How to Get a California Motor Vehicle Dealer License

What is a California Motor Vehicle Dealer License? 

A California motor vehicle dealer license allows an individual or business to legally sell vehicles as a way to earn income in the state of California. Its purpose is to protect the general public from dealers violating the law. Selling vehicles without a license as a business has serious legal implications, so it is best to obtain your license. 

Do I need a California Motor Vehicle Dealer License? 

Yes, if you are selling any new or used vehicle for non-personal purposes, then you need to obtain a vehicle dealer license. However, if you are only selling your own used car, you don’t need a license. 

TIP: some times, non-dealer professionals may also obtain motor vehicle dealer license in order to access dealer only auctions. You can reference this article for details

Popular Types of California Motor Dealer License

In California, there are mainly three types of auto dealer licenses and an add-on in the state of California

  • New Dealer License: allows to sell new vehicles to the public and other licensed dealers
  • Used Dealer License: allows to sell only used vehicles to the public and other licensed dealers
  • Wholesale-Only Dealer License: allows to sell only to licensed dealers. Dealers with this license type can’t sell to the public
  • Autobroker’s Endorsement: this is an add-on to a license. It allows the dealer to broker a transaction between a buyer and another dealer in exchange for a fee. As a wholesale dealer, having an auto broker endorsement is essential to sell to the public

Step 1: Determine the Type of Motor Vehicle Dealer License You Need 

As listed above, there are three different types of dealer license and an add-on in California. You need to decide what license you are applying for based on the type of dealer operations you hope to run. 

Step 2: Complete a 6 Hour Pre-Licensing Training Course

A 6 Hour Pre-Licensing Training Course is required of California Dealers before they can obtain a dealer license. The course has to be approved by the California Department of Motor Vehicles. The licensing course covers topics such as the following:

  • Laws and Regulations of the CA Auto industry 
  • Steps to take in order to become a licensed CA Auto Dealer

This course is entirely online through learning management systems, and completed, you will be awarded a Certificate of Completion. 

There are many schools where you can take the course, including: Dealer 101, Dealer Training, Redline Dealer Education, all approved by the California DMV. This is a list of all approved dealer education providers.

Once you complete the course, you will receive a certificate of completion. Then, you will need to schedule and pass the dealer license Test. 

Step 3: Pass the Dealer License Test at your Nearest DMV Licensing Office 

The test has 40 multiple-choice questions. Applicants need to score at least 70% (28/40) to pass. If you don’t pass the test on your first try, you can retake it as many times as you wish. However, if the applicant fails to pass the test for the third time, they would need to retake the dealer education program again and then the testing process starts from zero with another 3 attempts.  

An example question on the test is:

Pick One Option: 

The “Car Buyer Bill of Rights” limits a Dealer’s compensation from an institution financing the purchase of a vehicle to:

  • 1.0% for terms of 60 months or longer -or- 5% for terms up to 60 months
  • 2.5% for terms up to 60 months -or- 2.0% for terms of 60 months or longer
  • 10% for loans over $10,000

You can check out a practice test here.

You can schedule your test through your DMV account. You will then take the test at your local DMV Occupational Licensing Office.

Step 4: Determine Your Business Corporate Structure 

There are many options for your business: Limited Liability Company (LLC), S Corporations, and Sole Proprietorships. We list the pros and cons of each below: 

Limited Liability Corp (LLC)

  • Pros: Maximum amount of flexibility in business operations
  • Cons: A lot of filings and fees to stay compliance and cost of insurance tends to be higher

S Corporation

  • Pros: Better for smaller corporations with a max of 100 shareholders
  • Cons: More admin and rules than LLC

Sole Proprietorship

  • Pros: Easiest to get started, meant for solo business owners
  • Cons: Lack of legal distinction between the individual and the business. The owner is the business. Also may need to register a fictitious name if the business is not operating under the actual name of the owner

Here is a link with more information on each business type.

Step 5: Set Up Your Business Corporate Structure and Complete the Required Documents  

There are various documents that you will need to complete based on the type of business you decide to register. 

Limited Liability Corp (LLC)

  • Articles of Organization
  • Operating Agreement

S Corporation

  • Articles of Incorporation
  • Corporate Charter and bylaws
  • Corporate meeting minutes showing the election of corporate directors 

Sole Proprietorship

  • DBA filing with the Secretary of State if using names other than the owner name

Step 6: Obtain Federal Employer Identification number (EIN)

If your business is anything other than sole proprietorship or partnership, you would need to apply for a Federal Employer Identification Number. A federal EIN is an unique nine-digit tax identification number assigned by the Internal Revenue Service (IRS) to identify businesses operating in the United States. It is used for a variety of purposes, including filing federal tax returns, opening business bank accounts, paying payroll taxes, applying for business licenses, etc. 

You can apply for a federal employer identification number on the official IRS website. The application can be completed within one session and a Federal EIN number will be provided to the applicant upon completion. 

If your business is a sole proprietorship or partnership, you can submit the following identification in place of a federal EIN: A state driver’s license/person ID or a valid US passport.

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Step 7: Apply for a Business Bank Account

California's DMV mandates that car dealers must establish a new bank account using the dealership's specific name. Below are some well-known banks that offer services to car dealerships in California.

Step 8: Obtain Seller’s Permit from the California Department of Tax & Fee Administration

A seller permit from the California Department of Tax & Fee Administration is required if (1). You operate a business in California (2). Intend to sell or lease tangible personal property that would be subject to sales tax if sold at retail. 

Essentially, the permit allows the dealers to purchase cars they intend to sell tax-free. The dealers will collect taxes from customers when they sell. 

For details, you can visit here.

Step 9: Register with the California Secretary of State or County

The California Secretary of State website is primarily responsible for administering state elections and recording all business entities operating in the state. On the Biz File Online website, you can file business formation documents, receive filing evidence, search for business entities, and obtain entity status. 

  • To register your business name the California Secretary of State, you can simply create a login on the login page and then follow the instructions on the website to create an account register your business
  • The type of documents and payments needed varies depending on the business structure, i.e., corporation vs LLC
  • After you have successfully registered your business with California Secretary of State, you should receive a California Certificate of Good Standing, certifying your business exists in the SOS’ database

You will also need to file a Statement of Information (SI 550) or Statement of Information LLC (LLC 12) with the Secretary of State.

Step 10: Find a Dealership Location and Display Lot

The dealership location is where all primary dealer business is performed. Here are some notes about its requirements:

Retail Dealer


  • Need a physical location for your dealership
  • The office needs to be on the ground floor and has an direct entry from the outside
  • The office needs to be furnished with a desk, cabinet, and telephone
  • This location needs to meet all local zoning requirements 
  • The location must not be a residence
  • Need working landlines 

The display lot is a location to showcase the vehicles you are selling. It should meet the following requirements: 

  • The display lot needs to be large enough for one vehicle 

Wholesale Dealer 

  • Need a physical location for your dealership but can be located in a residence 
  • The primary office must be situated on the ground level and have direct external access. Walking through the hall to reach the primary office would not be acceptable
  • Need working landlines 
  • No display lot required

Step 11: Install a sign

One other requirement is that the office needs to have a permanent sign of 2x2 feet with business name, address, and hours of operations posted outside of your office. 

Step 12: City Business License

Some cities and towns may require you to obtain a Business License. This license may be called a Business License, Certificate of Occupancy or Tax Certificate. 

You can use the following link to find a location to apply for a Business License in your local jurisdiction.

Step 13: Obtain a Dealer Surety Bond

A surety bond is a financial guarantee made by the surety (insurance company) toward the obligee (California Department of Motor Vehicles) that the principal (auto dealer) won’t violate  the provisions of the California Vehicle Code. For example, if the dealers fail to pay their fees or remit sales tax they collect from vehicle sales, a claim can be filed toward the bond.

In terms of bond amounts, California retail dealers need one-year term $50,000 dealer surety bonds, which cost around $500 per year if you have a good credit. On the other hand, California Wholesale dealers need a one-year term $10,000 bond, which costs around $150 per year if you have a good credit. 

To get a dealer bond, generally you need to provide basic information such as business name, owner name, address as well as social security number for a soft credit check.

If you don’t want to get a surety bond, you can also apply for an irrevocable letter of credit prescribed by Section 320.27(10), F.S., in the amount of $50,000 for retail dealers and $10,000 for wholesale dealers. This letter of credit must be from a bank authorized to do business in California. An irrevocable letter of credit is essentially a promise by the bank of the applicant to pay California Department of Motor Vehicles under certain conditions (i.e. if the dealer applicant broke the law). 

Step 14: Submit Application Through the Online Form 

You need to complete the correct auto dealer application from the California DMV website. You will need to start by creating a MyDMV account and then use the account to apply for your license online.

If you have questions, you may call California DMV at 1-800-777-0133.

In the online application, you may need to submit many of the following documents.

  • $175 Non-Refundable Application Fee
  • Application for Original Occupational License, Part C (OL 12)
  • Original Application for Occupational License (OL 21A)
  • Surety Bond of $50,000 for retail dealers or $10,000 for wholesale dealers
  • Authorization to Release Financial Information
  • Application for Occupational License Personal History Questionnaire 
  • Request for Live Scan Service
  • Business legal document, such as Article of Incorporation, where applicable
  • Photography of the business office, business sign and the display lot. See photo requirement 
  • Property use & zoning verification form
  • Fictitious name certificate if using a DBA
  • Certificate of Completion for the 6 Hour Licensing Course
  • Federal Employer Identification Number (Federal EIN)
  • Government photo IDs of all individuals listed on the license
  • You will also need a copy of your lease or proof of property ownership

Step 15: Complete Live Scan Fingerprinting 

Each individual on the license needs to attend the fingerprinting appointment to check for any criminal record for the past 10 years. You can bring the Request for Live Scan Clearance (receipt) (DMV 8016) to your Live Scan appointment. 

More details can be found on the official California DMV fingerprinting requirement page. Here is a list of Live Scan locations.

After the appointment, the applicant should submit the Request for Live Scan Clearance (receipt) (DMV 8016) as a part of the application. The purpose of the fingerprinting is to determine if you have been found guilty of a felony. If you have been found guilty, then the California DMV will require an explanation. In such circumstances, we highly recommend you consult a professional attorney to maximize your chances of approval.

You can check your Live Scan status here.

Step 16: Schedule and Accommodate a Site Visit by DMV Inspector

After you submit your application, you can then schedule your inspection of your dealership location. The inspector wants will inspect your dealership to evaluate the following: 

  • The existence of a permanent main office
  • Display area exclusively used for displaying inventory cars and is of proper size
  • Sturdy permanent signs indicating names of the dealership + hours of operations 
  • Business permits and records prominently displayed

After the inspector approved your dealership, you will receive a temporary dealer license.

Step 17: Receive Your Approved Application 

Once the California DMV approves your application, the DMV will mail your license at the address you provided in your application. Now, you are a licensed motor vehicle dealer and go open a bottle of champagne to celebrate! 


How much time does it take to get a dealer license? 

It could take 8-9 weeks for you to obtain your California dealer license after the California DMV received your application. In the case your application is incomplete, the state will send you a letter requesting the missing information. This process will delay the approval time. Therefore, you want to make sure that your application is complete before initial submission to prevent unnecessary delay.

How to find a location for a dealership? 

It is easier to get a DMV approved location. If you can’t find it, you will need to search through craigslist and find a location zoned for a used car dealership. You can get a warehouse location with a small office setup. A real estate agent can also help you with your search.

Do I need to renew my license every year?

Yes, the California Auto Dealer License expires at the end of every year. Applicants should submit a renewal application after receiving a 90-day notice of expiration from the DMV. 

Every two years, the DMV requires you to take continuing education classes to renew the dealer license. 

How much does it cost to get a license? 

Retail Dealer License Cost: 

  • California Pre-Licensing Training: $125
  • Licensing Test at the Occupational DMV: $16
  • Auto Dealer Bond: ~$500
  • DMV Application Fee: $175
  • Live Scan Fingerprinting: $32
  • Total: $848

Wholesale-Only License Cost: 

  • California Pre-Licensing Training: $125
  • Licensing Test at the Occupational DMV: $16
  • Auto Dealer Bond: ~$150
  • DMV Application Fee: $175
  • Total: $466

Where can I buy a California Motor Vehicle Surety Bond? 

You can buy it from SuretyNow. We are a licensed surety agency nationwide and can find you the most affordable quote from over 10+ insurance partners that we closely work with.