Dreaming of owning your own car dealership? You can start a car dealership in Canada. It’s an exciting and profitable business if you do it in the right way. In Canada, there is a large Automotive market. Especially the growing demand for both new and used vehicles. It is a golden opportunity for many entrepreneurs to step into this industry.
However, setting up a dealership is not as simple as just buying cars and selling them. You need a step-by-step plan to get you started. It requires you to have complete knowledge. In this article, you will know everything about how you can start a car dealership in Canada. The requirement from the license requirements is to set up costs and tips for staying compliant.
Why should you start a car dealership in Canada?
Starting a car dealership is a great opportunity for entrepreneurs. Being among the largest countries in the world. It is a business where you get to become your boss. The business relies on buying vehicles wholesale and then selling them at retail. You can also see the direct contract with a car manufacturer to sell new vehicles. Also, if you become a used car dealer, you’ll typically source inventory through wholesale auctions and trade-ins.
Who needs a motor vehicle dealer license in Canada?
Any person or any company selling or leasing motor vehicles to the retail market. The consumer must feel licensed motor dealing. In BC, you must be licensed if you sell, lease, or advertise motor vehicles as a business. Repeated or commercial-style sales without a licence are treated as “curbing.”
Furthermore, even for the simple sale of a vehicle, consumers, as part of this activity, are also required to have a license. A licensed dealership must have at least one registered salesperson. If you operate as a sole proprietor and sell vehicles yourself, you must register both as a dealer and as a salesperson.Every person involved in retail vehicle sales in BC must have a license. Motor Dealers are responsible for insurance, and all sales and management staff interacting with retail customers hold valid salesperson licenses.
How to start a car dealership in Canada
Here are the steps you can follow to start a car dealership.
1- Decide Between New or Used Car Dealership
The first step is one of the choices you made. Decide whether you want to deal in new vehicles or used vehicles.
New Car Dealership:
Dealing with new cars or selling new vehicles. You need an OEM franchise agreement. It is done with an automotive manufacturer like Toyota, Honda, or Ford. A new car dealership comes with high Investments, good showroom standards, and strict requirements.
Used Car Dealership:
It’s an affordable and flexible option to open a used car dealership in Canada. It requires you to have a motor vehicle dealer license. In this option, you do not need to sign an OEM franchise agreement. Many entrepreneurs start with used car dealerships before expanding into new models.
2- Register Your Dealership and Business
It’s important to register your dealership business as a legal business in Canada. You can choose between these
- Sole Proprietorship is a simple and low-cost process. However, in this option, the owner is personally liable.
- Another option is a partnership. In this, 2 or more owners share that responsibility and those risks.
- Corporation office limited liability in text benefits. But in this option, you require more paperwork.
3- Apply for a Motor Vehicle Dealer License
As a car dealership in Canada, you need a motor vehicle dealer license. The rule of license varies by province.
- In Ontario, dealers and salespersons must complete the OMVIC Certification Course (Georgian College) and meet registration requirements.
- In BC, dealers are licensed by the VSA. Example fees: dealer application $1,000; salesperson licensing $126; compensation fund contributions apply to locations and individuals.
- In Alberta, automotive businesses must be licensed by the provincial regulator (AMVIC) under provincial law; dealers and salespeople are licensed separately.
Here are the other requirements you also need in most provinces, including
- A background check (police record).
- A salesperson license is required for anyone directly selling vehicles.
- Proof of your dealership location, lease, or ownership.
4- Secure a Dealership Location
You need to secure your dealership location. Zoning is very important. You are not allowed to park cars anywhere and start selling. Every city has its own zone in the bylaws. That helps you to determine where Automotive sales businesses are allowed.
A good location for your dealership should have:
- High visibility and traffic.
- Adequate parking and display space.
- Office space for staff and customers.
- Compliance with municipal zoning regulations.
Leasing space is important in an Automotive commercial zone. Most often, it is required before your license is approved.
5- Dealer Plate (D-Plate) Regulations
Apply for dealer plates through your provincial transportation ministry. Rules on when/how they can be used (e.g., demos, test drives, transport) vary by province; follow your province’s specific conditions.
6- Set Up Financing and Accounts
You need to set up your financial account for your business, as a car dealership. Requires significant working capital. You may also need financing for purchasing inventory. To set up a showroom and to cover the initial operating cost.
Some provinces require contributions to a compensation fund and/or security arrangements; check your regulator’s current rules. This is to protect a customer in case of financial loss or disputes.
For example, Ontario requires contributions to the Motor Vehicle Dealers Compensation Fund.
7- Build Your Dealership Business Plan
You need to prepare a solid business plan before opening. The plan must cover the startup costs, like license fees, insurance, and staffing. Your target market is about your budget cards, luxury models, or family vehicles. The source of your inventory management. Your online and social media sales marketing strategies. How to keep up with consumer protection laws and regulations.
Having a clear and solid plan helps you to secure your finances from the Bank and investors. You will get a clear road map of your business finances.
9- Stay Compliant with Consumer Protection
In Canada, the laws of car dealerships are highly regulated to protect buyers. A car dealer must provide an accurate vehicle history, disclose damage, and follow fair advertising practices.
For example:
- In Ontario, OMVIC enforces MVDA rules, including mandatory disclosures and registration.
- In BC, the VSA licenses dealers/salespeople and enforces consumer-protection standards.
When can you officially open your car dealership in Canada?
Once you are done with all these steps and have secured your license, location, and staff. It’s time to get ready to launch your car dealership in Canada. Make sure to invest in a strong online presence. Listings on automotive platforms like AutoTrader and Kijiji, and Clear customer service policies.
To build trust and attract long-term customers, you have to follow every rule and regulation in Canada according to the province.
Start your car dealership with the assistance of Bestax
If you are feeling overwhelmed about starting a car dealership in Canada. The process feels Complex with all the licenses, regulations, and paperwork. The good news is you don’t have to do it alone.
If you want expert guidance with licensing and financial setup, the team at Bestax Canada is here to help. Our expert accountants and business advisors specialise in dealership registrations across Canada, including Ontario, BC, and Alberta.
Visit bestaxca.com today to connect with an advisor and take the first step toward your dealership success.
Quick FAQs
1. What licenses do I need to start a car dealership in Canada?
You need a motor vehicle dealer license from your provincial regulator (e.g., OMVIC in Ontario, VSA in BC, or AMVIC in Alberta).
2. How do I register as a motor vehicle dealer in Ontario?
For registration in Ontario, you have to apply through OMVIC. Complete the dealer certification course, submit required documents, and get location approval.
3. Do I need a salesperson license and background check
Most provinces require dealership owners and sales staff. Because to must undergo background checks and obtain salesperson licenses before selling vehicles.
4. What zoning and location rules apply to a car dealership?
Dealerships must be in areas zoned for automotive sales with proper display space, parking, and offices. Municipal zoning bylaws apply.
5. How much does a dealer license cost in Canada?
Costs vary by province. For example (Ontario): dealer application processing fee $670; salesperson processing fee $335; plus a $324 contribution to the Motor Vehicle Dealers Compensation Fund (amount set by the Board).
6. How can Bestax Canada assist with dealership setup and compliance?
Bestax Canada helps entrepreneurs with business registration, dealership licensing, accounting, and compliance. Their experts simplify the process so you can focus on growing your dealership.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
