Obtaining a Colorado auto dealer license can seem like a daunting task, but it’s only difficult if you don’t have the right info. Let us show you how you can get a Colorado auto dealer license in just 6 easy-to-follow steps!
Do I Need a Colorado Auto Dealer License?
Anyone who sells new or used vehicles in the state of Colorado is required to hold a Colorado motor vehicle dealer license. But we have good news – it’s not extremely difficult to get a Colorado dealer license. You just need the proper information presented in a plain, straightforward manner, and that is exactly what we set out to do when creating this guide to obtaining a Colorado auto dealer license. Let us walk you through the process step-by-step to help you get your dealer license!
Step 1 – Qualify for a Colorado Dealer License
There are three qualifications that you must meet personally in order to qualify for a Colorado dealer license. These can be challenging for some to achieve, but we have broken down each qualification and we even have individual guides to help you with each of the state’s criteria. So, what does it take to qualify?
1. Personal Net Worth of $100,000+
This sounds intimidating and unfeasible for many, but don’t worry, we’ll help you understand how you can make this possible. No, you don’t need $100k cash in the bank. Your personal net worth is the sum of all of your assets minus the sum of all of your liabilities, or debts. How do you calculate your personal net worth? Add up the value of all of your assets (home, cars, cash, bank accounts, investments, personal belongings, etc.) and then subtract all of your debts (mortgage, auto loans, credit card debt, etc.). This number – after adding up your assets and subtracting your debts – is the number that must equal $100,000 or more.
Don’t sell yourself short here… Count everything you can assign a value to: furniture, electronics, watches, clothes, everything! And don’t forget that old 401(k) from three jobs ago that is still sitting with the investment company. As long as you can get that final number to a minimum of $100,000, you will qualify for a Colorado dealer license.
2. Credit Score of 701+
The Dealer Board will obtain a Vantage credit report from Experian. A minimum score of 701 is required in order to get a Colorado dealer license. This is another requirement that some have trouble meeting, but hopefully we can help! There are several ways to get a quick boost in credit score, and many more ways to get a boost in score over time. We have dedicated an entire guide to improving your credit score, but we’ll give a quick synopsis of that here as well.
The quickest way to get a boost in your credit score is paying down your credit card debt. Many people don’t realize that you’ll typically see an improvement in your credit score within 1 month if you pay off or pay down your credit card debt. For the long-term, make sure you don’t miss any payments on credit cards or loans, and don’t open any new accounts (unless you already have a long credit history and don’t have many recent credit inquiries). Improving your credit score helps you qualify for a Colorado auto dealer license. Plus, you’ll get better terms on loans, credit cards, mortgages, etc. – so it’s a win-win!
3. Pass a Criminal Background Check
The state will pull a criminal background check, so you want to be upfront from the beginning if you’ve had any run-ins with the law. If you have any felony or misdemeanor convictions – even if you’ve pled no contest – you’ll want to include all of the supporting court documents with your Colorado dealer license application. You also must be compliant with any Child Support Orders. If you are behind on child support, or if you don’t include supporting court documents for past criminal issues, your application may be delayed or even denied.
Step 2 – Get Educated
Dealer Education Class
The state wants to make sure every Colorado auto dealer knows the rules. Therefore, they require that you attend a pre-licensing education course. This applies to all new applicants for a Colorado dealer license, unless you’ve held a Colorado dealer license in the past three years. These dealer education classes last one full day and cover a wide range of topics to prepare you for your future as a dealership owner, helping you to remain in compliance with Colorado motor vehicle sales laws. Topics covered include licensing for both dealers and salespeople, advertising rules and regulations, contracts, disclosure requirements, repossessions, how and when title delivery must take place, vehicles with branded titles, credit applications, and much more. Colorado dealer education classes are very informative, and you will certainly learn a lot!
Once you’ve completed the course, you’ll get a certificate of completion. That Pre-Licensing Education Certificate for Dealers must be included when you submit your Colorado dealer license application. You can find additional information as well as a list of approved providers for the Colorado pre-licensing education course on the Colorado Department of Revenue website.
Dealer Mastery Exam
The next step after taking the pre-licensing education course is to pass the Mastery Exam. This is an online exam. The exam must be administered either by a license Colorado auto dealer, or by an approved third-party administrator. It’s an open-book exam with a 90-minute time limit, and you’ll get your score instantly upon completion of the exam. Once you’ve passed the Mastery Exam, you’ll need to fill out the Mastery Exam Affidavit (DR 2097). The affidavit will need to be included with your dealer license application. You can visit the Colorado Department of Revenue website for additional information and a list of approved exam administrators.
Step 3 – Find a Location
Now it’s time to find a home for your dealership. Before starting your search, you need to be aware of the requirements for a Colorado auto dealer location. If your location does not meet all of the requirements, the state will not accept your dealer license application. Take a look at what’s required:
- A permanent, enclosed office with enough space to accommodate dealer’s office.
- A place for books and records to be stored safely and available for inspection.
- Working electrical service.
- Adequate sanitary facilities (restrooms).
- Space to display one or more vehicles.
- Complies with local zoning requirements.
- Must be used exclusively for dealer business (the office, entrance and display area cannot be shared with another business). Powersports are exempt from exclusive use.
- Property must be owned or leased. If leased, the lease must allow Dealer operations, signage and space to display one or more vehicles. You’ll submit your lease with your dealer license application for review.
Source: Colorado Department of Revenue
Once you’ve secured a location for your dealership, you’ll need to post your hours of operation as well as a sign identifying your business. Your dealership must be open at least 3 days per week for a continuous 4 hours per day between 8 AM and 9 PM. Those hours must be posted outside of your location (on the door, for example). The sign identifying your business must be a permanent sign (no banners). If your permanent sign has been ordered but has not yet arrived, you can submit your Colorado dealer license application with a temporary sign and proof that your permanent sign has been ordered. The sign must identify your dealership by the licensed name and “be clearly visible to the public from outside the building that houses the dealership or from the public entry area of the building that houses the dealership”.
Step 4 – Prepare Documents
Along with your Colorado auto dealer license application, you will need to submit quite a few documents. Make sure to include every document that is required. Also, be sure to properly fill out each of the documents. Otherwise, your dealer license application may be delayed or even rejected. Here’s what you’ll need:
- Pre-Licensing Education Certificate (required if you haven’t held a Colorado motor vehicle dealer license in the past 3 years.
- Mastery Examination Affidavit (DR 2097) (required if you haven’t held a Colorado dealer license in the past year).
- Addendum (DR 2109B) for each owner, partner, LLC/LLP member, stockholder (5% or more), director or officer.
- Copy of a photo ID for the applicant and all people who filled out an Addendum (DR 2109B).
- Affidavit – Restriction on Public Benefits (DR 4679) for the applicant and all people who filled out an Addendum (DR 2109B).
- Statement of Financial Condition (DR 2114) for each owner, member, or partner. A financial statement is also required if you’re filing as a corporation or LLC
- Place of Business Affidavit (DR 2044) and photos of your dealership’s signs, entrances, buildings, and bathrooms to avoid a potential delay in processing.
- A copy of the lease for your place of business (if applicable).
- Dealer Plate Affidavit (DR 2640).
- A written Business Plan including but not limited to: staffing, hours of operation, overhead costs, sales projections, inventory acquisition,
Floor-planning
/ financing / lines of credit. - Franchise agreement (if applying as a franchised dealer).
If applying as an LLC/LLP/Corporation, you’ll also need the following documents:
- Certificate of Good Standing from the Colorado Secretary of State.
- Constituent Filed Document (such as Articles of Organization, Articles of Incorporation, Articles of Assocation, Certificate of Limited Partnership, etc.).
- Bylaws of the Corporation, operating agreement for a limited liability company, or the partnership agreement for any partnership.
- Trade Name: If doing business in a name other than the corporate name, attach a copy of the Certificate of Assumed or Trade Name.
Step 5 – Bond & Insurance
Before you submit your application, you will need to purchase a $50,000 Colorado auto dealer bond. Don’t worry, it’s not as expensive as it may sound. The price you’ll pay when you apply for a Colorado dealer bond is based on several factors. These include your credit score, prior claims against a dealer bond, and years of experience. Another critical factor is which company you use to buy your Colorado auto dealer bond. To shop multiple providers to find the best rates for your Colorado dealer bond, we highly recommend Colorado Dealer Insurance.
We have an entire guide walking you through how to get the lowest price for your Colorado dealer bond.
Next up is your Colorado dealer insurance. The sooner you get your Colorado auto dealer insurance, the sooner you’ll have coverage and protection when you buy inventory and have customers to your lot. Keep in mind that insurance for an auto dealer is a unique insurance policy that’s unlike other business insurance policies. You’ll also want to shop around with multiple insurance carriers, not just one, if you want the best price. Therefore, make sure you’re getting your insurance from an independent agency that specializes in insurance for Colorado auto dealers. We highly recommend Colorado Dealer Insurance.
Step 6 – Submit your Application
The final step is to submit your application for a Colorado dealer license to the state!
Make sure to include payment to cover the fees. The current dealer license application fee is $623, and there’s also a background check fee of $39.50 per applicant. You can view a list of all Colorado dealer license fees on the Colorado Department of Revenue website.
Once you’re certain that you have all of the necessary documentation and all forms are correctly filled out, you can apply for a Colorado auto dealer license online. If you prefer to keep it old school, you can fill out a physical copy of the Dealer License Application (DR 2109) and mail it to the state.