Don’t let an expired auto dealer license get in the way of dealership success.
Existing dealership owners already know the process to get an initial auto dealer license can be daunting, but without one, you can’t sell cars. Period. Each state has their own set of licensing obligations to guarantee legal and ethical practices toward consumers, as well as financial stability by businesses that sell motor vehicles.
Most states have a considerable list of requirements to be recognized for approval. Here are some examples:
- Financial statement prepared by a Certified Public Accountant (CPA).
- Surety Bond from the dealer’s insurance company. State coverage requirements vary and are typically listed on the application. Rhode Island, for example, has a $50,000 coverage obligation.
- An approved line of credit from a financial institution (Amount varies by state) in the dealership’s name.
- Lease agreement (or proof of ownership) and zoning approval for the intended location. Some states even require a detailed floorplan and photos of the location and signage.
- Franchise approval documentation if part of an automotive franchise.
- Incorporation documents for corporations.
- Federal Tax ID#
- Certificate of Good Standing from the state DOR.
Once you obtain an auto dealer license, don’t neglect maintenance.
Many dealer vendors, financial institutions, and state agencies require current dealer license copies annually to be sure they’re working with legitimate businesses. Without a valid license, dealers can’t buy from auto auctions or offer vehicle financing, and state agencies such as the Department of Motor Vehicles also require copies when issuing dealer plates or authorizing digital vehicle registration software use. Expiration dates vary by state, so it’s essential to ensure prompt renewals by verifying the date and setting reminders to give yourself enough time for submission. An expired license can open up a massive can of worms that will put a quick halt to all fundamental dealership processes. Let it go on too long, and you’re out of business, paying huge fines, and possibly facing jail time.
Use this checklist to be sure your dealership’s auto dealer license remains in good standing.
- Which employee will maintain dealer license compliance? While it’s smart to have one person in charge of managing licensing compliance, it’s important to have someone else follow up to make sure everything is current.
- What state agency oversees dealer license compliance?
- Know your state’s dealer license expiration policy. Does it expire yearly or bi-yearly? Do they send reminders? Even if they do, be sure to put other safeguards in place to make sure you don’t miss the deadline.
- Know the last day to send a dealer license renewal application to be sure it’s submitted in time.
- What is the renewal fee? Can it be paid for with a dealership check?
- Do you need a Certificate of Good standing from the state DOR?
- Do you need to renew your dealer surety bond for dealer license renewal approval?
- Are all applicable forms signed and notarized?
- Do you know the best place to mail the application package?
Follow through to make sure the renewal is accepted, approved, and received.
Once you send the renewal application, monitor it’s status until you get a current dealer license in hand. It’s always a good idea to send time-sensitive documents with tracking via USPS certified mail, FedEx or UPS to limit the risk that it gets lost in transit. Monitor shipping until you know it’s been received. If you feel like the approval is taking longer than it should, don’t hesitate to call the agency to keep the process moving smoothly. Even one missing document can halt approval.
Once the current license is received, make photocopies or scan it immediately. Post the original where directed by your state’s dealer licensing agency. Several employees may need access to the current license throughout the year:
- Office Manager
- Dealer Principal
- General Manager
- F&I Manager
- Vehicle Purchaser
- BDC Manager
- RMV Clerk
It’s a lot easier for essential employees to get a copy of the auto dealer license sent to them annually than have to hunt one down at the last minute. More than one person should have access in the event an employee has a day off, or there is a change in staff. Of all the licensing car dealerships have to maintain, the dealer license is definitely the most vital. Thankfully, maintaining a renewal is actually pretty simple as long as processes are put in place to keep them in good standing.
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Frequently asked questions
Questions About This Topic
What documents are typically required to obtain an initial auto dealer license?
Common requirements include a financial statement prepared by a CPA, a surety bond, an approved line of credit, a lease or proof of ownership with zoning approval, franchise approval documents if applicable, incorporation documents, a Federal Tax ID, and a Certificate of Good Standing from the state.
Why is it important to start the dealer license renewal process early?
Requirements and expiration dates vary by state, and even one missing document can hold up approval, so dealerships risk losing the ability to buy from auctions, offer financing, or register vehicles without a currently valid license.
Who at a dealership typically needs access to a copy of the current dealer license?
The office manager, dealer principal, general manager, F&I manager, vehicle purchaser, BDC manager, and RMV clerk may all need a copy throughout the year, since more than one person should have access in case of a day off or staffing change.
What happens if a dealership lets its auto dealer license expire?
An expired license can halt fundamental dealership processes and lead to significant fines or worse, so treating renewal as an ongoing checklist item rather than a last-minute task is essential.
