Have you been dreaming of opening your own used car dealership in Alabama? Or are you perhaps already selling new cars and just want to add used vehicles to your lot?
In this case, you will need to go through the dealer licensing process at the Alabama Department of Revenue (ADOR). The process involves getting registered with several state authorities, obtaining a suitable dealership location, getting insurance and an auto dealer surety bond, and more.
See a full breakdown of the licensing process for Alabama used car dealers in the sections below!
How to Get Your Alabama Used Car Dealer License
To become eligible to apply for a used dealer license, you will first need to register your business with the Secretary of State and get a tax registration from the Department of Revenue. Once you fulfill these initial requirements, you can proceed with your license application which goes through several stages.
Used Dealer License Application
The state of Alabama recognizes any enterprise that sells five or more vehicles in any one year period as a car dealer. Retailers sell only to the public and must collect sales tax. Alabama issues separate car dealer licenses in four categories: new or used car dealer, wholesaler, rebuilder, and reconditioner.
Each license application consists of three distinct steps:
1. Dealer Regulatory License
No matter which category of dealer you fall under, you’re required to get this license, which is issued by the ADOR. In order to apply, you first fill out an online application where you provide all the basic information about your business: tax number, surety bond details, insurance, and so on. See the next section for a list of all the documents and items you will need to attach to your application.
2. Business or Privilege License
In order to apply for this license, you first have to obtain the regulatory one. The purpose of this license is to receive permission to operate in the county in which you are located. The application must be filed at your local county probate office. The fee for this license is calculated based on your city’s population. See the ADOR’s page on Business Privilege License for a full breakdown of the application requirements.
3. Designated Agent Registration
Unlike the other dealer license types, used and new car dealers must also apply to become designated agents in Alabama. This step can also be completed only after you have obtained your dealer license from the ADOR.
Necessary Paperwork for Your Dealer Regulatory License
Before you are granted an Alabama used car dealer license from the ADOR (step 1, above), you’ll have to gather and submit the following:
- A correctly filled out online application form
- Proof of compliance with zoning requirements
- A surety bond in the amount of $25,000
- Proof of blanket liability insurance
- Proof of workers compensation insurance (if applicable)
- Sales tax number issued in the same name as your business
- Proof of a permanent business location with a land-line phone number
- Photographs of your business sign and location
- Coverage of all the required fees
The application fee per license type is $25. Once you have completed your application, you will be provided with further details about the submission of supporting documents, the required amounts of insurance coverage and details about your location.
Learn more about how to get licensed and start your auto dealership in Alabama by downloading our FREE ebook guide!
Your Alabama Auto Dealer Surety Bond
The auto dealer bond is a standard requirement for all car dealers. For used vehicle dealers, the standard amount is $25,000. Its purpose is to provide protection to consumers from malpractice on the dealership’s part, should it occur.
The amount for this surety bond is rather small, so your premium will not be high, either, as long as you have a good credit standing. Usually, the premium will be calculated to be between 1%-5% of the total bond amount. In case your credit score is below 650, you may be asked to pay between 5% and 15%.
To find out how much your bond will cost complete our bond application form, and we will provide you with a free quote! For any further questions about the bonding process, the purpose of this bond, or if you require assistance with the application, call us at 866.450.3412!