Auto dealers in Alabama must obtain an auto dealer license to legally operate in the state. The Motor Vehicle Division of the Alabama Department of Revenue is responsible for overseeing the licensing process.
In this guide, we’ll outline the licensing requirements and give you a step-by-step process for getting your Alabama dealership license.
Step 1: Determine license type
The first step to obtaining your Alabama dealership license is to figure out what type of license you need. Different license classifications let you perform different types of work. The Alabama Department of Revenue offers the following types of auto dealer licenses:
- Retailer license: This license lets you sell new and used motor vehicles
- Wholesaler license: This license lets you buy and sell vehicles at auto auctions
- Rebuilder license: This license lets you rebuild and make repairs to vehicles
Step 2: Get your business location
You need to establish your permanent place of business before applying for your auto dealer license. This business location must have a display area, an office, and a phone system with a publicly listed number. If you are a retail dealer, your business location must have a permanent sign indicating your trade.
Step 3: Register your business
Before you apply for your auto dealer license, you need to register your business and receive a business license from the Alabama Department of Revenue. You’ll need to provide a Federal Employee Identification Number obtained from the Internal Revenue Service (IRS). If you are operating as a sole proprietor you do not need to have an EIN and instead can provide your social security number with your license application.
Retail dealers need to get a sales tax number from the Alabama Department of Revenue.
Step 4: Get liability insurance
Auto Dealers must get and maintain liability insurance with the following coverage amounts:
- $25,000 bodily injury/person/accident
- $50,000 combined bodily injury/accident
- $25,000 property damage/accident or a combined single limit of $75,000/accident
Step 5: Get a surety bond
The Motor Vehicle Division requires auto dealers to post a surety bond as part of the licensing process. The bond ensures that the dealer complies with all regulations and provides financial protection to consumers and the state for any damages resulting from the dealer’s negligence.
The required bond amount for Alabama motor vehicle dealer bonds is $50,000. Dealers are only responsible for paying a small percentage of the total amount as a premium. This premium typically ranges 1% to 3%. The surety company issuing the bond determines the exact premium you’ll pay. When underwriting your bond, they will evaluate your industry experience, credit score, financial standing and other factors.
Step 6: Submit license application
After you get your surety bond, you are ready to submit your dealer license application. You can find all the application forms on the Motor Vehicle Division website.
Fill out the forms, gather all the required supporting documents as well as the appropriate licensing fees (listed below). You can then mail the application packet to the following address:
Alabama Department of Revenue
Motor Vehicle Division
50 N. Ripley Street
Montgomery, AL 36104
Here are the fees you should include with your application:
- $25 license fee
- $5 fee for each additional business location
Step 7: Get your privilege license
Alabama is different from other states in that you need to obtain a second license to operate as a motor vehicle dealer. The license is known as the Business Privilege License and you can receive it from your local county probate office.
Alabama dealership license frequently asked questions
How long does it take to get a dealership license in Alabama?
After the Motor Vehicle Division receives your application it will take them seven to fourteen days to process. If approved, they will immediately mail your license.
How do you renew an Alabama dealership license?
Alabama auto dealer licenses expire on September 30th the year after they are issued. The expiration date is the same no matter when the license is issued. For example, a person who receives their license on July 30th and another person that receives theirs on August 30th will both have their license expire on September 30th.
To keep your license valid, you must renew it by October 31st of the year prior to the expiration. For instance, if your license expires September 30th, 2022, you must complete the renewal by October 31st, 2021.
How much does a dealer license cost in Alabama?
New vehicle dealers, used vehicle dealers, wholesale vehicle dealers, and rebuilders all must pay a $25 fee to receive their license.
Dealers must pay the following amounts for their dealer plates:
- Auto dealer plate: $26
- Motorcycle plate: $18
- Transit plate: $26
- Motorcycle dealer transit plate: $18
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