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by Auto Legal Group
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Before opening a car dealership in California, several legal considerations should be taken into account. These include obtaining the proper licenses and permits, complying with state and federal regulations related to the sale of vehicles, and ensuring that the dealership is in compliance with any zoning laws or regulations in the area where it will be located. Additionally, it will be important to have a solid business plan and to be aware of the many consumer protection laws, and corresponding liabilities, that will apply to your dealership. It may also be advisable to consult with an attorney with experience in the automotive industry to ensure that your are compliant and have taken all available steps to protect your business for years to come.

These are just a few things to consider when opening a car dealership in California:

  1. Research the market: Understand the demand for the types of cars you want to sell, the competition, and the regulations in your area.
  2. Obtain the proper licenses and permits: You will need a dealership license from the California Department of Motor Vehicles (DMV) and other licenses and permits, such as a seller's permit from the California Board of Equalization, an employer’s license from the EDD, and a local business license, just to name a few.
  3. Find a location: Look for a location that is visible, accessible and has enough space to display and service cars, if you’re also considering having a mechanics shop as well. You may also be considering having an “office” style dealership, which has its own considerations as well.
  4. Create a business plan: Outline your financial projections, inventory plans, and marketing/sales strategies.
  5. Secure funding: Obtain funding for your dealership, whether through a small business loan, investors, personal savings, and/or through a flooring line of credit.
  6. Set up your dealership: Acquire the necessary equipment and inventory, hire staff, and set up your showroom and service department.
  7. Comply with regulations: Follow all state and federal regulations related to the sale of vehicles, including California's lemon law and truth in lending laws. Also, make sure you are following all employment laws.
  8. Adhere to and protect yourself when it comes to consumer protection laws (like the CLRA Cal Civ Code §1750): Make sure you comply with the many consumer protection laws that may apply to your dealership, such as the Consumer Legal Remedies Act (Cal Civ Code §1750), the Song Beverly Consumer Warranty Act/California Lemon Law (Cal. Civ. Code, §§ 1790 to 1795.8), the Automobile Sales and Finance Act (AFSA), and the Federal Trade Commission's Used Car Rule, just to name a few.
  9. Launch your dealership: Promote your dealership through advertising and other marketing efforts and open your doors for business.

It's worth noting that this is a general guide and specific steps might vary depending on the specific dealership. It is always advisable to consult with an attorney with experience in the automotive industry before starting the process to ensure that all legal requirements are met.