Launching an auto dealership in New Mexico can be a profitable decision. As vehicles change and evolve, there is always a demand for sleek vehicles with new features and used cars that fit tighter budgets. Whether you want to sell new or used vehicles, you must take several steps first. There are other ways to be a vehicle dealer in New Mexico as well. Perhaps you want to distribute cars or sell wholesale vehicles instead. Getting the right auto dealer license is essential in any of these examples. This guide covers New Mexico’s requirements for dealer licenses.
Determine the Type of New Mexico Dealer License You Need
The Department of Motor Vehicle’s Dealer Licensing Bureau defines dealer license requirements and car dealer license types. When you apply, it’s crucial to obtain the right type of license. These dealer licenses are available in New Mexico:
- Manufacturer licenses for manufacturing vehicles
- Distributor licenses for the distribution of vehicles
- Retail dealer licenses for selling new and used cars to the general public and running a car dealership
- Wholesale dealer licenses for wholesale operations
A wholesale dealer license allows you to sell to retail dealers or at auctions, but you cannot sell to the general public.
New Mexico Dealer License Requirements
Now that you know the license and application form you need to work with, be sure to understand the criteria. For example, applying to become a manufacturer is rarer than applying to become a used car dealer. Manufacturing also requires the proper facilities and equipment for automobile production. Whichever license you pursue, these are the next steps to take to start a dealership, be a wholesaler, or distribute vehicles.
Obtain a Permanent Business Location
You must have an established place of business. Choose a unique business name. Spend some time researching the local market to find an ideal business location for your target market and budget. Also, you will need to decide if you are buying or leasing a property for your dealership. If you lease, remember that you will need a contract for at least six months to satisfy the Motor Vehicle Division (MVD) requirements.
Gather the Required Documents
In addition to finding a place to operate, you will need to complete New Mexico’s sales tax registration process with the New Mexico Department of Revenue. You must get a business license, meet zoning requirements, complete articles of organization or incorporation, obtain a federal tax ID, and register with the Secretary of State. After you have all your business information, you will still need to satisfy the requirements for completing a criminal background check, getting a trader’s license, and obtaining the right liability insurance.
Get Your Criminal Background Check
You must submit to a criminal background check when you want to become a dealer in New Mexico. It asks if you have been convicted of a felony in the past decade or had a dealer license suspended, revoked, or denied. Although not all types of criminal convictions will exclude you from eligibility, it is important to be honest in reporting. To submit the background check, you must include an affidavit form when applying for your dealer license. If you have a criminal record, you must include information about it.
Obtain a Trader’s License and Proof of Liability Insurance
Check if the area where you want to operate requires a trader’s license. For example, any non-native of the land in Pueblo of Laguna must have a trader’s license from the Bureau of Indian Affairs to operate as a vehicle dealer or run other businesses there. You must also have adequate liability insurance to protect your business. There are insurance policies for both new and used car dealerships. In the event of a lawsuit, liability insurance is designed to protect your business up to the policy’s limits. It also helps to have ample insurance to cover losses from theft, fire, or other events that result in damage.
Get Your New Mexico Auto Dealer Bond
An auto dealer bond is essential to run your business. The state will require proof of this with your DMV application. A bond shows that you are dedicated to following state laws and to maintain your New Mexico auto dealer license. Your New Mexico auto dealer bond must be $50,000 to satisfy requirements. If your finances are stable, the surety bond cost is usually .75% to 5% of the total bond amount.
Bond companies can provide you with a customized bond quote for your New Mexico vehicle dealer business. There are used car bonds and license bonds. There are still options if your credit score isn’t great. You may qualify for a bad credit surety bond with a higher premium. Suppose you are unsure what to expect with a surety bond or how much you may pay based on credit factors. In that case, you can contact a surety bond company or fill out a convenient online application for a free quote with no obligation.
Submit Your Dealer License Application
By the time you are ready to submit your application, you should have all licensing requirements satisfied. Establishing and registering your business properly, obtaining any local permits that may be required, and having your motor vehicle dealer bond secured are all critical parts of preparing to obtain your license.
Take some extra time to review your application multiple times to ensure all requirements are met and all information is correct. You may find application process guides online or contact a local MVD office. If information on your application is incorrect or incomplete, the Dealer Licensing Bureau may not accept your dealer license application. This is also true if you forget to include any required supporting documents or skip any steps that lead to you getting the right information. For example, failing to complete a training course to get your pre-licensing education will create a delay and more hassles. To avoid unnecessary delays in the application process, be sure to include these required documents:
- Certificate and articles of organization or incorporation that show business ownership
- Applicant affidavit form to disclose any previous dealer license problems or criminal history
- Driver’s license, phone number, address, and other information about the owner or owners
- Zoning documents and depictions or photos of your business location, square feet, display area, offices, signs, equipment, and other vital points listed on the form guide
- A leasing document for at least six months if the property is leased
- Business license, federal tax ID, New Mexico tax ID-CRS, and Secretary of State partnership or corporation number
- For used cars, a pre-licensing education certificate from the state’s Independent Auto Dealer Association
- For new car dealers, a manufacturer franchise agreement
- Proof of a surety auto dealer bond of $50,000
Dealer license fees also apply to process the application. A $50 fee must be paid when submitting this information. You can pay by credit card or with an electronic check.
Renew Your License Yearly
When you have a dealer license in the state of New Mexico, you must renew it in accordance with state guidelines. Motor vehicle dealers can create an account online with the New Mexico MVD to renew licenses, make ownership changes, or complete other important tasks. The good news for licensed dealers in New Mexico is that the annual cost to renew a license is only $50. Reinstating a license can be more difficult. Since renewal is easy, be sure to set calendar reminders to renew before the deadline.
There are several questions that people often ask when they are considering getting an auto dealer license in New Mexico. These are some of the most frequently asked questions.
How Much Does It Cost to Get a Dealer License in New Mexico?
The main cost associated with getting a dealer license is the application fee, which is $50. Also, as noted in the previous section, there is a $50 annual cost to maintain the license. Although insurance, a surety bond, a lease, and other expenses are related to being a dealer, the actual cost of getting the license is small compared to that.
How Many Cars Can You Sell in New Mexico Without a License?
In order to sell cars without a license, you must sell vehicles that are registered to you. Without a proper auto dealer license, you can only sell four vehicles in a calendar year in the state of New Mexico. If you sell more than that, you face potential penalties. Even if you were to obtain vehicles to sell for others, a considerable amount of work would be involved.
Can You Get a New Mexico Auto Dealer License Without a Lot?
It is possible to get a dealer license without a lot. Although state law may not require a large lot for a dealer license, you will need a lot to display vehicles for people to look at, drive, or inspect if you are a retail dealer. Keep in mind that there are multiple types of auto dealer licenses. Depending on the type of license for a non-retail dealer, you may not need a large lot. If you are unsure about what you want to do and do not want to invest in a property with a large lot, spend some time researching what wholesalers and distributors do. This will help you determine how much space you need. Also, be aware of applicable zoning rules where you plan to operate your dealership.
Now that you know what is involved in getting a New Mexico dealer license, you are ready to take the next steps to become a licensed vehicle dealer.