What is an Auto Dealer License?
Why Do I need a Dealer License?
What About the Lot Requirement?
Can I Get By Without a Dealer License?
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.
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
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.
A dealer license enables you to do two things:
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.
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):
|Alabama||Lot required, no specification||Alabama Motor Dealer License|
|Arizona||Lot Required, can fit at least 2 vehicles||Arizona State Government website|
|California||Required, but size not specified. Anecdotally, we've had clients that got approved with lots fitting only 1 car||Cal. Code 270.08|
|Colorado||Lot required, with space to display two or more vehicles of your inventory||Colorado Dealer License Requirement|
|Connecticut||Lot required with room for at least 2 vehicles||Connecticut Dealer License Startup Requirements|
|Florida||Required, is sufficient to store and display all vehicles offered for sale. Open to interpretation||Florida Administrative Code 15C-7.003.|
|Georgia||Lot not required, but place of business is required||State of Georgia Rules and Regulation Rule 681-6-.01|
|Illinois||Required, can fit at least 5 vehicles with doors opened||Illinois Dealer Handbook|
|Indiana||Lot required, can fit at least 10 vehicles||Indiana Secretary of State|
|Kentucky||Lot required of at least 2,000 square feet||Kentucky Motor Vehicle Dealer license|
|Louisiana||Lot required, no specification||Louisiana Motor Vehicle License Requirement|
|Maryland||Lot Require, needs to be a paved lot big enough to hold 10 cars plus parking||Maryland Used Car Dealer License Details|
|Michigan||Lot required, land space must be at least 1,300 square feet and can fit 10 vehicles. Requires 650 additional square feet for customer parking||Michigan State Department|
|Minnesota||Lot required, no specification||Minnesota Motor Vehicle Dealer License|
|Missouri||Lot required, no specification||Missouri DMV Website|
|New Jersey||Lot required, can fit a minimum of 2 vehicle||New Jersey Motor Vehicle Commission|
|New York||Required, can fit at least 3 vehicles||New York DMV|
|North Carolina||Lot not required, but a place of business that is more than 96 square feet is required||North Carolina VS-415 Dealer License Requirements|
|Ohio||Required, must be at least 3500 square feet||Ohio Administrative Code Rule 4501:1-3-08|
|Oklahoma||Lot required, no specification||Oklahoma Used Motor Vehicle License|
|Oregon||Lot required with room for at least 1 vehicle||Oregon Department of Transportation|
|Pennsylvania||Required, can fit at least 5 vehicles with doors opened||Pennsylvania Code 19.18|
|South Carolina||Lot required, no specification||SC Dealer License Requirement|
|Tennessee||Lot Required, can fit at least 15 vehicles of your inventory and 3 parking spaces for your customers||TN Motor Vehicle Commission Dealer Requirement|
|Texas||Required, can fit at least 5 vehicle||Texas Administrative Code Rule 215.140|
|Utah||Lot required with room for at least 3 vehicles||Utah Dealer License Requirement|
|Virginia||Lot required, can fit at least 10 vehicles||Virginia Motor Vehicle Dealer Board Manual|
|Washington||Not required, but place of business required||Washington Vehicle Dealer Manual|
|Wisconsin||Lot required, 12x20-foot display area in the indoor area; if cars displayed outdoors, need the size of a standard parking stall,||Wisconsin Retail Dealer License Requirements|
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
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.
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.