What do you need to start your own Motor Vehicle Dealer business in the state of California?
So, you have decided to start your own dealership to sell used, new and/or recreational motor vehicles in the state of California. What do California motor vehicle dealers need to get started?
First, you will need to determine what type of Motor Vehicle License in the state of California that you are going to be obtaining. This is based on the type of motor vehicles you will be selling and can include the following:
- New Retail Motor Vehicle Dealer
- Used Retail Motor Vehicle Dealer
- Wholesale Motor Vehicle Dealer
Once you have determined what type of license that needs to be obtained, you will then need to nail down the licensing requirements in the state of California for Motor Vehicle Dealers. These can include the following:
- Pass dealer education exam with 70% or higher score
- Permanent Business Location for dealership
- Apply for state of California taxpayer ID and register business name
- You must complete the license application and provide the following:
- New Retail Dealers must complete all forms in the New Dealer Applications Forms Packet (OL 248N).
- Used Motor vehicles (Dealer-Wholesale Only) must complete all forms in the Used Dealer Applications Forms Packet (OL 248U).
- Live scan fingerprint for all owners
- Letter of Authorization (New trailer dealers only. Required for each line.)
- Statement of Information (SI 550) or Statement of Information LLC (LLC 12) filed with the Secretary of State (Corporation, limited liability company or limited liability partnership owned businesses only.)
- Copy of California Department of Tax and Fee Administration (CDTFA) Resale Permit (Enables you to collect sales tax.)
- Photographs of the business location (Refer to OL photography requirements.)
- Pay all license fees in full
One of the most significant licensing requirements for Motor Vehicle Dealers in California is the Motor Vehicle Dealer Surety Bond. What is a Motor Vehicle Dealer Surety Bond? Motor Vehicle Dealer Surety Bonds are required by the California Department of Motor Vehicles and are issued in the amount of $50,000 or $10,000, depending on the license being applied for. This Surety Bond protects the consumer from any wrongdoing on the part of the dealer and is a third-party agreement between the following parties:
- Surety – the carrier that issues the Motor Vehicle Dealer Surety Bond
- Obligee- the entity or division in a state that requires the Motor Vehicle Surety Bond
- Principal – the motor vehicle dealer applying for the Motor Vehicle Dealer Surety Bond
A Surety Bond protects third parties from any actions that may violate applicable laws in that state for Motor Vehicle Dealers. For example, in the event a salesperson misrepresents a vehicle to a consumer or fails to provide a title, the motor vehicle dealer surety bond protects the consumer. The consumer has a right to file a Surety Bond claim with the Obligee against the Principal. The Surety company is then responsible for paying the Surety Bond claim, in the event it is deemed valid under applicable laws and regulations. In the event that a bond claim is paid out by the Surety, the Principal is responsible for reimbursing the Surety company in full.
How much does a California Motor Vehicle Dealer Surety Bond cost?
Pricing for the California Motor Vehicle Dealer Surety Bonds varies. An underwriter will review your California Motor Vehicle Bond application, and your premium will be based on the following factors:
- Amount of the bond
- Term length of the bond
- Personal credit for all owners with at least a 10% ownership stake in the business
Individuals with good credit can expect to pay below 1% and up to 9%. Qualified applicants could pay as little as $100 annually for $10,000 bond amount. To find out how much your Motor Vehicle Dealer Surety Bond is going to cost, complete our online application for your free, no obligation price quote.
Can I get a California Motor Vehicle Dealer Surety Bond with bad credit?
Pacific Surety offers a wide range of approvals, regardless of credit, for California Motor Vehicle Dealer Surety Bonds. With our strong surety relationships, we have the ability to approve 99% of applicants, regardless of how bad their credit is. Our knowledgeable underwriting staff will work with you to ensure you receive the lowest possible pricing for your bond. Applicants with substandard credit can expect to pay 5%-10% of the bond amount in premium. To see what rate you will qualify for, please complete our online application for your free, no obligation price quote.
Can the premium for California Motor Vehicle Dealer Surety Bonds be financed?
California Motor Vehicle Dealer Surety bonds can be financed for eligible premiums. Some carriers have their own premium finance program that gives you the ability to purchase a bond when the upfront costs might be prohibitive. Typically, applicants who choose this option will pay a percentage of their premium as a down payment, and the balance of the premium will be paid in four (4) monthly installments.
How do I get a California Motor Vehicle Dealer Surety Bond?
The first step is to complete our quick online application for your free, no obligation bond quote. Submission takes only five minutes, and our underwriting staff will be in contact with you within a couple of hours with pricing. If you prefer to speak with our knowledgeable staff, please call 1-866-722-7873 and one of our Underwriters will assist you in applying for your bond.
After you receive approval, you must sign an indemnity agreement with the surety and provide payment for your bond premium. In most cases, we can issue bonds the same day we receive your signed documents and payment.