How to Become a Car Dealer in Alabama

Starting a car dealership in Alabama involves several key steps to ensure compliance with state regulations. This guide outlines the necessary requirements and procedures to help you launch your automotive business in the state.

1. Determine the Type of Dealer License Needed

Alabama offers several types of dealer licenses, including:

• New Vehicle Dealer

• Used Vehicle Dealer

• Wholesale Dealer

• Rebuilder

Identify which license type aligns with your business model, as each has unique qualifications and permissions.

2. Establish a Permanent Business Location

You must secure a physical business location that meets Alabama’s requirements, which include:

• A permanent sign with the business name

• Office space for conducting business

• Space to display vehicles

Your location must comply with all local zoning laws.

3. Register Your Business

Register your business with the Alabama Secretary of State and obtain an Alabama Sales Tax Number from the Department of Revenue. This allows you to legally collect sales tax on vehicle sales.

4. Obtain a Federal Employer Identification Number (FEIN)

You’ll need a FEIN from the IRS for tax purposes, opening business accounts, and completing state-level paperwork.

5. Secure Liability Insurance

Dealers must carry blanket liability insurance covering all vehicles. Minimum coverage requirements include:

• $25,000 bodily injury per person

• $50,000 bodily injury per accident

• $25,000 property damage per accident

Alternatively, a single limit of $75,000 per accident is acceptable.

6. Purchase a Surety Bond

Alabama requires all dealers to post a continuous $50,000 surety bond. This bond helps protect customers and ensure compliance with the law.

7. Apply for Your Dealer License

You must apply for your dealer license online through the Alabama Motor Vehicle Dealer License portal:

https://mvlicense.mvtrip.alabama.gov

After completing the application, a transmittal sheet will outline any documents you need to submit.

8. Become a Designated Agent

All dealers are required to become designated agents of the Department of Revenue, which grants the authority to process title applications. The dealer surety bond satisfies this additional requirement.

9. Await Approval

Once your application and supporting materials are approved, you’ll receive your official license and can begin operating legally as a car dealer in Alabama.

After obtaining your dealer license, consider using Carprolive for all your automotive software needs. From managing your inventory and offering a professional dealership website to accessing a full print forms library and enabling e-signature capabilities, Carprolive is built to support new and growing dealerships every step of the way.

Please note: The contents of this article are subject to change with any regulatory or legislative updates. This article does not constitute legal advice. Always verify the information with your state’s regulatory agency before proceeding.

Sources:

• Alabama Department of Revenue – Dealer License Requirements

• Alabama Department of Revenue – FAQs on Dealer Licensing

• Alabama Department of Revenue – Designated Agent Information

• Alabama Administrative Code – Dealer License