How to Get an Auto Dealer License in California in 7 Easy Steps

Obtaining a California auto dealer license is an essential step for individuals or businesses aiming to sell vehicles within the state. The California Department of Motor Vehicles (DMV) oversees the licensing process, ensuring that all dealers adhere to state laws and regulations.

This guide provides a comprehensive overview of the requirements and steps necessary to secure a California auto dealer license, aligning with the official guidelines provided by the DMV.​

Step 1: Determine the Type of Dealer License You Need

California offers several types of dealer licenses, each tailored to specific business activities:​

• New Vehicle Dealer License: Permits the sale of new vehicles to the public.
• Used Vehicle Dealer License: Allows the sale of used vehicles to consumers and other dealers.​
• Wholesale Dealer License: Authorizes sales exclusively to other licensed dealers.
• Auto Broker License: Enables facilitation of vehicle sales but without owning the vehicles (note that this is the difference between this type of license and the wholesale dealer license).

Identifying the appropriate license type is crucial, as each has distinct requirements and application processes.​

Step 2: Complete the Required Pre-Licensing Education and Examination

For used vehicles and wholesale-only dealers, California mandates the completion of a DMV-approved pre-licensing education program. This program equips applicants with essential knowledge about state laws, ethical sales practices, and business operations.

Upon completing the course, applicants must pass a written examination administered by the DMV. A Certificate of Completion from the education program and proof of passing the exam are required components of the license application.

Step 3: Secure a Business Location

Your dealership must meet local zoning laws and DMV requirements before approval. Key factors include:

• Zoning Approval: Obtain written confirmation that your location is zoned for vehicle sales (home-based retail dealerships are not allowed).
• Office Setup: Maintain a dedicated office with a desk, chair, filing cabinet, and landline phone for records and operations.
• Display Area: Provide space to showcase vehicles, visible from a public road (required for retail dealers).
• Signage: Install a permanent, DMV-compliant sign that clearly identifies your business.
• Proof of Location: Submit a lease agreement or proof of ownership with your application.
• Photo & Diagram: Include clear photos of your office, signage, and lot layout.

Non-compliance may delay approval or require reinspection.

Step 4: Obtain a California Auto Dealer Bond

A surety bond is required to protect consumers and ensure compliance with state laws. The bond amount varies based on your license type:

• $50,000 bond – Required for retail dealers.
• $10,000 bond – Required for wholesale-only dealers.

Why Do You Need a Bond?

• It guarantees that your dealership operates ethically and follows state regulations.
• It provides financial protection to customers in case of fraud or contract violations.

How Much Does a Bond Cost?

The actual surety bond cost depends on your credit score and financial history – dealers with strong credit may pay as little as 1% of the bond amount per year.

Want to get a free quote on your bond? Simply complete the bond form below!

Step 5: Submit the Dealer License Application

Prepare and submit the following documents to the DMV Occupational Licensing Inspector Office:​

• Application Forms: Complete the Application for Original Occupational License (Form OL 12) and other relevant forms.​
• Personal History Questionnaire: Provide detailed personal and business background information.​
• Live Scan Fingerprints: Undergo a background check by submitting fingerprints via Live Scan.​
• Financial Documentation: Authorize the release of financial information to assess financial stability.​
• Proof of Business Location: Submit lease or ownership documents, zoning approval, and required photos.
• Fees: Pay applicable non-refundable fees, including the application fee, fingerprinting fee, and dealer plate fees (additional plates require extra fees).

Ensure all forms are accurately completed and all required documents are included to avoid delays in processing.​

Step 6: Pass the Business Location Inspection

After you submit your application, a DMV representative will inspect your business location to verify compliance with all requirements. This inspection includes assessing office facilities, signage, display areas, and record-keeping systems. Successful completion of this inspection is necessary before a license is issued.​

Step 7: Receive Your Dealer License and Maintain Compliance

Upon approval, the DMV will issue your dealer license, allowing you to commence vehicle sales. To maintain your license:​

• Renew Annually: Dealer licenses must be renewed each year. The DMV will notify you at least 90 days before expiration.
• Continuous Bond Coverage: Ensure your surety bond remains active and is renewed alongside your license.​
• Ongoing Compliance: Adhere to all state laws and regulations governing vehicle sales, including the timely submission of required documents and fees.​

Important Updates and Considerations

Occupational Licensing Online Service

In 2022, the California Department of Motor Vehicles (DMV) introduced a new online service for Occupational Licensing (OL) customers. This platform allows dealers to apply for, renew, and manage their occupational licenses online, streamlining the licensing process. Electronic notifications will update customers on the status of their applications and prompt them when additional steps are required. Dealers are encouraged to utilize this system to ensure efficient handling of licensing matters. ​

Renewal Application Fees

The current fee structure for dealer license renewals includes:​

• Renewal Application Fee: $125​
• Family Support Program Fee: $1​
• Dealer Plate Fee: $92 for each dealer plate (plus applicable county fees)​.
• Motorcycle Plate Fee: $94 for each motorcycle plate (plus applicable county fees)​
• New Motor Vehicle Board Fee: $300 per location (for new automobile, commercial, motorcycle, ATV, motorhome, and recreational trailer dealers)​
• Autobroker Endorsement Fee: $75​

Dealers should ensure they are aware of these fees and submit renewal applications promptly to avoid any disruptions in their licensing status. ​

Seller’s Permit from the California Department of Tax and Fee Administration (CDTFA)

Before selling vehicles, dealers must obtain a Seller’s Permit from the CDTFA to collect and remit sales tax. This is a state requirement in addition to the DMV licensing process.

Business Entity Registration (If Applicable)

If operating as an LLC, Corporation, or Partnership, dealers must register their business with the California Secretary of State before applying for a DMV license.

Frequently Asked Questions

How long does the licensing process take?

The DMV may take up to 120 days to review and process your application. Delays can occur if the application is incomplete, if additional documents are requested, or if the business location does not pass inspection.

Can I operate my dealership from my home?

No, California does not permit home-based retail dealerships. Your dealership must operate from a commercial location that complies with local zoning laws and DMV specifications. However, wholesale-only dealers may operate from an office location without a display lot.

How do I modify my dealer license?

To modify your California dealer license, submit the appropriate form and pay the required $70 fee for changes such as name, address, branch additions, or officer updates. Forms for ownership changes and all other modifications can be completed online. Visit the California DMV Dealer Licensing Page for details and submission.

What happens if my auto dealer bond expires?

Your dealer license may be suspended or revoked if your surety bond expires and is not renewed. To avoid penalties, always renew your bond before the expiration date and submit proof of renewal to the DMV.

Do I need insurance to get a dealer license?

Yes, you need liability insurance to cover your dealership’s operations. If you plan to issue dealer plates, California law requires you to carry dealer inventory insurance as well.