What is an auto dealer license in Colorado?
Popular types of auto dealers in Colorado
Step 1: Meet the minimum networth requirements
Step 2: Meet the minimum credit score requirements
Step 3: Complete a pre-licensing training course
Step 4: Take an auto industry mastery exam
Step 5: Get a certificate of good standing
Step 6: Get a sales tax license
Step 7: Get verification of fingerprints
Step 8: Make a business plan
Step 9: Take pictures of your business
Step 10: Complete the secure verifiable identification form
Step 11: Obtain an auto dealer surety bond
Step 12: Provide a statement of financial condition
Step 13: Compile all supporting documents
Step 14: Complete the dealer application
Step 15: Receive your license!
TLDR: If you're looking to sell or lease three or more vehicles within a single calendar year at the same location in Colorado, you'll need to apply for a dealer/wholesaler license through the Auto Industry Division (AID) of the Colorado Department of Revenue (DOR). This license is essential to conduct your business legally and ensures compliance with the state's regulations. So, if you plan on engaging in vehicle sales or leasing activities, make sure to follow the steps we will take you through for you to obtain an auto dealer license from the AID.
An auto dealer license in Colorado is a legal authorization granted by the Auto Industry Division (AID) of the Colorado Department of Revenue (DOR) to individuals or businesses that intend to sell or lease vehicles in the state. This license is mandatory for anyone planning to engage in the sale or lease of at least three vehicles within a single calendar year at the same address. Obtaining this license is crucial as it ensures that the dealer operates within the confines of state regulations, consumer protection laws, and business standards. By holding an auto dealer license, individuals or businesses demonstrate their credibility and commitment to conducting automotive sales in a lawful and responsible manner, safeguarding both the interests of consumers and the integrity of the auto industry in Colorado.
The types of dealer licenses issued in Colorado depend on the dealers' business. Here are the different types of auto dealer licenses you can get:
A used motor vehicle dealer is a dealer authorized to sell pre-owned vehicles. They acquire used cars through various means, such as trade-ins, auctions, or purchases from private individuals, and then sell them to customers.
A new motor vehicle dealer is a business or individual authorized to sell brand new vehicles from specific manufacturers. These dealerships are typically associated with particular brands and have agreements with manufacturers to sell their latest models directly to consumers.
A wholesale dealer is a dealer who buys and sells vehicles primarily to and from other dealers, rather than selling directly to the general public. Wholesale dealers often participate in the automotive industry's wholesale market, supplying vehicles to retail dealerships or other wholesale dealers.
A buyer agent, also known as a vehicle broker, is a person or business that acts on behalf of a buyer to find and purchase a vehicle. They assist buyers in locating specific vehicles that meet their requirements and negotiate the purchase terms with the seller.
A salesperson is an individual employed by a dealership to interact with customers, showcase vehicles, and facilitate sales. They provide information about the vehicles, handle test drives, negotiate prices, and finalize sales agreements.
A wholesale auction dealer is a licensed dealer who participates in wholesale auctions, where vehicles are bought and sold in large quantities. These dealers often acquire vehicles from auctions to stock their inventory for retail sales or to sell to other dealers.
Before applying for a dealer license, you need a have a minimum net worth of $100,000. This requirement is put in place by the licensing authorities to ensure that prospective dealers have sufficient financial stability and resources to operate a dealership effectively and responsibly.
To apply for a dealer license, you will need to have a minimum credit score of 701. The AID takes this requirement seriously and will not approve your application if you do not meet it. The reason behind this credit score prerequisite lies in its reflection of the applicant's financial responsibility and creditworthiness.
Next, you are required to take a training course on being a dealer. The Pre-Licensing Education and Training course aims to equip prospective dealers/wholesalers with essential knowledge and skills related to the automotive industry. By submitting the certificate of completion, you demonstrate your competence and readiness to engage in the business of selling or leasing vehicles in a professional and informed manner. Once you successfully complete the course, you will be issued a certificate of completion. This certificate must be included as part of your dealer/wholesaler application. The Colorado Motor Vehicle Dealer Board has granted approval to the following companies to offer Pre-Licensing Education and Training.
The process of obtaining a dealer/wholesaler license involves taking an online computerized examination, which can be completed through an approved Colorado dealership or an authorized third-party administrator. During the examination, applicants have up to ninety (90) minutes to answer sixty (60) questions, and they are allowed to refer to study materials as it is an open book test. To pass, applicants must achieve a score of at least eighty-five percent (85%). Once the examination is submitted, the computer will instantly grade the results and display the score. If the applicant scores above the passing threshold, they must sign and submit an "Examination Affidavit." Furthermore, the individual responsible for administering the passing-score examination, whether associated with a dealership or an approved third-party administrator, is also required to sign the Examination Affidavit.
Here is the mastery exam guide to help you prepare for the exam.
In your application, you will need to include a certificate of good standing that is issued by the Colorado Secretary of State(SOS). This certificate serves as a confirmation that your business entity is in compliance with the state's regulations and that it is authorized to conduct business within the state. You can obtain this certificate through the SOS business search database. You can also call the SOS Business and Licensing. Here is their contact information: (303) 894-2200
As part of the process to become a dealer in Colorado, you need to obtain a sales tax license. This license allows you to collect and remit sales taxes on taxable goods and services sold within the state. In other regions, it may be known as a reseller's license, vendor's license, or resale certificate. Regardless of the name, it serves the purpose of facilitating the collection and payment of state and state-administered sales and use taxes.
You can get your sales tax license with a Colorado Sales Tax Withholding Account Application.
Obtaining verification of fingerprints is a necessary step when applying for a dealer license in Colorado. This process involves submitting the verification of fingerprints form and a receipt or confirmation from the 3rd party vendor. The purpose of this step is to ensure that applicants have a clean criminal history and are eligible to engage in the automotive business, where they may have access to sensitive information and interact with customers. You can find a list of approved vendors here.
Next, you must make a business plan. Requiring all applicants to submit a comprehensive business plan is essential for several reasons as it provides crucial insights into the viability and sustainability of their proposed auto dealership or wholesale operation. The business plan should include the following:
You should include pictures of the following in your application packet.
In every Auto Industry application and documentation, it is compulsory for licensees to sue their full legal name, precisely matching the information on their Driver License, Identification Card, or proof of lawful presence document. You must also submit a Secure Verifiable Identification form for all owners, partners, members, or officers affiliated with the enterprise. During the application procedure, individuals must provide a photocopy or a scanned version of a valid identification document, like a Colorado Driver License, to validate their identity. This requirement ensures transparency and adherence to regulations within the automotive sector, safeguarding the concerns of both consumers and regulatory bodies.
An auto dealer bond is a financial assurance that auto dealers must acquire to obtain or renew their dealer license. This bond serves as a protective measure for consumers and the government, guarding against dishonest or unethical conduct by auto dealers. It operates as a contract involving three parties: the auto dealer (principal), the government agency requiring the bond (obligee), and a surety bond company (surety) that issues the bond. In the event of illegal actions, regulatory violations, or failure to meet obligations, the bond provides compensation to affected parties, such as customers facing financial losses.
You must acquire a bond worth $50,000 which you will submit with your application. Throughout the application process, the bond agency assesses various aspects of the dealer, including their experience, financial standing, reputation, and credit. This evaluation helps the agency determine a bond quote for the dealer. The bond's premium is determined by the perceived risk associated with the dealer, wherein those with solid credit scores and ample experience are offered lower premiums, usually between 1% to 3% of the required bond amount. As a result, a Colorado dealer may pay as little as $220 to $600 for their bond, and the premium is typically paid upfront to secure the bond.
As part of the application process for a dealer license in the auto industry, financial statements are required for both the applicant and each owner, member, or partner involved. The financial statements must be completed using the specific form.
The last step before completing the application is compiling all the supporting documents we have listed so far that you submit along with your application. Here is a list of the documents you will need.
Once you have gathered all these documents, you can complete your application for a Dealer or Wholesaler License form. Ensure you follow all the instructions and provide the required information to prevent delays in processing your application. Once you're done, submit your application along with the license fee of $623 with all your supporting documents by mail to:
Department of Revenue
Auto Industry Division
1881 Pierce St., #112
Lakewood, CO 80216
Congratulations on completing your application and going through this process. If your application is approved, you will receive your license through the mail and you will be set to start your career as a dealer. All the best!
In the article, we have guided you through the process of obtaining an auto dealer license in Colorado, highlighting its significance for individuals or businesses involved in vehicle sales or leasing. We explored essential steps, such as meeting financial requirements, completing pre-licensing training, and passing the industry mastery exam. We emphasized the importance of obtaining a certificate of good standing, a sales tax license, and going through fingerprint verification. Additionally, we discussed the significance of crafting a comprehensive business plan and securing an auto dealer surety bond. By adhering to state regulations, this process ensures consumer protection and fosters responsible and lawful operations within the automotive industry. So, readers learned how to obtain their auto dealer license in Colorado through the step-by-step process outlined in the article.