Dealer Licensing in Hawaii
Going into the car business in Hawaii, especially on the smaller islands, can be a tricky venture. A number of even the successful dealerships end up under the safety net of larger mainland companies.
Plus, overall sales tend to ebb and flow more severely with the economy than on the mainland, especially considering the price of a tank of gas on the islands. But driving around the clogged streets of Honolulu and Waikiki, you would never know it (of course, a lot of those are rental cars).
If you are the daring sort and set on opening a dealership, you will encounter a great wave of paperwork. You will need a knack for document gathering. All of this is in order to receive a license to do business in the state. Without it, you will not be able to legally operate a dealership in Hawaii.
The application process is rather involved and includes a number of steps. The end result of your efforts will be to go before the Motor Vehicle Industry Licensing Board for review. This group of seven members is under the wing of the Hawaii Department of Commerce and Consumer Affairs. But before you reach the board, you will need to start way back at the beginning.
Applying for a Motor Vehicle Dealer or Auction License
A dealer is defined as anyone who sells 3 vehicles or more in a calendar year. It doesn't matter if the vehicles being bartered are new or used; you'll need a license either way.
Selling 3 vehicles or more in a calendar year via auction also requires the same type of license. To obtain the license, you must tackle the following measures:
- Complete a Application for License - Motor Vehicle Dealer or Auction (Form 101 4R). Luckily, things are made easy by the fact that most of the forms required for the board review are in this packet. If you have a handful of partners in this venture, they will each need to sign the document. Any glitch in the application (e.g. a section not filled out or illegible) can hold up the review process.
- Get out the camera for a comprehensive photo shoot of the place you intend to sell the vehicles. This includes photographs of the main showroom, the facade of the building, any signs, and even the bathrooms. The more thorough the visual documentation, the better.
- The board requests a Self-Inspection Report to be submitted. This is essentially a summary of the place of business in your own prose. Along with this report, you will need to present documents revealing the dimensions of the entire space, including the bathrooms and the outside perimeter. Once this form is in the hands of the board, they may authorize your establishment to begin business with the idea that a license will ultimately be issued.
- If you and/or your partners do not own the building where you intend to sell motor vehicles, a rental or lease contract must be attached to the application.
- Have your accountant prepare a financial statement, both an individual one for each member of the group and one reflecting the nature of the partnership, if applicable.
- Establish a line of credit, if possible at the opening phases of the business. This may be easier for franchisers. The line needs to be with a financial company that is backed by federal insurance or has a stand-alone worth of $50 million. The level of credit for a new car dealer must be at least $500,000. Used car dealer credit line requirements come in much lower, at only $50,000. Motorcycle and scooter dealers are also $50,000.
- If you are unable to attain the appropriate credit, then the alternative option is posting a surety bond with the board. A contract agreement for the bond is included in the main application package. Required bond levels are:
- $200,000 for those selling 10 new vehicles or more per month.
- $50,000 for those selling less than 10 new vehicles per month.
- $100,000 if you are selling more than 60 used vehicles per month.
- $25,000 for those selling fewer than 60 used vehicles per month.
- $10,000 if your product is motorcycles and/or scooters.
- Franchisers must supply their agreements with manufactures or distributors.
- If you'll be selling new cars and a service center is on site, you will need to make the Motor Vehicle Repair Industry Board aware of this. If work is outsourced to another shop, then you must provide certified verification of the deal.
Note: An application must be completed within 2 consecutive years.
The nonrefundable application fee alone is $50, regardless of the type of license or the location of your dealership. Beyond that, the fee schedule becomes a little complicated.
Your initial licensing fees will depend upon when you apply and what type of license. Furthermore, each type of license has a different fee, and the costs are much higher for those applying for a license in Honolulu.
Fees can vary dramatically based on all these factors. For the complete list, see the Application for License - Motor Vehicle Dealer or Auction (Form 101 4R).