Get Your Alabama Dealer License: The Complete Guide

The Alabama Motor Vehicle Dealer License, also known as an Alabama dealer license, is a permit granted by the Alabama Department of Revenue’s Motor Vehicle Division to individuals or businesses in Alabama who engage in buying or selling over five vehicles in a single year. This license covers new and used cars, motorcycles, recreational vehicles (RVs), trailers, and other motor vehicles sold for profit. In this guide, we will cover the entire process of obtaining an Alabama motor vehicle dealer license.

1. Determine Your Alabama Dealer License Type

Alabama offers a single Master Dealer License that covers all dealer activities, including selling new and used vehicles, wholesaling, rebuilding, and reconditioning. This simplifies the process of getting your car dealer license in Alabama by eliminating the need for multiple licenses.

Whether you plan to sell used cars, new cars, motorcycles, or operate as a wholesaler or rebuilder, the Master Dealer License covers all these activities. 

This consolidation means you only need to apply once and pay one licensing fee to conduct all dealer business legally in Alabama.

This is especially beneficial for dealers looking to expand their services without additional licensing hurdles.

2. Establish a Permanent Business Location

Alabama law requires all dealers to have a permanent, physical business location before applying for a license.

Your business location is a key factor in your license approval. It must be a dedicated space with an office, permanent signage, and a display area or lot for vehicles. 

Temporary, shared, or virtual offices are not acceptable. This ensures your dealership is a legitimate, accessible business. 

The location must comply with all local zoning ordinances, which can vary significantly between counties and cities. Location requirements for the Alabama dealer license are:

• Permanent sign affixed to the building or freestanding; must be legible from the street or 50 yards away  
• Display lot or parking area for vehicles (Some dealers without a traditional lot may qualify under specific conditions. See ALDOR for details)    
• Temporary rentals, including hourly or daily shared office spaces, are prohibited  
• No more than one licensed dealer may operate under the same roof 
• Photos are required of the building, sign, lot, and office for the application

3. Register Your Business & Obtain Tax IDs

Before applying, register your business entity with the Alabama Secretary of State and obtain necessary tax identification numbers. 

You must legally establish your business structure (LLC, corporation, sole proprietorship, etc.) and register for an Alabama sales tax number through the Department of Revenue. This step ensures you can legally collect and remit sales tax on vehicle sales, a critical compliance aspect. 

Additionally, obtaining a Federal Employer Identification Number (FEIN) from the IRS is required for your Alabama dealer license if you plan to hire employees or operate as a corporation or partnership.

4. Obtain Your Alabama Auto Dealer Bond

A $50,000 surety bond is a requirement for motor vehicle dealers in Alabama. This bond protects consumers and the state from dealer misconduct.

The bond acts as a financial guarantee that you will comply with Alabama laws and regulations. If you violate dealer laws, consumers or the state can file claims against your bond to recover losses. 

Your credit score and financial background largely determine the percentage-based premium for the $50,000 bond.

Bond premiums typically range from $500 to $5,000, depending on several factors, among which is your credit score. 

• • Higher credit scores usually mean lower premiums
  • Poor credit may require a higher premium or additional collateral

5. Purchase Liability Insurance

Alabama requires dealers to carry blanket liability insurance covering all vehicles owned or operated by the dealership.

Your dealership operations are covered by this insurance, which protects against bodily injury and property damage claims affecting both your business and customers. 

You must maintain minimum coverage limits throughout your licensing period if you want your car dealer license in Alabama to remain valid.

Insurance companies familiar with dealer policies can help tailor coverage to your needs, including garage liability and dealer’s physical damage coverage. Minimum coverage requirements:

• $25,000 bodily injury per person per accident  
• $50,000 combined bodily injury per accident  
• $25,000 property damage per accident  
• Or a combined single limit of $75,000 per accident

6. Complete the Online Dealer License Application

All applications must be submitted electronically via the Alabama Department of Revenue’s Motor Vehicle Division portal. 

The online application process requires you to fill out detailed business and personal information, upload required documents, and pay the $125 Master Dealer License fee. 

After submission, you’ll receive a transmittal sheet listing additional documents you must mail or upload. The online system also allows you to track your application status, making the process more transparent. 

Application fees for the Alabama dealer license:

7. Submit Supporting Documents

You must provide documentation to verify your business location, bond, insurance, and background checks. 

Supporting documents include photos of your business location and signage, proof of Alabama auto dealer bond and insurance, business registration documents, and criminal background check consents for all owners and partners. 

Ensuring these documents are complete and accurate will speed up your application approval for the car dealer license in Alabama.

• Photos of the building, sign, office, and vehicle lot 
• Copy of $50,000 surety bond  
• Proof of liability insurance  
• Business entity registration  
• Criminal background check authorization forms

8. Obtain Your County Privilege License

In Alabama, a “privilege license” (business license) from your county probate office is required to operate legally. 

This license is separate from your state dealer license and must be obtained in the county where your dealership is located. 

Fees and application requirements vary by county. 

The privilege license confirms your compliance with local business regulations and is essential for tax and legal purposes.

• Contact your local county probate office for application details and fees  
• Include your state dealer license number with your application  
• Keep your privilege license current to avoid penalties

9. Apply for Dealer Tags and Plates

Once licensed, you may apply for dealer tags at your county courthouse.

Dealer tags allow you to legally operate vehicles for sale or demonstration. Tag fees vary by county and vehicle type. 

Alabama limits the number of dealer tags issued based on your license and business size, so plan accordingly.

• Dealer tag fee: $25 (motorcycles $17)  
• Manufacturer tag fee: $25 (motorcycles $17)  
• Restrictions apply to the number of tags per dealer

10. Renew Your Dealer License Annually

Alabama dealer licenses must be renewed every year by September 30th. Timely renewal is critical to avoid penalties or suspension of your Alabama dealer license.

Renewals are submitted online through the ALDOR portal and require updated fees and documentation. Keep your business information current to ensure smooth renewals.

• Renewal fee: $125  
• 30-day grace period after September 30th 
• Late renewals may require reapplication

City & Regional Requirements in Alabama

In addition to state licensing, Alabama dealers must comply with local city and county regulations that can affect the Alabama dealer license approval and operation. Most Alabama counties require a privilege license obtained from the probate office. 

Local zoning laws may restrict where dealerships can operate, including signage and lot requirements. 

Some cities may have additional inspections or permits. For example, Birmingham requires zoning approval and a business license, while Mobile enforces strict signage ordinances.

• Verify zoning compliance with your city or county planning office before signing a lease or purchasing property.  
• Obtain a permanent business sign meeting local size and visibility rules. 
• Contact your county probate office early to apply for your privilege license and understand local fees.  

Local requirements vary. Birmingham, Mobile, Huntsville, and Montgomery have distinct rules.

Important 2025 Updates for Alabama Dealers

Unified Master Dealer License

Since 2020, Alabama has consolidated its dealer license types (new, used, wholesaler, rebuilder) into a single Master Dealer License. This allows licensed dealers to operate in all categories without separate Alabama dealer licenses, simplifying compliance and reducing administrative costs.

Online Application Submission 

All Alabama dealer license applications must be submitted electronically through the Alabama Department of Revenue’s Motor Vehicle Division (ALDOR) portal. Paper applications are no longer accepted, which speeds up processing times and allows for easier tracking.

Local Business (Privilege) License Required

In addition to the state dealer license, you must obtain a privilege license from your county probate office to legally operate. This local license confirms your compliance with county business regulations.

Dealer Tags & Plates  

Licensed dealers can apply for dealer tags at their county courthouse. Fees and restrictions vary by county, so it’s important to check local rules early.

Frequently Asked Questions

What is the difference between the Alabama Master Dealer License and the privilege license?

The Master Dealer License is issued by the state and allows you to sell or wholesale vehicles across Alabama. The privilege license is a local business license from your county probate office, required to legally operate your dealership within that county. You need both to run your dealership legally.

Can I apply for an Alabama dealer license without owning or leasing a physical lot?

No. Alabama requires all dealers to have a permanent physical location with a display lot, office, and permanent signage. Virtual or temporary offices aren’t allowed. Wholesalers who don’t sell to the public may have exceptions, but retail dealers must have a lot.

How do I obtain and submit the required criminal background checks for my Alabama dealer license?

Owners and partners must get criminal background checks through the Alabama Law Enforcement Agency (ALEA) or an approved provider. The results must be submitted to the Alabama Department of Revenue with your application, either electronically or by mail.

What insurance coverage is required for Alabama auto dealers, and can I use a personal policy?

Dealers must have commercial blanket liability insurance with minimum coverage of $25,000 bodily injury per person, $50,000 per accident, and $25,000 property damage. Personal auto insurance policies are not accepted; a commercial policy tailored for dealers is required.

How long does the Alabama dealer license approval process usually take, and what causes delays?

If your application is complete, approval typically occurs within 7 to 14 business days. Delays happen when documents like photos, bonds, insurance, or background checks are missing or incomplete. Submitting everything accurately speeds up the process.