I receive several calls a week
from persons that ask, “How do I get a Texas dealers
license without a lot.” Or they may say something like,
“I want to get a dealers license but I don’t want to
have a building”. I am also often asked, “Can I get a
dealers license at my home”?
I want
to let you know what Texas law requires in order to
obtain a dealer’s license in the State. First, I would like to give a
quick overview of the difference between a Texas Retail
Motor Vehicle Dealer License and a Texas Wholesale Motor
Vehicle License.
Texas Retail Dealer License
A retail dealer license in Texas
allows the person that is holding the license to sell
vehicles one of two ways. You can sell vehicles “retail” on
your lot directly to consumers, or you can sell vehicles
“wholesale” to other licensed dealers. A retail dealer
license allows you to sell both “retail” and “wholesale”.
Texas Wholesale Dealer License
A wholesale dealer license in Texas
is a little bit different. When you have a Texas wholesale
dealer license you are only allowed to sell vehicles to
other persons that hold a dealer’s license. You can never,
ever sell a vehicle to a person on the dealer lot that does
not have a dealer license. So, a Texas wholesale motor
vehicle license only allows you to sell “wholesale” to other
dealers, never to a retail customer on the lot.
With that being said, there are some
slightly different requirements required by the State of
Texas when it comes to obtaining a retail dealer license
versus a wholesale.
First, let’s go over the retail
dealer license requirements. In order to obtain a retail
motor vehicle license from the State of Texas you must have
a building that meets all local zoning requirements. And, by
the way, you can always find your local zoning requirements
by contacting your city hall or county court house. Just ask
for planning and zoning, then inform them of the address you
would like to have your dealership at and they will inform
you whether or not you can have a dealer’s license at that
location. Texas requires all dealer’s licenses to be located
in a building that meets all local zoning requirements. This
is State law.
State law
requires the building you use for a retail dealer license is
enclosed and has an office with at least one desk, two
chairs, internet access, and a phone that is listed in the
dealership name. You must also have a sign that is visible
to the general public that displays your dealership name in
at least 6 inch or larger letters. The law in Texas also
requires dealers to have a display lot that is large enough
to display 5 vehicles of the type you are selling. In order
to have a “retail” motor vehicle dealer license in Texas you
must have a building and a display lot. If you do not have
a building and display lot you will not be able to obtain a
retail dealer’s license in Texas. This is the law.
How do you get a dealer’s license
in Texas without a lot? You can become a wholesale motor
vehicle dealer.
State law requires the wholesale
dealer to meet many of the same requirements as a retail
dealer, such as, you must have a building that meets local
zoning, you must have a business sign, you must have an
office in the building that has at least one desk, two
chairs, internet access, and a working telephone that is in
the dealership name. However, wholesale dealers in Texas are
not required to have a display lot. This would allow you
to have a dealer license without a lot. However, you must
still have a building that houses an office. And remember,
wholesale dealers can never sell vehicles to customers on
the lot that do not have a dealer license, vehicles can only
be sold to other licensed dealers. I speak with many, many persons every
week, whether on the phone, on a zoom webinar, or in one of
my live training classes that I hold throughout the country
and I often hear the statement like “I want to start with a
wholesale license, learn the ropes, then upgrade to a retail
license later”. I never recommend starting with a wholesale
license and then upgrading to a retail license because, in
my opinion, these require two totally different kinds of
dealer operations. In just a moment I will let you know
how to get a dealer’s license at your home.
Think about one way a wholesale dealer
must operate. If you obtain a wholesale dealer license you
can get into dealer auctions and buy vehicles at wholesale
then must sell them to other dealers, never to customers on
the dealership lot. Why is a dealer that has the opportunity
to buy vehicles at wholesale prices at a dealer auction
going to buy the vehicles from you for a higher price that
they could of at the dealer auction. Dealers, like you, are
smart. They study wholesale pricing and it is very easy for
them to find out what price you paid at the dealer auction
for the vehicle that you are trying to sell them at a
markup. This is not a proven profit strategy.Another way wholesale dealers operate
is by developing a relationship with at franchisee in order
to purchase all of the trade ins they do not want to display
on there lot. Developing relationships with franchisees can
take years. Many franchisees have certain wholesalers they
have worked with for years and may not be interested in
selling vehicles to the newest wholesaler on the block. To really make money you will need relationships with
multiple franchisees.
Your relationship with a
franchisee can be a very volatile one. What I mean by this, you could
work years to keep a trade in purchasing relationship with
one franchisee, then another wholesaler comes along an
offers to buy there trade ins a much higher price, then they
may call you one day and say “thanks but I know have another
buyer that I am working with” and now you no longer are
buying that franshisee’s trade ins. I know of a very
small handful of wholesalers that make a great living and
have several buying relationships with franchisees, but they
are not the norm. I know of very few wholesale dealers that
are making a lot of money however, retail dealers tell a
different story.Now, think about how a retail dealer
works. You obtain a Texas retail dealer license, and you can
buy vehicles wholesale at the dealer auction, mark them up,
then sell them at retail on the lot and the world is your
market. You are never limited to just selling vehicles to
other dealers, you can sell vehicles to anyone, whether they
have a dealer’s license or not.
This really opens up
your market and, in my opinion, gives you a much greater
chance of achieving higher profits. You are never reliant on
4 or 5 franchisees for your income, you are reliant on the
tens of thousands of persons that buy motor vehicles from
retail dealers every day. I have been in this industry for
many, many years and I always recommend starting with a
retail license.
How do you obtain a dealer license
at your home?
All of the same requirements must be
met, whether you are applying for a retail dealer license or
wholesale dealer license. You must have a building with an
office, desk, two chairs, internet access, and a phone
listed in the dealership name. You are also required to meet
the sign requirement, and for retail dealers, you must have
a display lot that is not part of a driveway. One exception
is that the building you house your office in must be
separate from your residence. In other words, the building
that you use to house your dealer license must be a
completely separate building that is not attached to your
residence.
The building you use at your property
must also meet all local zoning requirements, which is
rarely allowed in a residential neighborhood. So it is
possible to have a dealer license at your home property but
it must be in a building that is separate from your
residence and must meet all local zoning requirements.
If your zoning does not allow you to have a dealership at
your home, I want to strongly encourage you to find a
building that meets local zoning and obtain a retail dealer
license. I talk to persons all the time that do not want
to find a building and lot to rent in order to obtain a
Texas retail dealer license. I think any person that is not
willing to make a small investment in a building and lot so
they may obtain a dealer license are missing out on an
incredible opportunity to obtain a dealer license and take
their income to a whole new level.You might find a property in your
area that you can rent for eight or nine hundred dollars a
month, or more. If you are not making an eight or nine
hundred dollar profit on each vehicle you sell, then you are
not marking your vehicles up enough. It is very much the
norm in this industry to pay your entire month’s rent with
one good sale. Then you can keep the profits from all the
other sales in your pocket. So why would you ever hesitate
to rent or purchase a building to get into what can be a
very lucrative business. We are approved by the Texas
Department of Motor vehicles to provide you mandatory 6 hour
dealer pre-license course, so when you are ready to make the
move, click on blue
Enroll Now button.
We are here to help you start your
Texas motor vehicle dealership!
Delus Johnson-Lead Instructor Automobile Dealer
Training Association