned for your business activity. Because zoning laws vary from city to city, you must visit your local zoning office for a consultation.
Prepare your location to meet licensing standards. Check your application packet for detailed requirements. In most cases, you must install permanent signs showing your business name. Additionally, you must furnish your office and install a land-line telephone, an answering machine and a fax machine. In many states, you will be required to submit photographs of your location to show you have met all applicable requirements.
Register your business with the appropriate state authorities. Refer to your application packet for a checklist of offices to contact. Alternatively, visit the U.S. government’s business resource website, Business.gov, for a state-by-state index of general business registration procedures (see Resources). Typically, you will be required to file business formation documents and obtain a tax registration number. If you plan to have employees, you will be required to register for unemployment insurance and workers’ compensation. Other requirements may apply depending on local law.
Obtain sufficient liability insurance and an appropriate surety bond, if required by the licensing authority.
Complete the application and submit it, along with associated documents and fees, to the indicated address. If an inspection of your business location is required, you will be notified. When processing is complete, you will be issued a license to operate as an auto broker.
Many states require an automobile display area at the business location whether or not you intend to display vehicles. However, many states require display space for only three vehicles.