Can you start a used car business from home in California?

Answer 1

There are 2 types of dealer's licenses. You can have a wholesale only license where you can use your home as the address. The dmv will drive by to check it is an actual address and not just a field of weeds because this is the location where you will keep records. Your limitations are you cannot use a sign, store or work on cars at the address. The way wholesalers make money is by purchasing cars from private parties, other dealers, auctions and selling them through auctions or to other dealers that need your specific car. You cannot sell the car retail to anyone, even yourself or family members. You won't be provided retail paperwork from the dmv so it is impossible to transfer the car title to anyone elses name. To do that you will have to get a retail dealer you know to run the sale through his license for a small fee usually. Wholesalers typically make $200-500 per vehicle. Keep in mind the person who buys it needs to also add another $1,000+ to make a profit so that is why as a wholesaler you make less per car. You work harder but it is an easier business to run.

If retail is your decision then you must obtain a location that is zoned by the city for auto sales. It is easier than it sounds as many areas are. Look for the smallest office possible to start out. Also avoid cities that require a "conditional use permit" as this process costs $1400 or more and the city can still say no after months of you providing them with plans, neighbor notification, etc. The dmv only requires 1 or maybe 2 parking areas to "show" the vehicle and a small office to post your signage, "no cooling off period" and "right to have mechanic inspect" signs. The main problem with retail is you must collect salestax and send it to the state quarterly. You are the dmv basically. This involves keeping track of the tax on each sale and sending it to the state as required. Many dealers are tempted to use this money to live off of, buy other cars with, etc., and just hope to make it up as some later date. Don't do this because you will almost always be short. The other issue is dealing with picky sometimes unreasonable buyers who keep contacting you about the condition of the car you sold them, even though it was most likely sold 'as is'. They often complain to the dmv, the city, online, to neighbors, other businesses by you and may even sue you in small claims, and win! Believe it or not judges hate used car dealers and almost always take your customers side even if they are crazy. In the wholesale business you get to avoid crazy retail customers, tax collection, and even smogging the cars.

To become a licensed car dealer the State of California Department of Motor Vehicles requires a dealer applicant to take a six hour preparation class to become a licensed car dealer. There are 2 main types of dealers, retail or wholesale. Retail Dealers have more restrictions as liability which required more dealer insurance as well as a larger dealer bond, but retail dealer are the only dealers allowed to sell to the public. Wholesale dealers may only sell to other dealers.

The applicant must take the class and pass a 40 question test, then submit an application and a bond, then submit photos and pass an on-site inspection. Upon review the DMV inspector will review the dealer's application and then approve the temporary license. Often the largest struggle for those attempting to start a retail dealership is the zoning for the city or county to allow a dealership at the chosen location. Make sure that the location you choose is zoned properly and/or will be an acceptable location for a retail dealership. Rarely do wholesale dealerships struggle getting proper zoning permission from the government.

Once a would be dealer passes the test they must prepare for DMV approval from the inspector. To prepare the following tasks must be done. The applicant must produce 11 photos 1)building 2)outside sign 3)display area 4)office 5)business license 6)resale permit 7)telephone 8)inside signs 9)locked cabinet 10)checkbook 11)dmv dealer book

Then the applicant must submit: zoning approval letter, OL902 certificate of class completion, TSM888 business license resale permit fictitious name statement telephone listing live scan fingerprint card personal history questionnaire completed dmv dealer application bond in the name of the owner / dealership.

Temporary license can be granted within 30 days permanent license can be granted within 120 days.

http://www.dmv.ca.gov,