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How to Get a Dealers License For Auto Auctions

cars parked at a private auto auction

The number of cars sold at an auction every year surpasses nine million sales. Because automobiles have a depreciating value, people gravitate toward auctions to get the best deal on one.

These events aren’t just for the general public, either. There are private auto auctions where dealers can purchase high-end models to sell on their lot. To do so, though, you must first have a dealer’s license. To learn how you can obtain one, keep on reading.

Benefits of Attending a Private Auto Auction

There are three different kinds of auctions: public, private, and government. Many people attend public ones because the cars are cheap. However, owners can downplay the car’s problems or how many miles it has on it, leaving you to pay for the repairs.

The cost to fix your car might be higher than it would’ve been to buy a better one. When you attend a private auction, you won’t run into this problem because every seller is legally obligated to tell the truth about the car’s background.

As for government car auctions, they usually sell automobiles that were once police cars, taxis, and ambulances. They also have regular sedans and trucks that were once used by people working at government agencies.

They don’t usually have many miles on them, their records are easy to get a hold of, and the vehicles are typically well maintained. The only problem with old government cars is that you might have trouble reselling them, as these auctions are open to the public. Anyone can get their hands on one of these cars.

The perk of private auctions and having your dealer’s license is that you can sell any cars you’ve had trouble selling previously. You can also get a deal on the cars other dealerships weren’t able to sell. These car auctions can take place either in-person or online.

Dealer’s License Requirements

If you’re concerned that you need to own a gigantic lot to obtain your license, that is not true. You don’t even need to own a lot at all.

When you are new to the dealership world, it is best to get your license before investing in a lot. Start small, go to an auction, and learn how other dealers bid on their cars. Then, you can pick up a few of your own to get your business running.

If you are looking to sell one of your old cars on your own property, you don’t have to go through the process of obtaining an auto auction license. Every state limits the number of personal vehicles you can legally sell in a year, and you can usually find it on the Department of Motor Vehicles’ website. If you surpass this number, you become eligible to get your license revoked, and you might have to pay thousands of dollars in fines.

Applications and Identification

You’ll either need to go to the DMV, the Motor Vehicle Board, or your state’s Department of Licensing to begin your application process. There are a few types of dealer licenses, but the one you can buy cars from auto auctions with is the wholesale dealer’s license.

Keep in mind that it is pretty expensive to apply for a dealer’s license. The application forms will cost you anywhere from $100-$700.

You’ll need to provide the state evidence that you own a business so that they know how much to tax you. They’ll also conduct a background check to see if you’ve previously committed any crimes. Some states have you submit your fingerprint to do this, while others have you fill out forms.

Depending on where you live, you must complete a training course and pass a dealer’s license test, like you would with a driver’s license. These classes typically cost around $300.

While this may sound like a lot of work, it is best to legally obtain a license rather than borrowing someone else’s to purchase an auctioned car. In doing so, you are committing fraud and could face misdemeanor charges.

Surety Bonds

From there, you will need to acquire a surety bond, which holds your business accountable if found fraudulent. This bond prevents your business from taking advantage of a customer and allows the state to keep track of your activity.

If you fail to provide the customer with any paperwork or information about the car that is an essential part of their ownership, they can file a claim against your bond. The company you purchased the bond from can then investigate whether the claim is valid.

If the claim is valid, then you will have to come up with a way to resolve the issue, or you will have to explain why you are defending yourself against the claim. Losing your case means that you’re going to have to pay the bond company back for the money they spent investigating the claim and paying for the settlement.

Every state has a surety bond amount that you are required to take out. For example, in Alaska, the surety bond amount is $50,000. The good news is that you would not have to pay for this in its entirety.

The bond company considers your credit score when they come up with your bond premium, which is the percentage of the total bond amount you pay upfront. The better your credit score, the lower your premium will be. Sometimes you’ll only end up paying for 1% of the bond amount, meaning that if you are getting your surety bond in Alaska, you’ll only have to pay $500.

Renewing Your License

The expiration time for a dealer’s license is also dependent on the state. In Oregon, you can apply for a three-year license. It costs over a thousand dollars, but it saves you the hassle of having to renew it every year or every other year.

States like Florida and California require proof that you are continuing your dealer’s education in your renewal forms. If you have recently taken dealer’s license courses, it shows that you are familiar with any new rules and regulations set in place by your state.

Some states charge you the same amount to renew your license as they for the application fee. Additionally, you should factor in the cost of changing your surety bond if you plan on selling a different number of vehicles than in years past.

You can’t wait until the last minute to renew your license. Some states want your paperwork filled out and sent in a month or two before your license is no longer valid. You should mark the date of your renewal application deadline on your calendar so that you do not have to go through the entire process all over again.

What to Do After You Purchase a Car

Once you get your license and purchase a car, you need to figure out how to transport it. Using a company that ships, hauls, and tows vehicles is the best way to go about this, and if you can find one that does all three, that’s even better. That way, no matter what kind of service you need, you can use the same place.

Pros of Shipping

If you attend an auction with a business partner or employee, it might be tempting to have one person drive the car back to your place of business. Before you make a decision, consider the benefits of shipping the vehicle.

The cost to transport your car depends on how far it needs to travel, your car’s weight, and the time of the year. Get a quote today to ship your auction vehicle and crunch out the numbers to figure out if the cost of shipping is worth the miles you would be saving.

When preparing your budget, keep in mind that you’ll also need to purchase fuel along the way. Any cars that need work done are likely not worth driving back to your business’ location.

Additionally, you won’t have to worry about getting the vehicle back safely because it’s in a professional’s hands. Although it might take them a couple of days longer than it will take you to drive it back, they know which routes are the best to take and keep an eye on any inclement weather.

Apply for Your Dealer’s License

Now that you know the steps required for getting your dealer’s license, get your documents ready for the DMV. Once you get all your paperwork in, all you have to do is wait for the approval.

During the wait time, start preparing for all the responsibilities that come with purchasing cars from auto auctions. If you want to know more about the ins-and-outs of auction car shipping, check out this article about auto auction shipping. We’ve got all your car shipping needs covered.

Dave Armstrong
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