Dealer Licenses are expensive
To buy and sell cars legally you need a Dealer License. Obtaining a used car dealer license from any state requires that you meet certain requirements for that state and is usually time consuming and expensive.
The first and most expensive requirement for a used car dealer license is the location. Most states require that a used car dealership be located in a commercially zoned location which means high rent. Landlords usually require a first month’s rent and security deposit, usually costing between $1,000 to $3,000 depending on the location.
The second major cost is the commercial dealer insurance that a used car dealer is required to maintain. Used car dealer insurance usually cost $2,000 to $12,000 per year and requires a down payment of 20% to 40%.
The third major cost associated with a car dealership is the dealer surety bond. Most states require a Dealer Bond which typically cost between $500 and $5,000 depending on your credit. An individual with average credit can plan on paying around $2000 per year for their used car dealer bond.
You then will have utility deposits, signage, legal fees, etc… totaling another $1,000 to $3,000.
So the initial costs to open a used car dealership runs between $3,000 and $10,000 depending on your particular state.
Used car dealers also have ongoing monthly expenses which include rent, dealer insurance, dealer bond, utilities etc…
The ongoing monthly expenses to maintain a used car dealer license is usually between $500 and $2,500 per month, depending on the state where the dealership is located.
The bottom line is that owning and maintaining your own used car dealer license is very time consuming and expensive.
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