Dealer License Scams?
Dealer License for $$$ a month! Scam?
Watch this video – Learn to recognize the dealer license scams
Are they all scams? No, but many do not offer complete explanations of their offers. These are the dealer license scams. The following details what to watch for in the website offers. Don’t just scan the info on their websites. READ EVERY WORD. If you see any of the following issues….proceed with caution.
And before you enter into any deal, verify with your state licensing group that it is valid and legal under your state licensing laws
Here are 5 red flags to look for….. You can easily be mislead by not understanding the licensing rules and regulations of YOUR state.
- Dealer Auction License Dealer License Scams. The service uses the term “dealer auction license”. There is NO dealer auction license. Dealer only auctions are in the business of auctioning vehicles, for a fee to the seller and the buyer, for owners such as dealers, banks, leasing companies, car rental companies, etc. The auction just provides the auction service between the seller and buyer. To access a dealer only auction, the business must be a dealer buyer or a seller exempt from your state’s dealer license requirements (banks, leasing companies, insurance companies, car rental companies, etc).
Since there are hundreds of auctions around the country, the registration process to allow entry, has been simplified. Dealers register with the service Auction Access. Once approved a dealer obtain an ID card for each of their employees authorized to purchase under their auction account. The ID card resembles a credit card with a photo that the buyers can use to scan into the auction. Visit the Auction Access web site to review the service.
The term “dealer auction license” is not used in the vehicle sales industry. It has no meaning. So why are they using it? I have no idea!
- The Wholesale Dealer License Scams. They are offering you a wholesale dealer license but the services do not make it clear in their promotional material that a wholesale dealer cannot sell to the public. Wholesale dealers can only sell to other dealers. Wholesale dealers act as finders for retail dealers. I have received many phone calls from individuals who have invested $2-$3K in getting a “dealer license” only to find that it was wholesale, worthless for what they wanted to do.
The offer may refer to the wholesale license as a auto dealer license, which it is, but it is wholesale only. If you want to sell to the public, do not obtain the wholesale dealer license.
- The Co-op or Shared License Dealer License Scam. They say they are a consulting firm that will set you up with a dealer in your state or another state. They use the term dealer co-op or shared license. These dealers that they will place you with are usually set up as LLC’s with a manager who will provide you training and assistance. Some of the consulting firms will also provide assistance in obtaining your own license. More about that later.
Important point: Once you are paired with a dealer, the consulting firm has no legal responsibility for you using the co-op dealer’s license. They will however, as stated in the contact, continue to bill the monthly fee. You will also be charged other fees by the co-op/shared dealer license.
The “get you a dealer license” services cannot be offered to residents of all states. Why? Because states has set laws or rules to stop the service from being offered to residents of their state. Example: Texas.
- Co-op/Shared License Issues in Dealer License Scams States require that a vehicle must be shown and sold at the business location of the dealer. So let’s assume you have a shared license from another state. You WILL be allowed into all dealer only auctions. You purchase your first vehicle at the auction. Then you discover….. you do not own it! It will be titled assigned to the shared license holder. You advertise on Craigslist in your town as an individual. Bingo….this is a violation of Federal Trade Commission advertising guidelines. You must advertise it as a dealer. Plus you have defrauded Craigslist of their fee for dealer listings.
You have also violated the licensing laws of your state. You are advertising as a dealer with the vehicle being located in your state. If you are offering for sale, negotiating and agreeing to a price on a car in your state, then you are required to be licensed in your state and this process must take place at a dealer business location.
These services will throw around the idea that you are selling on the Internet. Know this….. vehicle businesses do NOT sell on the Internet, they ADVERTISE on the Internet. It may seem like I’m just being stupid in strictly defining words but YOU need to know that every state dealer licensing group in its rules or regulations say that vehicles cannot be displayed and sold off the business premise (without special permission).
These co-op, out of state, dealers, will handle the paperwork and process the sale for a fee. The paperwork will have to be sent overnight both ways. As a member of the LLC, you are personally liable for your actions that violate the laws in any state.
Here is a practical co-op problem. Your potential buyer likes the vehicle. You explain, you will have to send the paperwork to a location in another state. At that point, a red flag will go up and many buyers will walk away. They want to drive away in the car……now! “I’ll give you cash. You give me the car.”
Another service offered is the co-op/shared license is set up with a dealer in your state. Same issues and the vehicle must be sold at the dealer’s business location.
5. They say you are an Agent of the Dealership. Sorry, but in the vehicle sales business there are no agents of dealerships. There are owners, salespeople, service managers, service techs, finance manager, etc. If you are selling a car that is in the name of a dealer, and in these examples it is, you are an employee by law. You may be a contract sales employee (1099) or a direct employee (W-2). In any case you are a salesperson which requires a sales license in many states.
A SIMPLE SUMMARY OF DEALER LICENSE SCAMS INFO
Buyer beware of these advertised easy ways to get a dealer license. Educate yourself about the dealer business before investing any money. You must understand what you are purchasing. It is your money and your legal responsibility to know.
I have talked with many over the years who were burned by these offers because they did not have a clue about the licensing laws or the car dealer business. It’s not complex but it is a regulated industry.