How to Get a Auto Dealer License Without a Lot

TLDR: You can get a wholesale dealer license without a lot, but you won’t be able to sell cars to the general public. You will need a display lot to get a non-wholesale dealers license, but the definition of what is a valid “lot” leaves room for interpretation. In most cases, a plot of land that can park 5-10 vehicles is sufficient for most municipality requirements.

Assumption: you’re familiar with the general steps of getting a dealer license. If you’re not, checkout our general guide here. 

What is an Auto Dealer License? 

To professionally buy, sell, or exchange new or used vehicles and register a dealership, obtaining a dealer license is mandatory in many states. The requirements for obtaining a dealer license differ from state to state. For example, in California, even those who plan to sell a single car for profit (or "flip" it) must acquire a dealer license. However, some states, such as Texas and Washington, allow individuals to sell up to four vehicles per year without a dealer license, provided that they have titled all the vehicles in the name of the sellers prior to the sale

Types of Dealer License

Car dealerships come in various types, some of which require a license while others do not. The necessity of obtaining a license depends on several factors, such as the type of vehicles being sold (new, used, salvage, etc.), the nature of the dealership (wholesale, independent, etc.), and the specific regulations of the state where the dealership operates. 

• Retail Dealer: franchised vehicle dealers typically don’t need a license but non-franchised independent dealers typically need a used dealer license 
• Wholesale Dealer: specializes in selling used cars to other dealers and not directly to retail car buyers. In most states, wholesalers can obtain a "used car dealership bond" similar to that required by independent used vehicle dealers. However, some states, such as California, mandate that wholesalers obtain a specific "wholesale dealer license."
• Salvage Dealer: engaged in the business of purchasing, selling, repairing, or reconstructing salvage motor vehicles and non-repairable motor vehicles. Some states, such as Georgia, require a specific license for salvage dealers/inspectors.
• Recreational Vehicle Dealer (RV/Trailer/Motorsports): specializing in recreational vehicles such as trailers, motorcycles, RVs, and all-terrain vehicles. A few states require a separate license, such as Florida and New Mexico

Why Do I Need a Dealer License?

A dealer license enables you to do two things: 

1. Participate in closed auctions only available to dealers, which historically have been on average 20% cheaper than that of regular retail
2. Sell cars to others. Note here that a general dealer will be able to sell to both the public and other dealers, while a wholesale dealer can only sell to other dealers. 

In some states, there exists subcategories of licenses, such as motorcycle dealer license or franchise dealer license. The license categories may vary by vehicle type and type of dealership, but the general idea is still applicable: a dealer license allows you to buy and sell cars/vehicles and they exist as either retail or wholesale. 

What About the Lot Requirement? 

To get a dealer’s license without a lot, you can apply for a wholesale license. Obtaining a wholesale license does not require a lot. However, a wholesale license only allows you to sell, buy and trade cars among wholesale dealers and you can’t sell cars to car end users.

On the other hand, getting a retail dealer license in most states will require proof of ownership of a display lot. The size requirements of the lot varies from state to state, and is measured by the number of cars that can be parked in that lot. 

A lot of folks think that to start a dealership, you need a large parking lot with a giant squiggly man inflatable balloon (see below). However, that is simply not true. The truth is that a plot of land that can fit 5-10 cars is usually sufficient, and some states don’t even require a display lot at all! 

Here are the lot size requirements for the most populated 30 states (viewable only on desktop or tablet):

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The requirements vary state by state, but as you can see, lots are not required in 3/30 states (Georgia, North Carolina and Washington). 

Unfortunately, some states have harder requirements to meet (Michigan & Indiana), but for most of the other states that require lots that fit 5 or less cars, we’ve seen clients secure retail lots that fit their DMV requirements costing from $800/month to $2000/month, depending on the state and location. I even know of someone in Texas that converted one half of their two acre personal property into a commercial zone and used that to get their license approved

Can I Get by Without a Dealer License? 

Seems like a lot of work to get a dealer license, having to deal with lots and all, can’t I just sell cars on Facebook marketplace? Well, the answer depends on how many cars you want to sell! In most states you’re allowed a personal limit in terms of the number of cars you can sell before you need a license. For example, in the state of Washington you can sell up to 4 cars in a year before requiring a license. 

If you’re selling more than the personal limit a year, we highly recommend that you get a dealers license, as the fines are hefty and you may possibly face jail time. For example, in Arizona, selling more than 4 cars in a year without a license is considered a class 1 misdemeanor, which carries a maximum possible sentence of 6 months in jail and up to a $2,500 fine. 

Conclusion

There’s lots to learn when it comes to being a successful auto dealer. I hope this was helpful in demystifying one of the more common questions we’ve heard when it comes to dealer licensing. 

We’ve helped many new auto dealers through the licensing process, taking care of everything from general licensing questions to their bonding needs. Give us a call if you have any questions and check out our general dealer licensing guide if you are serious about becoming an auto dealer.