How hard is it to get a dealers license?

TerryBPP · 04-12-2005, 04:30 AM

I buy and sell a car about every 3-6 months. I was told by my accountant that it would be wise to get car dealers license so that I would not be charged with a crime. Its illegal to buy and sell more than 3 cars a year here in FL. I found the fees for the license which are pretty cheap. But it cant be that easy. What are the stipulations to getting the license?

Superman · 04-12-2005, 06:38 AM

Good question. I'd like to go to the dealers' auctions. Cars are pennies on the dollar there.

MikeSid · 04-12-2005, 08:21 AM

I had the same idea a few years ago Supe.

In Washington, $750 per year license fee, $30K bond, and a hunk of commercial property where you can operate "regular business hours."

I think the zoned commercial property is what keeps most folks from doing this. Otherwise it would be easy to justify the bond cost and the initial $750 with the deal you'd get at a Dealer's auction like Odessa.

speeder · 08:52 AM

Everything Brian said.

Wholesalers definitely "curb" cars, and a lot of people just "ride along" w/ the person w/ the dealer's license and pay them a fee to procure a car for them. This makes the most sense if you only want one or two cars. The real players in the wholesale biz do serious volume w/ small margin, (as Brian described), if they lose or break even on a few it's not the end of the world.

You have to know WTF you are doing in that world or you'll get killed. It's like going to Vegas. Real good chance of winding up on a Greyhound w/ a bag of candy bars............

TerryBPP · 04-12-2005, 08:51 AM

I have bought many cars through our local auction and found it to be $1000' s cheaper. But the cars I buy are many years old and made in large quantities ie. mustangs, carmy's, taurus's. I usally get them for around $3,000 and sell around $5,000 minus the $500 I have been paying my dealer friend for his help.

But, as you said, SoCal the high end euro's do not sell for that much less than retail. Not sure why just the norm.

I spoke with the DMV and they said here in FL you need:

100 sf of office space
3 parking spaces
$25,000 bond

speeder · 04-12-2005, 08:54 AM

Quote:

Originally posted by TerryBPP

I spoke with the DMV and they said here in FL you need:

100 sf of office space
3 parking spaces
$25,000 bond

Jesus, those are tough rules. Sounds like you could operate out of a men's room @ McDonalds.

TerryBPP · 04-12-2005, 08:58 AM

Exactly! How about an Arby's? hmmmmmmmm

CarreraS2 · 04-12-2005, 09:06 AM

Quote:

Originally posted by TerryBPP
I have bought many cars through our local auction and found it to be $1000' s cheaper. But the cars I buy are many years old and made in large quantities ie. mustangs, carmy's, taurus's. I usally get them for around $3,000 and sell around $5,000 minus the $500 I have been paying my dealer friend for his help.

But, as you said, SoCal the high end euro's do not sell for that much less than retail. Not sure why just the norm.

I spoke with the DMV and they said here in FL you need:

100 sf of office space
3 parking spaces
$25,000 bond

With the high end, there is a different dynamic, and, like speeder says, you have higher volume pros in the action.

In California, here's the dynamic (probably the same in Florida, I'd think). One of my large luxury car dealership clients goes out and buys many cars at each auction. I'm surprised at the high prices they (and other like them, who all drive the prices up) pay.

But, the reality is, they NEED to have the used cars on their lots. It helps support the new car business. It helps bring customers in, who may buy used, or who may be able to be talked into new. They use them as low cost examples in their newspaper ads.

It's necessary inventory for their business, so they just pay what they have to pay - which usually ends up to close to "private party retail."

With lower end cars, or cars with more years on them, particularly ones that are out of warranty, you don't have the same pros involved, who are willing to operate on much smaller margins (or even take losses) for the reasons above.

Your Florida regs sound pretty much the same as California regs for a dealer's license (to sell to the public). The reason you need those things is that the DMV wants the public to have a set place they can find you!

All of that hassle, plus finding out that I could not buy $40,000 used MBs for $28K at the auto auctions, is why I canned the idea myself.

tabs · 04-12-2005, 10:17 AM

Quote:

Originally posted by speeder
Everything Brian said.

You have to know WTF you are doing in that world or you'll get killed. It's like going to Vegas. Real good chance of winding up on a Greyhound w/ a bag of candy bars............

Hey Speeder....It doesn't matter if you know what you are doing in Vegas....with Casino odds your going home on the Greyhound every gawd Dam time...

My Daddy bought cars through the auto auctions...for a couple a hundred you can get a dealer to buy a car for you...it's cash on the line though for the purchase.. he save alot of money that way.

kaisen · 04-12-2005, 01:41 PM

It should be easy to find the requirements by visiting Florida's DMV or DOT. There is a difference between a wholesaler and a retailer and a broker, so be clear what you want to do.

A wholesaler cannot sell a car to the public, just to another wholesaler or dealer, by hand or at auction. The requirements are usually just a small office where you keep your records accessible for the govt.

A broker allows you to help sell NEW cars also, but the franchised new car dealership actually sells the car.... you are just paid for your services, either by the customer or the selling dealer. Requirements are similar to wholesale.

A retail 'dealer' needs to have enough commercially-zoned space to have inventory. Usually space for three cars on display, either inside or outside. That property must meet all commercial zoning requirements like bathrooms and handicap parking, etc. Also. moststates require you to either provide warranty OR inspection for your cars. Inspection requires a mechanical stall (big $$ and bigger insurance $$) or a signed contract with a local shop.

The average wholesaler makes $200 per unit and sells 20-30 units per month. Most wholesalers make their money by giving 'buy bids' to local franchised dealers when a customer tries to trade a car that is not their cup of tea (i.e. a Porsche at a Ford dealer). The wholesaler will get a call "what's this worth" and he'll put in his bid. If they take the car in, he owns it for that $$. He then takes it to auction or sells it to an appropriate dealer, and after all is done, makes $200 gross profit. A wholesaler usually holds the car no more than a couple weeks.

The average retail independent dealer makes $1500 per unit, gross profit. But there's a lot more at risk, and higher expenses. He usually turns his vehicles every 35 days, but may hold on to a unit as long as 6 months. Most independent dealers buy a third at auction (like Riverside, CA, or Manheim, PA, or Florida Auto Auction of Orlando (actually Ocoee)), a third from wholesalers, and a third from trades or 'off the curb'. The auctions are a great place to see thousands of cars (FAAO and Manheim PA are the biggest) and most auction prices are wholesale. Again, if retail margins average $1500, that $12000 Taurus should have a block price of $ 9500, auction fees, transport, some reconditioning expense, and you'll own it for $10000-10500. Making $1500 a piece and selling 10-15 a month is a good living if your expenses are in check.

And it is as complex as day trading. Actually, it is more complex.

Someone once told me: "You know how to make a small fortune in the car business? Start with a large one."

E

TerryBPP · 04-13-2005, 04:35 AM

Down here they have 6 different types of dealers. Franchise, independent, wholesale, auction, mobile home, and recreational.

As you said kaisen, wholesale dealers can only sell to other dealers. But they dont even need an office in FL. Independents can sell to the public but must have the 100 sf office. Franchise is a dealer that is expanding from another state. Couldn't get a good explaination of a auction dealer. Moblie and recreational are self explanitory.