Everyone keeps asking if it is possible to get a dealer’s license without a physical lot. This question comes up all the time, and it’s also the top topic request, so I thought it’s high time I address it. I’m here to clear things up for you, to explain what you need to do, why a lot is usually necessary, and then we get into some additional details that go beyond the basics. Nonetheless, our discussion will center around how to get dealers license without a lot. Many people seem to think that a physical lot isn’t necessary. Well, there are a few workarounds, and I’m going to walk you through what you need to know, how it all works, and the specifics. I’ll cover the different types of licenses, what’s involved in each, and the advantages you get.
How to Get Dealers License Without a Lot
Now, each state has its own rules, and this could mean different licenses under different names. You may find yourself with all or just a couple of these licenses. I’ll walk you through each type. You will also learn about their advantages and disadvantages.
1. Get a Wholesale License
Let’s say you are not really into finance, but you love the idea of buying and selling cars just for the fun of it. In this case, the next step for you would be getting a wholesale license. Yes, this is one way to get dealers license without a lot but it comes with a caveat. This license lets you buy cars from actual auctions. You can buy them, and handle all the paperwork and everything, but you can’t sell these cars directly to the general public. That’s the main limitation of a wholesale license.
For instance, if a customer comes to you with $6,000, ready to buy a car and drive away, legally, you can’t sell it to them. Instead, you need to work with a licensed dealer to handle the paperwork, submit the sales tax, and take care of all the formalities.
One of the big advantages of having a wholesale license is the flexibility. In some states, you can even have a small or virtual office. You might have seen ads online offering ‘Get your dealership for $4.99’ or similar. What they’re actually offering is a wholesale or dealer’s license, which might just be a tiny office space in a state with very relaxed laws.
However, I would advise you to conduct business in your own state with the appropriate license. For example, you might be in California and find the cost of a dealership too high due to expensive rents in places such as Los Angeles. In such a case, you could get a wholesale license and set up a small office. The advantage of a wholesaler’s license is that you will be eligible to obtain lines of credit for buying cars. This is because you’re operating a legitimate business within California. Avoid getting tempted by seemingly cheaper licenses from other states, such as Alabama, Georgia, or Florida. These may seem like a bargain, but they are not a good idea.
Flooring companies and banks tend to be wary of out-of-state licenses. For example, in Las Vegas, if you show up with a license plate from Georgia or Alabama and try to buy cars, they may refuse you. They’ll be concerned about risks like bounced checks, as there’s nothing locally binding you. Over the years, there have been many problems associated with this practice. You definitely don’t want to be linked with such issues. So, it’s really important to get a local state wholesaler’s license.
2. Obtain a Broker License
Let’s look at the second method—getting a broker license. Now, depending on your state, this license may be called a wholesaler license or a broker license. These sound similar, but they can be different in various states. For example, with a broker’s license, you can buy cars and handle the paperwork for customers without a physical store. In some states, the requirements are completely different. This can be a bit tricky to explain because it really depends on state laws and regulations.
Just like you need a wholesaler license, you also need a dealer’s license in your state. Starting with these two licenses is a good way to build your business without a full dealership and all the costs that come with it. You can just have a small office and choose between a broker’s license or a wholesaler’s license to get started.
3. Consider Car Rental Release
There’s also a third option, which is not very well known. I’m talking about a car rental license. It may sound unfamiliar but with this method, you can get dealers license without a lot. In some states, such as Nevada, you’ll receive a DMV number when you get this license. This number is linked to a short-term lease or lesser license, which is available in some states but not all. Once you have this 8-digit DMV number, you can go to Auction Access, and they’ll allow you to buy cars through auctions.
Let’s say you are reading this because you’re interested in getting a dealer’s license to buy cars for Turo. Well, you don’t necessarily need a dealer’s license for that. However, there are advantages to having one. For example, if you buy a car from an auction and it’s not as popular as you hoped, with a dealer’s license, you can easily return it. But as a regular car rental company, once you buy and register a car, you have to pay sales tax immediately, and you can’t get rid of that cost. With a dealer’s license, you can avoid this by returning the car to the auction and canceling your placard.
4. Buy and Sell Vehicles Under Someone Else’s License
This is also an option that many people talk about but it comes with a really big downside. If you asked for my opinion, I would say do not purchase vehicles under someone else’s license because it can lead to problems. Typical problems include repossessed cars, messed up paperwork, and people getting sued. So, avoid buying cars under another person’s license.
If the dealership runs into problems, and all the cars are seized, with liens placed on them, that will also affect you. You would just wake up to the news that tow trucks have taken all the cars away. You are basically not in control since it isn’t your license.
We get it, the dealer might just be your friend or my cousin, and that’s fine. If you want to do that, go ahead. But you can instead get a wholesaler license or a broker’s license for just a little more money. It’s not too difficult for a start.
5. Convert Your Personal Property Into a Lot
Technically, you can use this method to get dealers license without a lot, but owning the property is usually necessary. It really works in rural areas but there is no guarantee that you will get it. Some people have managed to get dealer’s licenses without a physical business location using a regular house. So, if you have a house and a small business, but no place for a dealership, you can try to convince your local county and city to let you keep your dealer’s license at your home. If you have the space, this might work. You will have to divide your garage and create a separate business entrance. You should also have a separate driveway leading to the street, with some concrete laid there. Now, just put up a sign. You will have to go through a lot of city processes, such as getting permits and correct zoning, which may take some months, say up to 6 months. Hopefully, the licensing agency will allow you to run your dealership from home.
A Dealer’s License is Still the Best Option
Despite all the methods we have discussed in this article, a traditionally obtained dealer license still stands out. With this license, you can buy cars at auctions and sell them to the public. The only concern is really that you need a physical location and I understand that you might not yet have the luxury. But the idea of a physical location makes a lot of sense because you’ll be interacting with the public, handling personal information, and dealing with banks.
A physical storefront adds to your legitimacy, and customers prefer buying from a licensed dealer rather than someone in their pajamas at home. Similarly, banks prefer to lend large sums to properly licensed dealers rather than a makeshift setup. Most states, in fact, insist on having a storefront for this reason.
Every state has its own rules though. In some places, you might need a lot with 10 or 15 parking spaces, but in others, just 5 spaces might be enough. People often think you need a huge lot and lots of expenses to run a car dealership. But in reality, if you find a good retail location, put up a sign that meets DMV size regulations, and have a small parking area for about 5 to 10 cars, you can manage quite well. The cost for such a spot can range from $1,000 to $2,500, depending on your location. On the other hand, if you go for a bigger lot, the costs can shoot up to $10,000, $15,000, or even $20,000 a month. So, for someone just starting out, I’d recommend a smaller option to keep your costs low.
As I mentioned, don’t prioritize shortcuts; make sure to get your licensing the right way. If you want banks to take you seriously, you must present yourself appropriately, which includes having a physical location that reflects who you are and what your business stands for. So, get your dealer’s license and make sure it’s from your local state. Avoid going out of state or using sketchy companies that offer dealer licenses from random places. Just follow the correct procedure. It’s not overly expensive.
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