What are the Requirements to Start a Small Car Dealer?

What are the Requirements to Start a Small Car Dealer?

May 08, 2020

When most people think of car dealers, they think of the large franchise lot with hundreds of cars. While that is one type of operation, it can be overwhelming to think of all that goes in to starting a dealership. If you are wanting to get in the game, it does not take much to start up.

Start your company. Whether you plan to be a sole proprietor with a fictitious name (dba), limited liability company (llc), or a corporation (inc), it will be important to get this filed. You will want to do this before signing the lease as it is required that the lease match the dealer license, and the insurance match the dealer license. It can be quite cumbersome and a waste of time to change this later.

Location, location, location. This is a common phrase in real estate, but it is also a particularly important step in the process. The first thing is that choosing a location is important for the success of the dealership. If you are going to be a retail dealer a visible lot will be key.


Dealer School. While the details about the class may vary by state, the requirement that a new dealer must attend a training course is standard across the board. This educational class will provide more details on the process of becoming a dealer, and accepted practices and how to conduct business once you open.

Insurance and Bond. Once the location has been approved and you are ready to submit your application, you will need to secure garage liability insurance and a surety bond. The required amount of insurance may vary by state and the agent providing the quotes should be able to explain how the coverage works, what is required, and other optional coverages available to you. Many agencies, such as ours, have the ability to write both pieces for you. Anytime you can consolidate the number of people you will need to call and speak with will be beneficial for you.

Depending on what state you are in, there are additional requirements you may have to adhere to. However, these items listed above are standard across the board, and also will make up the bulk of the cost and work you can expect to put in to starting a small car dealer.