If you want to open your own dealership and become a Colorado motor vehicle dealer, you will have to meet multiple licensing requirements as established by the Colorado Department of Motor Vehicles. Read on to learn the steps you will need to complete to get a Colorado dealer license.
Step 1: Ensure You Qualify
This is the first and most important thing to do. To qualify, you must:
- Have a minimum net worth of $100,000 – Calculate this by subtracting your total liabilities from total assets.
- Have a minimum Experian vantage credit score of 701 – If you are unsure of your credit score, you can look it up from the Colorado Department of Revenue at Colorado.gov. Also, if your credit report has derogatory information, ensure you give additional information in the application.
- Pass a criminal background check or give court documents if you have ever been convicted of a misdemeanor or felony – You will be disqualified if charged within the last 10 years for felony convictions relating to property, persons, or fraud, odometer tampering, title forgery, and auto theft.
Step 2: Determine Your License Type
The type of cars you sell will be determined by the motor vehicle dealer license you apply for, and you must ensure you apply for the right one. The different dealer licenses to get in the state of Colorado include:
- Franchised dealer – Sells used or new cars
- Used motor vehicle dealer – Sells only used cars
- Wholesale auction – Sells cars to other dealers at auction
- Wholesale dealer – Sells cars to other dealers
- Wholesale power sport – Deals with used power sport cars
- Franchised power sport – Deals with used or new power sport cars
- Wholesale power sport – Sells power sports cars to other dealers
Step 3: Establish a Location
Colorado motor vehicle dealers must have a permanent business location that meets the following requirements:
- Enclosed with office spaces
- Adequate electrical service
- Standard restrooms
- Display space to hold at least one car
- Storage space for required records and books
- Open display of operation hours, which should be at least four consecutive hours, three days a week between 8 a.m. and 9 p.m.
Step 4: Get Zoning Approval
You must make sure that the business locations comply with all local zoning requirements. You can do this by contacting your local zoning official to get all the necessary information and steps to implement the requirements.
Step 5: Take the Dealer Education Program
If you are applying for the first time, you must pass a pre-licensing exam and obtain a certificate. You must also take and pass the Auto Industry Mastery Examination online and send the examination affidavit along with your application.
Step 6: Get a Motor Vehicle Dealer Bond
Auto dealer bonds protect the public and state government when you get your license. It protects your clients from unethical or dishonest actions during transactions. The Colorado auto dealer bond is usually $50,000, and you must pay a certain premium to get it.
The premium usually depends on the surety bond company you work with. The companies usually consider your credit score as the most crucial factor when determining the cost of your bond. They also look at other financial indicators like financial statements.
Normally, the rate ranges between 1% and 3% if you have a good credit score, meaning that you can pay between $500 and $1,500 for the $50,000 bond. If you also want to act as a salesperson, you should get another $15,000 bond.
Your bond form should have your signature and that of your surety company. The surety company includes:
- Your business’s legal name
- Physical business location
- The date of the dealership bond
- Dealership type
- Public notary signature
Step 7: Finish the Application
Once you do all these things, it’s time to fill in the application and gather all the necessary documents, including:
- Addendum for every person with over 5% ownership in the dealership
- Identification documents like passport or driver’s license for everyone who signed the addendum
- Pre-licensing education certificate
- Mastery education affidavit
- A business plan detailing the business operation hours, financing, inventory acquisition, sales projections, overhead costs, and staffing
- Sales tax license
- Owners’ and applicants’ statements of financial condition
- An affidavit for restriction of public benefits for every owner
- Location photographs
- A copy of the property lease
- Colorado sales tax account number or sales tax license
- Surety bond form
If you are applying as a corporation, an LLC, or a partnership, you also need to include the following documents:
- Trade name
- A copy of the operating agreement, bylaws, or partnership agreement
- Certificate of good standing
- Constituent field documents, like articles of incorporation
- Dealer plate affidavit
- Franchise agreement
Step 8: Pay Fees
When submitting your application, there are associated fees you must pay. For a new application, you must pay $623 for wholesalers and dealers, $231 for salespersons, and $39.50 for fingerprint processing.
If you renew your license, the fee is $508 for wholesalers and dealers and $178 for salespersons.
Step 9: Mail Paperwork
Send all the paperwork listed below plus the licensing fee to:
Auto Industry Division
P.O. Box 17087
Denver, CO 80217-0087
All your documents should be 8.8 inches by 11 inches and should not be double-sided or stapled.
After receiving your application, the Colorado Motor Vehicle Dealer Board will review it and determine whether to approve or deny it. You can follow up on the process by calling (303) 305-5604 to speak to the licensing department.
The Colorado Motor Vehicle Dealer Board can suspend, deny, or revoke your license if they notice material misstatement in your application.
This means omissions, misleading statements, or misrepresentation in your identification documents, prior occupational licensing history, employment history, and criminal background, including felony convictions, misdemeanor, filings, indictments, and deferred judgment.
Who Needs a Colorado Dealer License?
Motor vehicle dealership licenses are for anyone who wants to open a car dealership in Colorado selling new or used cars. It allows you to buy new cars from manufacturers and used cars from individuals or auto auctions.
How Much Is a Colorado Dealer License?
Colorado vehicle dealership license costs usually differ depending on your license type. First-time original dealer, wholesale, wholesale auctions, and power sports dealer licenses cost $623. If you are renewing the licenses, it costs $508.
How Do Dealers Renew Their Dealership Licenses?
Colorado car dealership licenses expire on June 30th each year regardless of when you got them, which requires you to renew them at that time. You will receive a renewal package 30 days before the expiration date, with instructions on how to renew your license, the address to mail the renewal form to, and the required fees. If you do not receive this package, contact the licensing department immediately.
There is usually a 30-day grace period for you to renew the license instead of reapplying. If there is no grace period, you have to reapply, which includes buying a new bond. If you do not renew your license on time, you will sustain a late renewal fee, which the department evaluates after sending your renewal form.
Do I Need to Take a Mastery Exam to Renew My License?
If you are renewing your license before the expiration date or before the grace period ends, you don’t have to take the exam. However, you will take the exam if you renew it a year or more after expiry.
What Are the Benefits of a Car Dealer License?
- Access to dealer auctions – As a licensed dealer, you can get vehicles at auctions for wholesale prices and sell them for more. You can also get car parts at wholesale prices, things you would not get without the license. This is not only beneficial to your business but also helps you save money if you want to buy your personal use car.
- Tax benefits – You will enjoy tax-free purchases and discounts from repair shops and other dealers. You can also write off vehicle-related purchases like car repair bills and gas.
What Convictions Should I Disclose to the Board?
The Colorado Motor Vehicle Dealer Board requires that you disclose all misdemeanor and felony convictions within the past 10 years. Some misdemeanors that are easy to ignore include driving under the influence, reckless driving, driving under restraint, and leaving an accident scene.
While some are not enough to deny you a license, withholding the information can cause denial or suspension.
Before starting a car dealership in the state of Colorado, you must obtain a motor vehicle dealer license. This allows you to buy cars from manufacturers and used cars from individuals and auctions.
There are different motor vehicle licenses depending on the type of cars you want to sell, like used motor vehicle, wholesale, used motor vehicle, and franchise licenses. You have to follow the required application steps, let the board know about any felony or misdemeanor charges, apply for a bond, and submit all the required documents to operate as an auto dealer in the state of Colorado.