How to get a dealer license in Colorado

Selling 'three or more used motor vehicles' or offering 'more than three used motor vehicles at the same address or telephone number in any one calendar year' is prima facie evidence that you are in the business of selling used vehicles (C.R.S. 44-20-102(26)). Acting as a dealer without a license is unlawful, except for a business selling its own work vehicles under narrow limits, such as no more than 20 vehicles in two years (C.R.S. 44-20-124(2)).

• Used motor vehicle dealer: Sells, exchanges or leases used vehicles only. May also negotiate sales for consumers with a written compensation disclosure, except motorcycles, autocycles and off-highway vehicles. Up to two named owners may act as salespersons.
• Motor vehicle dealer: Sells new and used vehicles and must file a manufacturer's certificate of appointment. Up to two named owners may act as salespersons.
• Wholesaler: Sells vehicles only to licensed dealers. Up to two named owners may do the wholesale work. Needs the $50,000 bond, the exam and the 8-hour course.
• Wholesale motor vehicle auction dealer: Runs auctions where the buyers are licensed dealers, or sells government vehicles to consumers. Must carry check and title insurance or give written guarantees.
• Business disposal license: Lets a business sell its own used work vehicles (owned over a year, used only for business, titled to it, taxes paid, not mainly passenger vehicles) if vehicle sales are no more than 20% of gross revenue.
• Buyer agent: Paid by a consumer to help buy or lease a vehicle. $5,000 bond.
• Motor vehicle salesperson: Sells vehicles while employed by a licensed dealer. $15,000 bond and the state exam.
• Temporary motor vehicle dealer license: Up to 60 days for the buyer of a dealership that has been awarded a new vehicle franchise, or 30 days for an out-of-state dealer selling at a specific event.
• Powersports vehicle dealer and used powersports vehicle dealer: Dealers in off-highway vehicles, snowmobiles and personal watercraft, licensed under part 4 of C.R.S. 44-20.

Surety bond. The bond is $50,000 for motor vehicle dealers, used dealers, wholesalers, wholesale auction dealers and business disposal licensees, or $5,000 for dealers who sell only small utility trailers under 2,000 pounds. A savings account, deposit or certificate of deposit can be used instead. The bond covers retail consumers' losses from dealer fraud, pays only after a final fraud finding by the board or a court, and must be renewed each year with the license, which can be done with a continuation certificate (C.R.S. 44-20-112). Salespersons need a $15,000 bond and buyer agents a $5,000 bond (C.R.S. 44-20-113, 44-20-114).

Insurance. The dealer licensing statute (C.R.S. 44-20, part 1) does not list a garage liability insurance requirement for a used dealer license. Wholesale motor vehicle auction dealers must carry check and title insurance or give written guarantees of title and payment (C.R.S. 44-20-108).

Place of business. Dealers and used dealers need a principal place of business used only for the licensed business and related businesses, with adjoining space to display at least one vehicle and a permanent enclosed building big enough for the dealer's office and a safe place for records. Records may be kept at another Colorado site after 30 days' written notice to the board (C.R.S. 44-20-102(22), 44-20-119). The building needs electricity and adequate sanitary facilities, and it cannot be a room in a hotel, rooming house, apartment or dwelling unless the whole ground floor is commercial and the office is on that floor (C.R.S. 44-20-120). The board's rule defines adequate sanitary facilities as a publicly accessible private bathroom with a working toilet, and you must document that you own or lease the site and are in possession of it (1 CCR 205-1, Rule 44-20-120). Local zoning still applies. Test drives and delivery of vehicles or documents may happen away from the lot. Your prelicensing education certificate must be posted at the principal place of business (C.R.S. 44-20-118(7)).

Background check. Each applicant submits fingerprints to the Colorado Bureau of Investigation (CBI) or the Auto Industry Division for state and FBI criminal history checks and pays the CBI's cost. An arrest with no recorded outcome leads to a name-based court record check (C.R.S. 44-20-118(8)). The board must deny a license if the applicant was convicted of, or pleaded no contest to, a felony under articles 3, 4 or 5 of Title 18, or a crime of odometer, salvage, title or retail consumer fraud, in the previous three years. It may also deny for other convictions, fraud, false statements, or an unfit licensing, criminal or financial record (C.R.S. 44-20-121).

Pre-license education. Required (8 hours).

1. Have the owner or managing officer (or all general partners) complete a board-approved 8-hour prelicensing education program and keep the certificate (C.R.S. 44-20-118(7)).
2. Pass the state dealer exam with a score of at least 85% and file the board's examination affidavit (C.R.S. 44-20-116; Rule 44-20-104(3)(k)).
3. Secure a principal place of business with display space, a permanent enclosed office, electricity and a restroom, in a location local zoning allows, with proof you own or lease it (C.R.S. 44-20-120; Rule 44-20-120).
4. Get a $50,000 dealer bond, or a savings account, deposit or certificate of deposit instead (C.R.S. 44-20-112).
5. Submit fingerprints to the CBI or the Auto Industry Division for state and FBI background checks and pay the CBI fee (C.R.S. 44-20-118(8)).
6. Apply to the Motor Vehicle Dealer Board through the Auto Industry Division with the board's license application, the license fee, and a document naming the board secretary as your agent for service of process (C.R.S. 44-20-118).
7. After you are licensed, post your education certificate at the dealership and buy depot tags ($5 each) or dealer plates to move your vehicles (C.R.S. 42-3-116).

Not for a used dealer license, which requires a principal place of business with room to display at least one vehicle and a permanent enclosed office building. The statute does not apply that rule to wholesalers, who sell only to licensed dealers, though they must report any change of place of business (C.R.S. 44-20-102, 44-20-119).

A Colorado wholesale motor vehicle auction dealer may sell only to dealers licensed in Colorado or another jurisdiction, apart from separate government vehicle sales to consumers (C.R.S. 44-20-108). AuctionACCESS (auctionaccess.com), which credentials buyers for over 400 auction marketplaces, limits membership to licensed vehicle dealers and their authorized representatives.

Licenses expire one year after the month they are issued. The state mails a renewal notice 30 days before expiration, and you renew each year by paying the renewal fee and renewing your bond. There is a 30-day grace period with a late fee if your bond stays in force. A license ends if you surrender it or abandon your place of business for more than 30 days, and then you must file a new application (C.R.S. 44-20-111, 44-20-112).

This is general information, not legal advice. Rules and fees change, so confirm the details with the Colorado Department of Revenue, Auto Industry Division, for the Colorado Motor Vehicle Dealer Board before you apply.

Planning the business side too? Read how to start a car dealership. Used cars you offer for sale need an FTC Buyers Guide in the window. Selling your own car instead? See how to sell a car in Colorado.