Have you always dreamed of owning an auto dealership? If you think life as an auto dealer is easy, think again. The auto industry is a unique one. Not only is it one of the most competitive industries in the nation, it’s also one that requires a lot of hard work and dedication. With all of the risk involved in being an auto dealer, you’ll need to understand the legalities, regulations and all of the other specifics before you apply for a license and open your doors. Here are 5 must-knows about the auto industry that you’ll need to research before you call yourself an auto dealer:

#1: You’ll Need a General License and a Dealer’s License

You never want to cut corners when you’re opening a legitimate business. Many people try to bend the rules by selling a limited number of vehicles, but when you’re selling cars for profit you’ll need a dealer’s license. To apply for a license, you may need to pass an exam to verify you know the safety laws and the rights of the consumer in the state. In addition to this, you’ll need a general business license. Don’t cut corners when it comes to licensing.

#2: You’ll Need a Fully Comprehensive Insurance Portfolio

When your inventory is worth hundreds of thousands of dollars, you’ll need to protect it. Unlike other industries, there are several different property and insurance policies that are required to run a fully protected dealership. In addition to coverage that covers your inventory, you’ll also need general liability and lot coverage when you’re servicing cars.

#3: Know the Federal Disclosure Laws

The Federal Used Car Rule is designed to protect consumer’s rights. If you fail to disclose specific information, you could be forced to pay a hefty fine. Dealers who fail to comply with the rules multiple times may be forced to close their doors. You must be willing to learn Federal rules and consumer’s rights laws before you become a dealer. If you’re not familiar with these rules, learn them before you open your doors.

#4: Bonding is Separate From Insurance

Insurance is designed to pay for losses to your inventory. It will also pay for property damage and injury. Insurance doesn’t pay when you have a failed contract. To protect yourself from failed contracts, you must secure a surety bond. While bonds are expensive, they are necessary in the automotive industry.

#5: Selling Retail or Wholesale

There is a major difference between being a retailer and a wholesaler in the industry. As a retailer, you’ll be selling cars to the public. As a wholesaler, you’ll be selling cars to businesses or other dealerships. Decide which route you would like to go before you apply for licensing. Make sure your business also has a website that is SEO optimized and easy to use. If you’re selling inventory like cars and Jeep wrangler tires online, make sure your customers know where to go to find these products.

Starting out as a new auto dealer can be very overwhelming when you’re not prepared. Be sure to know the laws, apply for licensing, and prepare yourself for an exciting new professional life as an auto dealer.