What are the Differences Between a New, Used, and Wholesale Dealer?

If you're getting your auto dealer license, it's good to understand the different types of license classifications so you can meet your business goals.

Let's look at some of the more common classifications:

New Vehicle Dealer

This is often referred to as a franchise dealer.

This license classification has a franchise agreement to sell brand new vehicles of a specific make and even specific models from a manufacturer.

Some states like Arizona and Colorado require franchised dealers to purchase a surety bond while many do not like North Carolina or Oklahoma.

Used Vehicle Dealer

Selling used motor vehicles is the most common type of vehicle sales. You have both independent used dealer lots, but franchised dealers also tend to sell used vehicles.

Obviously, a used dealer sells vehicles that have had a previous owner.

Nearly all states require used dealers to purchase an auto dealer bond.

Wholesale Dealers

A wholesale dealer is responsible for selling vehicles to (typically used) to other licensed dealers in the state.

Without wholesale dealers moving used vehicle inventory, it would be hard for a used vehicle dealer to keep their lots full.

Wholesale dealers are not allowed to sell vehicles directly to end consumers, only to other licensed dealers.

And in nearly all states, wholesalers are required to purchase a surety bond to protect their customers.

Other Dealer Classifications

Other classifications include:

• Powersports dealers
• Motocycle dealers
• Salvage parts dealers
• Recreational vehicle dealers
• Auction dealers

Every state is a little different. Click here and select your state to see the dealer license and whether it requires a surety bond to obtain licensure.