How to Get a Car Auction License in New Jersey

September 13, 2023

Right now, used vehicles are retaining value for longer than ever. The growth of auto dealer licenses in the United States reflects the continued expansion of the automotive industry and consumer demand for a wide range of vehicle options. That makes running a vehicle auction business a lucrative opportunity for any entrepreneur. However, if you plan to run an auto auction in the state of New Jersey, there are a few things you'll need first in order to obtain your license. This article will cover all of the licensing and other requirements involved in running a vehicle auction in New Jersey.

What Type of License Do You Need to Buy and Sell Cars in Auctions?

In New Jersey, individuals wishing to buy or sell a few cars at auction don't need any kind of licensing. However, if you're planning to do so as a profession or as an organized business, licensing is required. Every new and used car dealer in the state of New Jersey needs a dealership license from the New Jersey Motor Vehicle Commission (MVC) to legally operate. You can obtain the necessary applications for the required dealership license from the MVC website.

The MVC offers four types of dealership licenses, which are:

  • New and used car dealership
  • Used car dealership
  • Leasing dealership
  • Boat dealership

To operate a vehicle auction business, you'll need a used car dealership license.

New Jersey Auto Auction Licensing Requirements

If you wish to become a motor vehicle dealer in the state of New Jersey, you'll need to complete the dealer license application and meet the licensing requirements. Here are the requirements for obtaining a New Jersey dealer license.

A Published and Established Place of Business

The first requirement for obtaining a new or used car dealer license in New Jersey is that you must have a published and established place of business. This must include an office that's at least 8 feet by 9 feet, with a desk, chair, and landline telephone. It must also have a working safe that's suitable for storing and protecting motor vehicle documents.

Your place of business must also have enough space to showcase a minimum of two vehicles. Plus, it must have a permanently affixed exterior sign with lettering large enough for passersby to read it from the roadway.

Necessary Evidentiary Paperwork

There is also a variety of evidentiary paperwork that you'll need that prove the bona fides of your business. This includes the following documents:

  • A copy of your place of business's telephone bill
  • A copy of your place of business's deed, lease, or purchase agreement
  • Your IRS form showing your federal taxpayer identification number
  • A copy of your New Jersey Sales Tax Certificate of Authority
  • Driver's license copies for all business owners/officers/members/partners
  • A copy of your business formation papers or corporate resolution
  • A copy of your alternate/fictitious name filing certificate
  • A copy of your certificate of authority from the Department of Treasury (if you represent an out-of-state corporation or LLC)

Proper Insurance and Bonding

You must also obtain the proper insurance cover for your business as well as a surety bond. All used car dealerships in New Jersey need liability insurance that covers between $100,000 - $250,000 for bodily injury and at least $25,000 for property damage. They also need a $10,000 surety bond in your business's name and with its correct business address listed.

Steps to Get a Car Auction License in New Jersey

There are multiple steps involved in obtaining the necessary license to operate a vehicle auction in New Jersey. The appropriate steps are as follows.

Step One: Obtain the Right Insurance and Surety Bond

Before beginning the license application process, you'll need to obtain the proper insurance and NJ auto dealer bond the license requires. As specified in the requirements section, this means you'll need liability insurance with between $100,000 - $250,000 of bodily injury coverage and a minimum of $25,000 of property damage coverage. Plus, you'll need a $10,000 surety bond to cover legal claims by the state or individual customers resulting from your business operations.

Step Two: Obtain a Federal Tax ID and NJ Sales Tax Certificate

Next, you will need to obtain a federal tax ID and a NJ Sales Tax Certificate. This is necessary so you can properly file your business's federal tax forms and collect sales tax as per New Jersey state requirements. You can apply for the required federal tax ID online via the IRS website. And you can obtain the necessary New Jersey sales tax certificate by registering your business online with the NJ Treasury Department.

Step Three: Background Check and Fingerprinting

Since running an auto dealership—including a vehicle auction business—means you'll be processing large financial transactions, you'll need to get fingerprinted and pass a background check before applying for your car dealer license. For most applicants, this is merely a formality. The state uses the background check to make sure you don't have a criminal background that would suggest you cannot be trusted to operate a fair and legitimate used car dealership.

Step Four: Establish Your Place of Business

As discussed in the requirements section, there are minimum standards your place of business must meet before applying for an auto dealer license. Plus, you will need the right documentary evidence to prove that the business location meets those minimums before you submit your application.

Step Five: Register Your Business With the NJ Secretary of State

Before you may begin operating your vehicle auction business in the state of New Jersey, you must formally register your business with the NJ Secretary of State. This is required for you to legally operate your business in New Jersey and to file business tax paperwork within the state. You can complete the business registration via the New Jersey state website.

Step Six: Submit the Proper Application Forms

Next, you'll need to fill out and submit the proper application forms for the auto dealer license you need. If you're running a vehicle auction, you'll need the same license as any other used motor vehicle dealer. The application must be signed by your business's owner, partners, members, or corporate officers. Depending on the specifics of your business, you may also need to submit some supplementary application materials, which can include:

  • A dealer certification of license location type and proper walls
  • Child support data
  • Your MVC Dealer Certification/Signature card
  • A statement of your business's hours of operation
  • A fingerprint request notification form

You may also need to get the zoning for your place of business approved by the local municipality where you plan to operate.

How Much Does It Cost to Get an Auction License in NJ?

There are a few fees associated with the NJ auto dealer license application. You will pay $100 for the wall license that you'll need to display at your place of business. Plus, you'll pay a minimum of $257.50 for the initial set of five dealer license plates issued to your business. On top of that, you will also pay the premium for the required insurance and the up-front payment required for your surety bond. You will have to get an insurance quote and a bond quote to know what your specific costs will be.


What Is a Car Auction License, and Why Is It Required in NJ?

In the state of New Jersey, all car dealerships must have a New Jersey auto dealer license to operate. A car auction business needs a used car dealership license. This is required so the state can make sure you operate your business according to all relevant laws and meet all prerequisites before opening for business.

How Long Does It Take to Process a Car Auction License Application in NJ?

Although turnaround times aren't guaranteed, you can expect to receive your license within 30 days. This assumes, of course, that you've met the necessary requirements, paid the necessary fees, and filled out the application correctly.

What Are the Consequences of Operating a Car Auction Without a License in New Jersey?

You may face fines for operating a car auction without a license in New Jersey. And license holders may have their license revoked if they fail to meet the obligations set forth by the license.

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