Wholesale Dealer License
Selling Used Cars with a Wholesale Dealer License
Wholesale car dealers play a major role in the auto industry. Traditionally, in most industries, wholesalers by products in bulk from manufacturers and resell them at a higher price to retailers. In the auto industry, wholesalers buy cars in bulk at special dealer-only auctions and resell them at a higher price to retail dealers or at other auctions. Auto wholesalers do not buy directly from the manufacturer.
Major retail dealers, car rental companies, corporate fleet managers and banks sell used and repossessed vehicles at dealer-only auctions. The purpose of these auctions is to liquidate large volumes of vehicles that are difficult for these organizations to sell. Wholesalers purchase the vehicles and resell them to smaller used car dealers that are better equipped to sell them to the general public. Contrary to popular beliefs, these used vehicles cannot be obtained at auction for unreasonably low prices. They are priced fairly according to the wholesale market.
Car manufacturers do not sell new cars at dealer-only auctions. Car manufacturers provide new cars directly to new car dealers. If these vehicles do not sale within a certain period of time, they are sold off at dealer-only auctions to wholesalers. This process helps move vehicle inventories from new car dealerships to used car lots around the country. Retail dealers also send the trade-ins they do not wish to keep on their lot.
Auto wholesalers also broker sales between dealers. Some major dealers do not have the time to attend auctions. Instead, they will contact a wholesaler directly. The wholesaler will then broker the sale of those vehicles to smaller used car dealer in exchange for a commission fee. Typically, major dealers will only conduct business with established wholesalers that they have dealt with before. It is difficult for a new wholesaler to get the attention of major dealers.
When smaller dealers need specific vehicles, they can contact wholesalers who will search the auctions for them. Wholesalers will also contact major dealers that they know to find out if any those types of vehicles are being prepared for future auctions. Smaller dealers are more likely than the large franchise dealers to give a new wholesaler a chance before contacting an established wholesaler.
While wholesalers can broker sales between other dealers, reselling auctioned vehicles is their primary business. The auto industry transfers millions of cars each year through these actions. Wholesalers make a small profit on each transaction but complete many transactions each month.
Dealer-only auctions are closed to the general public. The vehicles are sold in bulk under wholesales terms. Retail sales tax is not applied to the final sale. This tax is only applied once the vehicle is sold to the general public. Only licensed car dealers are allowed to purchase vehicles at these auctions. While retail dealers can buy from these auctions and sell to the general public, those with a wholesale dealer license are only allowed to sell to retail dealers. They are not allowed to sell to the general public.
A wholesale dealer license is needed in order to buy cars at dealer-only auctions and then resell them to used car dealers. Since millions of cars are transferred through these auctions each year, a licensed wholesaler has the potential of making a significant income.