Thinking of launching your career as a car dealer in Alabama? The automotive industry in Alabama offers exciting opportunities, but understanding the licensing process is crucial for a smooth start. This guide breaks down the essential steps to obtain your Alabama car dealer license and dealer plates, ensuring you’re legally compliant and ready to hit the ground running in the competitive world of car sales.
Step 1: Securing Your Alabama Motor Vehicle Dealer License
The first key step for any aspiring car dealer is obtaining the mandatory Alabama Motor Vehicle Dealer License. The Alabama Department of Revenue (ALDOR) requires all license applications to be submitted electronically through their online portal.
To begin your application, navigate to the Alabama Partner Registration Portal: Alabama Partner Registration.
Once you’ve submitted your online application, the portal will generate a transmittal sheet. This important document outlines the specific supporting documents you’ll need to physically mail to ALDOR to complete your application process.
Who Needs an Alabama Car Dealer License?
It’s important to understand who is required to hold a dealer license. In Alabama, this includes:
- New and Used Car Dealers: Anyone selling new or used motor vehicles, encompassing cars, trucks, and SUVs.
- Motorcycle and Trailer Dealers: Businesses dealing in motorcycles and trailers (excluding specific trailers not requiring titling).
- Wholesale Dealers: Dealers who sell vehicles to other dealers rather than directly to the public.
- Vehicle Rebuilders: Entities involved in rebuilding or restoring damaged vehicles for resale.
Understanding Alabama Car Dealer License Fees
Becoming a licensed car dealer involves several fees. Here’s a breakdown of the current fee structure:
- Master Dealer License: $125. This is the primary license for your dealership.
- Additional Business Location Fee: $5 per additional physical location. If your dealership operates from multiple sites, this fee applies to each extra location.
- Off-Site Sales License: $25 per event. If you plan to conduct sales at temporary locations away from your primary dealership, you’ll need this license for each event.
- Master Off-Site Sales License: $25. This license might cover multiple off-site sales events, offering a more cost-effective solution if you frequently conduct sales outside your main location.
It’s crucial to note that off-site sales licenses must be acquired at least 10 calendar days before any planned off-site sale. These licenses are managed through your MyDMV account.
Bonding Requirements for Alabama Car Dealers
ALDOR mandates a continuous surety bond for all licensed car dealers to protect consumers and ensure ethical business practices.
- Surety Bond Amount: All licensees must provide a continuous bond of $50,000 to ALDOR. This bond acts as a financial guarantee.
- Designated Agent Status: Alabama law requires all car dealers to become designated agents of the Department of Revenue. The dealer bond also fulfills this designated agent bonding requirement, simplifying the process.
Insurance Obligations for Licensed Dealers
Adequate insurance coverage is a critical requirement for all Alabama car dealers. You must maintain blanket liability insurance to cover all vehicles owned by or associated with your dealership.
- Minimum Insurance Limits:
- $25,000 for bodily injury per person per accident.
- $50,000 combined bodily injury coverage per accident.
- $25,000 property damage coverage per accident.
- Alternatively, you can opt for a combined single limit of $75,000 per accident, covering both bodily injury and property damage.
Step 2: Obtaining Alabama Dealer and Manufacturer License Plates
Once your dealer regulatory license is secured, the next step is obtaining the necessary dealer license plates. This process involves two stages: first, acquiring the appropriate privilege license from your county licensing office, and then requesting your dealer plates from ALDOR.
After obtaining your dealer regulatory license, visit your county licensing office to purchase the relevant privilege license(s) as per Alabama law (Sections 40-12-51, 40-12-62, or 40-12-169 of the Code of Alabama). Proof of these privilege licenses is necessary to obtain dealer plates from ALDOR.
Dealer plates can be requested through your MyDMV account after you have the required privilege licenses.
Eligibility for Different License Plate Types
Alabama offers various types of dealer plates, each with specific eligibility criteria:
- Dealer (D) Plates: These are standard dealer plates available to licensed motor vehicle dealers, whether they sell new or used vehicles.
- Motorcycle Dealer Plates: Specifically for licensed motorcycle dealers.
- Manufacturer Plates: Available to manufacturers of passenger cars, motorcycles, trucks, truck tractors, or trailers, provided their manufacturing facility is located within Alabama.
Restrictions on the Number of Dealer Plates
The number of dealer and motorcycle dealer plates you can obtain is subject to certain restrictions, particularly for dealers:
- New Car Dealers: Limited to a combined total of 35 dealer and motorcycle dealer plates.
- Used Car Dealers: Limited to a combined total of 10 dealer and motorcycle dealer plates.
- Increased Plate Allocation: Both new and used dealers can apply for an additional combined total of 25 dealer and motorcycle dealer plates if they have processed certificates of title for 300 or more title transfers in Alabama during the previous dealer regulatory license year. This incentivizes higher sales volumes and provides more flexibility for larger dealerships.
Manufacturers of vehicles and motorcycles face no limitations on the number of manufacturer and motorcycle manufacturer plates they can purchase.
Fees for Dealer License Plates
There are specific fees associated with each type of dealer plate:
- Dealer Plate: $25
- Dealer Motorcycle Plate: $17
- Manufacturer Plate: $25
- Motorcycle Manufacturer Plate: $17
These fees are non-refundable and cannot be prorated.
Who Can Operate Vehicles with Dealer Plates?
Alabama law specifies who is authorized to operate vehicles displaying dealer (D) plates:
- Prospective Purchasers: Potential buyers are allowed to test drive vehicles with dealer plates for up to 72 hours. This allows for extended test drives and vehicle evaluations.
- Dealership Owners: Owners of the dealership are permitted to operate vehicles with dealer plates.
- Dealership Partners: Partners in the dealership are also authorized to use vehicles with dealer plates.
- Corporate Officers: Corporate officers of the dealership can operate vehicles with dealer plates.
- Dealership Employees: Employees of the dealership are permitted to drive vehicles with dealer plates as part of their job responsibilities.
Permitted Uses of Dealer Plates
Dealer plates can be used in specific scenarios to facilitate dealership operations and customer service:
- Loaner Vehicles: Dealer plates are permitted on vehicles temporarily loaned to customers whose vehicles are undergoing service or repair at the dealership. This provides customer convenience and maintains service satisfaction.
- Driver Education Programs: Vehicles with dealer plates can be temporarily loaned to high schools for student driver education programs, supporting community initiatives.
- Inventory Vehicles: Dealer plates are primarily intended for vehicles that are part of the dealer’s or manufacturer’s inventory, ready for sale.
- Limited Payload Trips: Trucks or truck tractors in a dealer’s inventory with more than two axles on the power unit or a GVW exceeding 26,000 pounds can use dealer plates for a single payload trip, limited to 72 hours of usage. This allows for vehicle demonstration or delivery purposes.
It’s critical to understand that if a dealer charges customers a fee for any of the uses listed above (loaner vehicles, etc.), dealer plates cannot be legally displayed on the vehicle. In such cases, standard plates should be used.
Dealers have the option to display standard license plates on vehicles within their inventory. When standard plates are used on inventory vehicles, ad valorem tax is not applicable.
If a dealer’s license is revoked or forfeited, all dealer plates must be returned to ALDOR within 10 calendar days of the revocation or forfeiture date.
Prohibited Uses of Dealer Plates
Dealer (D) plates are explicitly prohibited for use on certain types of vehicles and for specific purposes:
- Rental or Lease Vehicles: Dealer plates cannot be used on vehicles that are part of a rental or lease fleet.
- Tow Trucks: Tow trucks are not permitted to use dealer plates.
- Service Trucks or Vans: Service trucks or vans used for dealership operations cannot display dealer plates.
- Other Service Vehicles: Any other service vehicles associated with the dealership are prohibited from using dealer plates.
Penalties for Misuse of Dealer Plates
Violations of dealer plate regulations can result in significant penalties:
- First Violation: $200 fine.
- Subsequent Violations: $500 fine for each subsequent violation.
- False Statements: Willful misstatements or submission of documents containing erroneous information to obtain dealer license plates can lead to criminal penalties (Class A misdemeanor) and a civil penalty of $1,000 assessed by ALDOR.
- Dealer License Law Violations: General violations of the dealer license law are classified as a Class A misdemeanor.
- Insurance Policy Lapses: Failure to maintain the mandatory blanket motor vehicle liability insurance policy can result in a substantial civil penalty of $5,000.
Reporting Requirements for Dealer Plates
Proper reporting is essential for managing dealer plates:
- Lost or Stolen Plates: If a dealer or manufacturer license plate is lost or stolen, it must be reported to law enforcement immediately. A police report should be obtained and maintained for audit purposes.
- Illegible Plates: If a plate becomes mutilated to the point of illegibility, it must be returned to ALDOR. A replacement plate will be issued upon payment of the applicable fee as per Section 40-12-265 of the Code of Alabama 1975.
- Vehicles Withdrawn from Inventory: When a vehicle is withdrawn from dealership inventory for personal or business use outside of dealership sales, the licensed dealer is required to purchase a regular Alabama license plate and register the vehicle appropriately.
Important Note on Tax Evasion
It’s crucial to understand that motor vehicle dealer, motorcycle dealer, and manufacturer license plates are explicitly not intended to be used as a substitute for regular license plates to avoid registration fees and ad valorem tax obligations. Such misuse is illegal and subject to penalties.
For detailed information, please refer to Sections 40-12-390 through 40-12-400 and 40-12-264 of the Code of Alabama 1975.
This comprehensive guide provides a roadmap to navigate the Alabama car dealer licensing process. By understanding these requirements and diligently following each step, you can establish your car dealership on a solid legal foundation and focus on building a successful business.
