Wanting to Buy and Sell Used Cars? Legal Advice that will Save You Money

January 27, 2012

You may have decided that you want to buy and sell used cars, and you're seeking some advice as to whether this is a good idea. Actually, if you want to buy and sell cars, the first thing you will have to obtain is a business license. Generally, these are available at your local town hall for about $25 and they allow you to use the three letters d/b/a in your name.

Dealer's License

Once you have chosen your business name, you will have to obtain a dealer's license from the town and this is where it begins to get cumbersome. There are different types of dealer licenses that you must obtain from your town. If you opt for new car sales, then you will have to have a site with lighting, drainage and storage requirements. You will also need a new car dealer's license that is only issued after you have been granted a vehicle sales license variance by the zoning board of appeals. If the neighbors are up in arms about your plans, this could involve some very expensive legal work and an appeal to the Superior Court.

Wholesaler's License

Your best bet to save money is to go after a wholesaler's license. A wholesaler's license means you do not need to have a set site to do business. Most towns will usually let you bend the rules a bit if you have one or two wholesale cars on your property, as long as the vehicles won't be on your land longer than a couple of days and as long as they are outbound, rather than inbound.

There is a gray area here and that is vehicle sales, because a wholesaler's license means you are buying vehicles, whether from dealers or at auto auctions, for sale to other wholesalers or dealers and not to the public. Incidental sales to the public are allowed, in other words a car here and a car there. However, if you are found selling regularly on a retail basis under a wholesaler's license, you will be lucky if you escape with just a warning. They may pull your license and force you to obtain a new car dealer's license. Then your legal woes begin as you will face a round of hearings and there could still be a court challenge. The chances are good that if you opt for a new car sales license and you plan to buy a new car, this could pose some expensive legal requirements.

Lifestyle Changes

Even if you opt for a wholesaler's license--which is admittedly the least expensive way to go because you only need a sales tax license which you can also obtain yourself--you will be facing lifestyle changes. Your 9:00 to 5:00 day is out the window because you will have to be available when the cars are. If an auction is at 6:30 a.m., you had better be there early or else you won't be able to purchase the cars you want to. If you do purchase a wholesaler's license, you'll need the funding to pay for the cars because auctions and lone sellers usually deal only with cash. You also need the wholesale customers so that you can sell a car.

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