Dealer Licensing in Delaware
Becoming a licensed car dealer in Delaware is like starting any business. The process is involved, and you will need to work with several different state agencies and some local groups, too. Many dealer applicants hire lawyers, engineers, and accountants to help them get through the process.
You can file the application without outside help as long as you understand and follow all the steps. The Division of Motor Vehicles (DMV) is very eager to provide answers to your questions. After all, the cars you sell will be the very same ones they inspect, title, and register.
Generally speaking, you need a dealership license if you sell more than 5 vehicles per year. There are different types of dealer licenses depending on what kind of buying and selling your company will do:
- Wholesale dealer.
- New vehicle dealer.
- Used vehicle dealer.
In addition to these main types of dealers, there are vehicle auction dealers, mobile home dealers, and motorcycle dealers.
Initially, the licensing procedure is the same for all dealer licenses. You can check with the DMV to clarify how your particular situation differs from the basic procedure.
A careful read of the Dealers Manual, which can be viewed using the free Adobe Reader, will help your understanding of the process. As you read, try to focus on your specific situation because there is a lot of information included in the manual.
You'll have to visit a DMV office to get the Application For Dealership License (Form MV29). Complete this application, after you've read the Dealers Manual, and submit it to the DMV with your other paperwork.
Along with your application, you must include a copy of the Signature Authorization (Form MV26) ―the signature authorization form. The signers on this form will be able to process title paperwork with the DMV.
All company owners must submit to a criminal background check. Make extra copies of your criminal record and send one to the State Bureau of Identification and put one with your application to the DMV.
To finish the application you'll need to have a business name. You can register your business name with the Prothonotary's Office. Don't be intimidated by the fancy name, a Prothonotary is just another way of saying the court clerk.
Applying for a business license with the Division of Revenue is the best way to get a handle on tax forms, and licensing requirements. The business licensing fee is $100 for motor vehicle dealers and $75 for wholesalers.
Liability insurance is required for all dealers. It is a good idea to consult with a well-informed, Delaware-licensed insurance company because business insurance can be expensive and complicated. You may want to ask a lot of questions about the premium, deductibles, filing claims, coverage amounts, and certificates of insurance.
Where you sell vehicles is just as important as how you sell them. Your car lot must have certain characteristics to qualify as a dealership site:
- Business sign
- Office with telephone in business name
- Lot space for at least 5 vehicles
In many cities, local businesses are reviewed by the planning boards or zoning departments. You will want to have your site reviewed by the city or town; be sure to ask about driveway or highway access to your car lot.
You will be very interested in getting your dealer tags; the dealer plates make it possible for you to move vehicles between buyers and sellers without applying for a title and registration.
The DMV is very particular about how you use the dealer tags and asks you to follow the rules laid out in the Dealer Manual.
Dealer tags expire every year on December 31st and the annual fee is $10 per plate. You will be issued a certain number of dealer plates depending on how many vehicles you sell. Of course, the first year you won't know so the DMV uses vehicle sales estimate.
Other General Requirements
When you are running a dealership, you are managing a business. The DMV and the Department of Revenue have expectations you will conduct your business ethically and legally. Be sure you know all the reporting rules.
You must also keep good records; your filing system should be organized, detailed, and neatly filed on site.
As you might expect, the DMV also wants you to file an application for title every time you issue temporary plates. And don't forget about consumer rights; to protect consumers, the buyers guide must be posted on all cars and trucks weighing less than 8,500 lbs. Basically, all passenger vehicles.
Specific Requirements for Some Dealers
Some requirements are specific to the dealer license type. If you are applying for a new vehicle dealer license, you will need to bring a letter of franchise from the vehicle manufacturer. For example, if you are going to sell Chevrolet, you'll get a franchise letter from that maker. Include the letter with your application for a dealer's license.
All other dealers, those without franchises, must be incorporated in the state of Delaware. As a dealership owner, you must hold a Delaware driver's license and be a Delaware resident, unless you are running a new vehicle franchise dealership.
The licensing process may sound difficult and the number of different state and local agencies you have to please can be intimidating. If you are serious about making a vehicle dealership your livelihood and if you really want to own and run your own business, then you'll find a way to navigate the dealer licensing requirements.
Refer to our Dealer-related Information section for additional information.