How to Start a Used Car Dealership in Colorado: Dealer License ($841), $50,000 Bond and Eight-Hour Course

If you want to sell used vehicles in Colorado, you need a Colorado used car dealer license from the Department of Revenue's Auto Industry Division, working with the Motor Vehicle Dealer Board. The license sits on top of a business entity, a sales tax account, a qualifying building, a $50,000 surety bond, and an eight-hour prelicensing course. None of these steps is hard on its own, but they have to happen in the right order, and several of them depend on each other.

This guide walks through the process in the order most applicants find works. It covers the fees, the statutes that govern dealers (C.R.S. 44-20), and the mistakes that delay applications most often.

Disclaimer: This article is informational content, not legal or tax advice. Dealer licensing rules, fees and forms can change, and the board may reset fees each year. Confirm every figure with the named agency before you pay, and consult a qualified attorney or CPA for your specific situation.

What You Need Before You Start

Gather these items before you begin the application so you are not stopping midway to hunt for a document:

• A business name that is available on the Colorado Secretary of State's records, checked through the Colorado business entity search
• Formation documents for your entity (Articles of Organization for an LLC or Articles of Incorporation for a profit corporation)
• A registered agent with a physical Colorado street address, plus the agent's consent
• A building for your principal place of business that has electrical service and sanitary facilities
• Written confirmation from your city or county that the location is zoned for vehicle sales
• Your federal employer identification number, if your entity needs one
• Government-issued ID and fingerprints for each owner and each salesperson
• A surety bond for $50,000, or a savings or certificate of deposit alternative that meets the same requirement
• A payment method for the license fee and related filing fees

Step 1: Choose the Right License Class

Colorado issues several classes of vehicle dealer license under C.R.S. 44-20. Picking the wrong class costs you time and fees, so decide this first. The main classes are:

• New and used dealer: the most common choice for a dealership selling new and used vehicles.
• Used motor vehicle dealer: for selling used vehicles only.
• Salesperson: for individuals who sell vehicles for a licensed dealer. A dealer license covers up to two named owners as salespersons.
• Wholesaler: for selling to other dealers rather than retail buyers. A wholesaler license covers up to two named owners.
• Wholesale auction: for operating an auction that sells vehicles to licensed dealers.
• Business disposal: for businesses that sell vehicles they have owned for over one year, where those sales are under 20% of gross revenue.
• Buyer agent: for representing buyers in vehicle purchases.

Powersports, RV, trailer and other specialty dealers appear as separate rows on the Department of Revenue fee schedule (Form DR 2246), so check that schedule if your inventory is not standard passenger vehicles.

One warning about the line between a hobby and a business: selling three or more vehicles of the same type in a calendar year is prima facie evidence of dealing under 39-26-104(1)(b)(II). Occasional flipping can therefore require a license even if you never planned to open a lot.

Step 2: Form Your Business Entity

Colorado has no general state business license. Your first government filing is with the Secretary of State, Business Organizations Division, which forms the entity you will license as a dealer.

1. Pick a compliant name. An LLC name must include a term such as Limited Liability Company, LLC or Ltd. Liability Company under section 7-90-601 C.R.S. It must also be distinguishable on Secretary of State records. Capitalization and punctuation do not make a name distinguishable, so ABC Inc and abc inc are treated as the same name.
2. Optionally reserve the name. A name reservation costs $25 and holds the name for 120 days. It is useful if your bond, zoning and building steps will take time.
3. File the formation document online. Articles of Organization for an LLC cost $50. Articles of Incorporation for a profit corporation also cost $50. Filings made through the Colorado Secretary of State online filing system are processed in real time, so your record can update immediately after payment unless your document sets a delayed effective date.
4. Name a registered agent. The agent can be an individual or an entity and must consent to the appointment. An individual agent must be at least 18, hold a current valid Colorado driver's license or state ID card, and live in Colorado or have a usual place of business there. Enter the agent's name and ID number exactly as they appear on the credential. The address must be a physical Colorado street address, never a P.O. box.

Plan the periodic report now, even though it is not due yet. A new LLC or corporation files no periodic report in its first year. The first report is due in the second year, costs $25, and is filed every year in the entity's periodic report month. You can file it as early as two months before that month and as late as two months after it without penalty. An entity that does not file becomes delinquent.

Step 3: Register a Trade Name If You Will Use a Different Name

If the dealership will operate under a name other than the one on your articles, file a Statement of Trade Name. Trade names are filed statewide with the Secretary of State, not with the county. The fee is $20 to file online and $5 to renew. Confirm the current process on the Secretary of State trade name FAQ.

Step 4: Secure a Qualifying Principal Place of Business

This step is easy to overlook. Under 44-20-120, your principal place of business must be a building with electrical service and sanitary facilities. A room in a hotel, a rooming house or a dwelling does not qualify. Local zoning also applies, so a building that meets the statute can still be disqualified if your city or county does not allow vehicle sales there.

Before you sign a lease or buy a property, ask the local planning and zoning office in writing whether vehicle sales are permitted at that address. Ask about any conditional use permit, signage rules and display requirements. Keep that written answer for your file. If you plan to sell from a second site, that location needs its own additional location fee, listed in the table below.

Step 5: Open a Department of Revenue Account and Sales Tax License

Dealers collect sales tax on vehicle sales, so you need a sales tax license in addition to the dealer license. The Colorado Department of Revenue, Taxation Division, administers the state sales tax. The state rate is 2.9%, plus any special district taxes that apply to your location. Apply through the Colorado sales tax license page.

Watch the city issue closely. Home-rule cities, including Denver, Aurora, Colorado Springs, Boulder and Fort Collins, collect and license their own city sales tax. A state sales tax license does not cover them. If your lot is inside one of those cities, you must also apply directly to that city. Check with the city's tax or finance office before you assume your state license is enough.

Step 6: Complete the Eight-Hour Prelicensing Course

Applicants for used dealer, auction and wholesaler licenses must complete an eight-hour prelicensing course approved by the Motor Vehicle Dealer Board. Under 44-20-118(7), the course requirement is waived if you have held a dealer license in the past three years. If you are waived, keep documentation of the prior license, because the application will ask for it.

Ask the board or the Auto Industry Division for the current list of approved course providers and whether they offer online sessions. Course fees are set by the provider, not the state, so compare prices before you enroll. Save your completion certificate and include it with the application.

Step 7: Obtain the $50,000 Surety Bond

Under C.R.S. 44-20-112 and 44-20-113, a dealer, wholesaler, auction or business-disposal applicant must post a $50,000 surety bond. A dealer selling only small utility trailers needs a $5,000 bond instead. Salespersons carry a separate $15,000 bond. All bonds are annual.

You can use a savings or certificate of deposit alternative in place of a surety bond, as long as it meets the same $50,000 requirement. Ask the Auto Industry Division how the alternative must be documented and held before you choose it.

A surety bond is not free. You pay an annual premium to a surety company, and the premium depends on your credit and financial profile. This article does not state a premium rate because we could not verify one, so get quotes from a licensed surety agent and compare the annual cost against the cash alternative before you commit.

Step 8: Submit Fingerprints, the Application and Fees

Each owner and salesperson must complete a fingerprint check, which costs $39.50 per person. Schedule fingerprinting early, because results can take time and your application cannot be approved without them. Assemble the completed license application, the entity documents, the course certificate, the bond or alternative, the zoning confirmation and the sales tax information, then submit everything with your license fee.

The original fee for a dealer, wholesaler, business disposal, buyer agent or auction license is $841 on the schedule covering July 1, 2025 to June 30, 2026. That schedule has now expired, and the board may reset fees each year. Check with the Auto Industry Division for the 2026-27 schedule before you finalize your budget.

Fee Summary

The figures below come from the DR 2246 schedule for July 1, 2025 to June 30, 2026. Confirm each one with the agency before you pay.

Item	Amount	Notes
Articles of Organization (LLC) or Articles of Incorporation	$50	Secretary of State, paid online
Name reservation	$25	Holds the name for 120 days; optional
Trade name (Statement of Trade Name)	$20 to file; $5 to renew	Only if you operate under a different name
Original dealer, wholesaler, business disposal, buyer agent or auction license	$841	Schedule expired; check with the Auto Industry Division
Dealer license renewal	$686	Annual; check with the Auto Industry Division
Original salesperson license	$203	Check with the Auto Industry Division
Salesperson renewal or transfer	$157	Check with the Auto Industry Division
Additional location	$352	Requires its own zoning review
License change	$203	Check with the Auto Industry Division
Late fee	$50	Applies when renewal is late
Fingerprint check	$39.50	Per owner or salesperson
Off-premise permit	$200 or $500	Check with the Auto Industry Division for which applies
Temporary out-of-state dealer	$367	Check with the Auto Industry Division
Dealer surety bond (or alternative)	$50,000	Bond amount, not a fee; premium depends on your profile
Small utility trailer dealer bond	$5,000	Bond amount, for dealers selling only small utility trailers
Salesperson surety bond	$15,000	Bond amount, annual
Periodic report (LLC or corporation)	$25	First due in the second year; annual after that
Sales tax license	Check with the Department of Revenue	State rate is 2.9% plus special district taxes

Common Mistakes to Avoid

• Leasing a space before confirming zoning. A lease signed before you have written zoning approval can leave you paying rent on a site you cannot license.
• Using a residence or hotel room as your office. Under 44-20-120, these do not qualify as a principal place of business.
• Assuming the state sales tax license covers a home-rule city. Denver, Aurora, Colorado Springs, Boulder and Fort Collins license their own city sales tax.
• Using an old fee figure. The $841 fee is from a schedule that has ended. Confirm current amounts before budgeting.
• Skipping the course waiver paperwork. If you claim a waiver because you held a license in the past three years, attach proof.
• Forgetting the registered agent's ID details. A mismatch between the name or ID number on file and the credential can hold up your entity filing.
• Letting a salesperson sell before licensing. Salespersons need their own license and a $15,000 bond.
• Treating occasional sales as exempt. Three or more vehicles of the same type in a calendar year is prima facie evidence of dealing.

Expected Results

Results depend on your entity type, your location, the completeness of your file and how quickly the agencies respond, so treat any timeline here as an estimate and confirm current processing times with the Auto Industry Division. Your business outcome depends on sales execution, inventory, financing and local market conditions, none of which a license can guarantee.

Keep Your License Active

A dealer license runs to the end of the month one year after issue, with a 30-day grace period under 44-20-111. Calendar your renewal date when you get the license, and pay the $686 renewal fee before the grace period ends to avoid the $50 late fee. Renew your $50,000 bond each year, keep your salespersons current, and file the entity's periodic report every year after the first. If you add a location, file for the $352 additional location fee before you sell from it. Franchise dealers also need a manufacturer appointment, which is a separate process from the state license.

Next Steps

Start with the Secretary of State, then the zoning letter, then the bond quote, since those three items control your timeline. The Colorado Small Business Development Center Network at sbdc.colorado.gov offers free and low-cost advising that can help you organize the plan. For federal small business resources, the SBA Colorado district page lists local contacts.

Because dealer licensing involves entity structure, sales tax, bonding, lease terms and possibly multiple city jurisdictions, consider working with a Colorado attorney and a CPA before you sign anything. The cost of an hour of professional review is small compared with a rejected application or a lease on a site you cannot use.