How to Become a Wholesale Car Dealer
Becoming a wholesale car dealer is an easy way to get into the auto industry, and it costs much less that opening a traditional retail new or used car dealership. Wholesale car dealers specialize in used cars and sell primarily to dealerships that need used cars for their inventories. However, with the advent of Internet sales, many used car wholesalers have started doing business with retail clients via the Internet. Wholesalers aim to sell a large volume of used cars, making a small profit on each one.
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Instructions
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Check licensing requirements for your state. Auto wholesalers, also called brokers, are required to have a dealer's license. You can find licensing requirements for your state by contacting a local branch office or visiting the website of the state's Department of Motor Vehicles.
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Find a place of business. Although wholesalers may or may not be open to the public, they must have an established place of business that is properly zoned for an automotive business. Your wholesaler dealer application packet may include a form that must be certified by an inspector or zoning officer in your community. The form acknowledges that your intended place of business is properly zoned to do business with used cars.
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Purchase a surety bond. This is an insurance policy that will pay your creditors and suppliers in the event you unexpectedly close your business or are forced to liquidate. Surety bond requirements start at $10,000 but can rise significantly depending on your state's requirements. Thankfully, surety bonds may be purchased online, where there is stiff competition for your business that drives costs down.
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Complete the license application. The requirements vary by state, but you will be required to have an established place of business and set hours during which the office is staffed. The wholesale dealer license process is overseen by the Department of Motor Vehicles, so any questions regarding the application can be directed to a branch office or customer service hotline.
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Apply for a line of credit. In order to finance the purchase or hundreds or thousands of used cars in a year, you will need significant operating capital or a line of credit. Wholesale dealers can apply for a floorplan line of credit, which means that the vehicles purchased on the line of credit are the collateral. Interest will be due after a set number of days if you have not sold a vehicle. If you start small and wholesale one or two vehicles at a time, you can simply use the proceeds from each sale to purchase your next cars, which requires much less capital.
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Find inventory. As a licensed dealer, a wholesale dealer is allowed to attend dealership-only auctions, where vehicles can be found for less than their fair market values. The cars at dealer auctions could be low-mileage domestic lease turn-ins or high-mileage imports; the availability of vehicles varies daily depending on the auctions you visit.
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Wholesale your inventory. Once you have cars, contact dealerships and let them know what you have. Alternatively, if your state allows wholesale dealers to sell to the general public, post your vehicles via an online classified site. Remember to aim for a target of between $300 and $1,000 profit per wholesaled vehicle, depending on the price of the vehicle and your goals. If you are unable to sell inventory, you can always send it back to the auction, hoping that you are able to recoup your investment.
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