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Steps for Opening a Car Dealership Business in California

Sailun Tires

California residents appreciate great cars. After all, there are more than 14 million vehicles officially registered with the state automobile authority. So clearly, a car dealership business idea can pay off quite well.

Keep in mind, however, that your dealership has to be registered. Even if a business plans to sell vehicles online, they need to have a qualifying physical location to do so.

In the beginning, starting a car dealership in California may be a bit expensive, but it can pay off very well. If this sounds interesting, take a look at the steps you need to complete to start your own car dealership.

Dealership type

First of all, it is important to decide if your dealership will sell new or used cars since California doesn’t allow you to sell both new and used cars. You can either start a used car dealership or a brand new car dealership.

Keep in mind that in order to sell, deal, or broker, you need to have a license either as a new car dealer or as a used car dealer. So, determine what cars you want to sell.

New car sellers need to be franchised through a manufacturer. If you want to sell new cars, you have to check with the manufacturer of the new cars that you want to have in your dealership. To secure a deal, you have to meet the manufacturer’s conditions and guidelines.

It’s good to know that you can also sell used cars there while the dealers who start used car dealerships can’t sell new cars.

Get a car dealer insurance

Image by chapay from Pixabay

Next, you should look into different California business insurance plans before you start selling. The insurance plan should cover garage stock, road risk, goods in transit, contents insurance, public liability insurance, and employers liability insurance. 

Basically, you should have an insurance plan that takes good care of both your business and its customers along with the employees working at your dealership. And the good news about these coverages is that nowadays, you can purchase them online and obtain a certificate of insurance in a matter of minutes which will save you valuable time.

Reach out to your local inspector

In California, you have to contact the local inspector to get things off the ground. This person is responsible for evaluating your application.

They are the ones who will answer all the questions you might have and they will tell you everything you need to know about license acquisition.

For California businesses, contact 229-3126 to get more information. Also, check the DMV website to find an inspector who can help you.

Get yourself a dealer’s handbook

You should look for a dealer’s handbook and get one since it has dozens of important details for anyone interested in becoming a car dealer in the state of California.

With a handbook, you will be able to go through the whole process smoothly and it will help you keep everything within the legal boundaries. The handbook can be found on the official DMV website.

Get the license

Image by RJA1988 from Pixabay

You will have to file various forms and these depend on the dealership type you select. File all of the necessary papers, contact the local inspector to check if everything is fine and then wait.

If you want to open a new car dealership, you should look for the specific forms on the DMV’s website. On the other hand, if you want to start a used car dealership, you can also find the necessary forms on the official website (DMV), but they are different from the papers you would fill for a new car dealership.

Cover all taxes and fees

You should pay all taxes and necessary fees to get the license and officially open your dealership.

If you fail to make the necessary payments, you will never get the license you need to operate your business.

Keep in mind that manufacturer fees and government fees are different. It may set you back for at least $700 or $800 to get a license.

The fees range from application fees, broker fees, locations fees, all the way to the motor vehicle board fees, and car dealer plate fees. Keep in mind that you need to pay all fees and taxes to get the green light to start selling cars to the general public.

Final words

This mini-guide should give you a decent overview of the whole process that needs to be completed to start a car dealership in California.

You may have to deal with a few additional technicalities, but the most important things are covered here.

Good luck in your car dealership business venture!


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