How to start a used car dealership in Tennessee
Last verified: November 9, 2026. Every rule links to its official source.
To start a used car dealership in Tennessee you need a dealer license from the Tennessee Motor Vehicle Commission (TMVC). Plan on a $600 license fee, a $50,000 surety bond, $300,000 of garage liability insurance, a CPA-compiled statement showing $10,000 net worth, a 288-square-foot office on a lot for 15 cars, and at least one licensed salesperson. You collect 7% state sales tax plus local tax on each sale.
Tennessee at a glance
| What | The number | Source |
|---|---|---|
| License | Motor vehicle dealer license from the TMVC; $600 for 2 years | TMVC: fee schedule |
| Who needs one | Anyone selling or offering more than 5 vehicles a year | TMVC: dealer license |
| Bond and insurance | $50,000 surety bond; garage liability of at least $300,000 per occurrence | Rule 0960-01-.15 and the bond form |
| Site | 288-square-foot office with a restroom, a lot for 15 vehicles, 3 customer spaces | Rule 0960-01-.21 |
| Course | None in the published requirements | TMVC: dealer license |
| Sales tax | 7% state, plus local tax of up to 2.75% on the first $1,600 in almost all of Tennessee | Department of Revenue |
| Drive-out tag | 60 days; $6.50 plus a $2.00 processing fee (2023 manual) | Revenue: dealership manual |
| Renewal | Every 2 years | TMVC: renewal |
Who will you deal with to open a Tennessee dealership?
The Motor Vehicle Commission licenses you, your city and county clear the address, the Department of Revenue registers you for tax, and county clerks title your buyers’ cars.
| Office | What it grants or collects |
|---|---|
| Tennessee Motor Vehicle Commission, part of the Department of Commerce and Insurance | Dealer and salesperson licenses, the on-site inspection, dealer plate eligibility, and penalties up to revocation |
| Your city and county | The zoning letter the Commission requires, any certificate of occupancy, and business licenses from the county clerk and, inside a city, the city |
| Department of Revenue | The Sales & Use Tax Certificate, sales and business tax returns, and EZ Tag drive-out tags |
| County clerk | Title and registration for your buyers, and the county business license |
| County assessor | The business personal property schedule, due March 1 |
| Attorney General | Consumer complaints and warnings about fake dealerships |
| Department of Financial Institutions (TDFI) | Registers industrial loan and thrift lenders; ask it before you finance your own sales (see below) |
How will you sell: cash, outside financing, your own financing or wholesale?
The dealer license covers retail sales however the buyer pays. What changes is the paperwork.
- Cash. You collect sales tax at the sale, and title work goes through the county clerk.
- Outside lender financing. When a deal depends on a lender’s funding, T.C.A. 55-17-114 requires a written conditional delivery agreement. You keep any trade-in, the buyer may void the deal if its terms change, and you pay off what is owed on the trade-in within 30 days after you are funded. The Commission fined a dealer $1,000 in September 2026 for missing those 30 days.
- Financing your own customers. This is buy here pay here: the buyer pays you over time. We found no Tennessee dealer-finance license comparable to other states’ sales finance licenses; confirm with TDFI or counsel before you start. Tennessee’s Retail Installment Sales Act, with its $11.75 per $100 cap, does not apply to motor vehicles under T.C.A. 47-11-102, so have counsel confirm what limits apply to your contracts. See Financing your own sales in Tennessee.
- Tracking devices. Under T.C.A. 39-13-606, placing one on a vehicle to follow an occupant without the consent of all owners is a Class A misdemeanor, with no dealer or lienholder exception. Get the buyer’s written consent in the contract.
- Wholesale only. The Commission’s license and fee pages list no separate wholesale dealer class. Auctions are licensed separately and are “strictly wholesale, by and between licensed auto dealers.” Ask the Commission, (615) 741-2241, which license fits a dealer-to-dealer business.
What are the steps to start a used car dealership in Tennessee?
There are 10 steps, and the site comes early because the zoning letter, sales tax certificate, bond and insurance all name the address. Each step is covered in How to get a Tennessee dealer license, step by step, and the one-page Tennessee checklist puts them in order.
- Set up the business. Gather entity documents, a list of every owner of more than 5%, and court papers for any owner, officer or director with a felony conviction. Use one exact business name, with any d/b/a, on everything that follows. The Commission’s published requirements include no fingerprinting.
- Find a site that meets the Commission’s rules. Rule 0960-01-.21 calls for a permanent building, not a residence, with an office of at least 288 square feet and a restroom, a gravel or similar lot for 15 vehicles, and 3 customer spaces. Add a sign with 8-inch letters, a listed phone number and at least 12 posted hours a week.
- Get the zoning letter and the local business licenses. The zoning letter must state that auto sales are a permitted use at the address. Then get the county clerk’s business tax license, plus, usually, the city’s inside city limits; each clerk charges a $15 registration fee.
- Register for sales tax. The Department of Revenue’s Sales & Use Tax Certificate must show your exact name, address and any d/b/a. Under rule 0960-01-.24, your dealer license is invalid while you lack a current sales tax number.
- Get a CPA-compiled financial statement. Under rule 0960-01-.08 it must follow GAAP, show net worth of at least $10,000, and be dated within the 12 months before you apply.
- Buy the bond and the insurance. The $50,000 surety bond runs 2 years and covers buyers’ prepaid title and registration fees and taxes. Garage liability coverage must be at least $300,000 per occurrence.
- Line up a salesperson, a service agreement and your floor plan list. Every dealer needs at least one licensed salesperson, at $50. Without an on-site repair facility you need a service agreement with a nearby garage, and you list your floor plan lenders.
- File the application in CORE, with photos. Upload every document and photos of the lot, sign, hours, phone, office and restroom, and pay the $600 fee. Documents still missing after 90 days cost 25% of your fees.
- Pass the on-site inspection. The Commission decides eligibility after the inspection and document review. A re-inspection you caused costs $400 under rule 0960-01-.14.
- Get the license, then set up plates and tags. Licenses are issued within 14 business days of approval. Then order dealer plates and start printing 60-day drive-out tags through the Department of Revenue’s EZ Tag program.
What does it cost to open a used car lot in Tennessee?
The state’s fees are fixed: $600 for the 2-year dealer license, $50 for each salesperson, and small fees for plates and tags. Private companies price the bond, insurance and financial statement.
| Item | Cost | Who sets it |
|---|---|---|
| Dealer license, 2 years | $600 | Rule 0960-01-.14 |
| Each salesperson | $50 | TMVC fee schedule |
| Re-inspection you caused | $400 | Rule 0960-01-.14 |
| Business license | $15 per clerk; $30 inside Nashville’s Urban Services District | Davidson County Clerk and other clerks |
| Memphis zoning letter | $50 basic, $100 expedited | Shelby County |
| Dealer plates | $47.30 for the first, $23.65 for each additional | T.C.A. 55-4-226 |
| Drive-out tag | $6.50 plus a $2.00 processing fee | Department of Revenue |
| Business tax | At least $22 a year for each location | Department of Revenue |
| Bond, insurance, financial statement | Quoted privately | The surety, insurer and accountant |
How long does it take to get a Tennessee dealer license?
The Commission says licenses are issued within 14 business days of approval, which follows the document review and site inspection. It gives no time for the whole process. The other published clocks:
- Zoning letter. In Memphis and Shelby County, a basic letter takes 6 to 10 business days and an expedited one 3 to 5.
- Financial statement. It must be dated within the 12 months before you apply.
- The file. Every document is due within 90 days of the Commission receiving your application, or 25% of the fees is forfeited.
What do you have to do in your first 90 days as a licensed dealer?
From the first sale you handle drive-out tags, title paperwork, sales tax, disclosures and records, and from 2027 new proof for your buyers’ registrations. Each is covered in After the sale in Tennessee, and who can inspect you.
- Drive-out tags. Each costs $6.50 plus a $2.00 processing fee (Revenue’s 2023 manual) and lasts 60 days. T.C.A. 55-4-226 provides one tag; Revenue currently allows a second and may revisit that. Keep temporary tag logs at the dealership (rule 0960-01-.11).
- Titles. Revenue’s dealership manual says possessing a signed-over title without the buyer’s name on it is a Class C misdemeanor. We found no set number of days for submitting the title and registration paperwork, so ask your county clerk, and finish before the buyer’s tag expires.
- Sales tax. You collect 7% state tax, a 2.75% state single-article tax on the part of the price above $1,600 up to $3,200, and local tax of up to 2.75% on the first $1,600 in almost all of Tennessee. Tax is figured after the trade-in, documentation fees are taxable, and returns are due by the 20th of the month after each period.
- Disclosures. If you know a vehicle is rebuilt or has a salvage history, you must disclose it before the sale on the Commission’s form, signed by the buyer (rule 0960-01-.29).
- Buyers’ registrations. From January 1, 2027, a first-time registration needs proof of citizenship or lawful presence, and a dealer handling it must submit a copy of the buyer’s documentation (T.C.A. 55-4-144(f), from Public Chapter 954). From July 1, 2027, it also needs proof of insurance (Public Chapter 1077).
- Records. Keep business records as long as state or federal law requires; the Commission may inspect them during normal business hours.
- February 15. The annual sales report is due, and under T.C.A. 55-17-125 your sales count affects how many dealer plates you may hold.
What trips people up
- Selling a few cars while you wait. More than 5 a year needs a license, a household counts as one seller, and selling cars titled in someone else’s name is prohibited. See How many cars can you sell in Tennessee without a dealer license?
- Signing a lease before the zoning letter. The Commission needs the local statement that auto sales are permitted at that address.
- Selling tax-free to an out-of-state LLC. The Commission warns that forming an LLC elsewhere “does not create an exemption from tax”. You collect the tax unless a three-day removal affidavit is completed, and the dealer “may be held liable” if it is done wrong.
- Missing the 30-day trade-in payoff. The Commission’s September 2026 actions included a $1,000 penalty for it.
- Scratch-off mailers. The Commission’s April 14, 2026 notice says most violate its advertising rules, and the dealership is “solely responsible.”
- A third drive-out tag. Revenue allows two for now, and the Commission warns that more puts your license at risk.
What changed recently
- July 1, 2027 (coming). First-time registrations need proof of insurance until June 30, 2029 (Revenue Notice 26-16).
- June 30, 2027 (coming). The narrow antique and unique vehicle auction exception in Public Chapter 540 ends unless extended. It covers one auction format, not antique sales in general.
- January 1, 2027 (coming). First-time registrations need proof of citizenship or lawful presence (Revenue Notice 26-15).
- July 1, 2026. The notice before you sell a repossessed car follows the rewritten T.C.A. 47-9-614 (Public Chapter 704).
- June 1, 2026. A dealer that moves must file a new application and notify the Commission in writing (rule 0960-01-.21(6)).
- September 15, 2025. The dealer license fee rose from $400 to $600 and the salesperson fee from $35 to $50 (TMVC notice).
Frequently asked questions
Do you need a license to sell used cars in Tennessee?
Yes, once you sell or offer to sell more than 5 vehicles a year. An individual may sell up to 5 used vehicles titled in his or her own name within 12 months, and a household counts as one individual. Unlicensed selling carries civil penalties of $100 to $5,000 per day or per act under rule 0960-01-.13.
How much does it cost to start a used car dealership in Tennessee?
The state charges $600 for the 2-year dealer license and $50 for each salesperson, plus small fees for plates, drive-out tags and local business licenses. The $50,000 bond, the $300,000 garage liability policy and the CPA-compiled financial statement are priced privately, and rent and inventory depend on your plan.
Do you need a separate license for buy here pay here in Tennessee?
We found no Tennessee dealer-finance license comparable to other states’ sales finance licenses. Confirm with the Department of Financial Institutions or counsel before you finance in-house. The Retail Installment Sales Act’s $11.75 per $100 cap does not apply to motor vehicles (T.C.A. 47-11-102), so have counsel confirm what limits apply to your contracts.
Is there a wholesale dealer license in Tennessee?
The Motor Vehicle Commission’s license and fee pages list no separate wholesale dealer or broker class. Auctions are licensed separately and are strictly wholesale between licensed dealers, with a $1,200 fee and a $50,000 bond. If you plan to sell only to other dealers, ask the Commission which license fits.
Does Tennessee tax a dealer’s inventory?
Montgomery County’s assessor says inventories held for sale are not considered tangible personal property. Other business personal property goes on a schedule due March 1, so ask your own county assessor how it applies. Sales tax is separate: you collect it from the buyer on each retail sale.
What will buyers need to register a car starting in 2027?
From January 1, 2027, a first-time registration needs proof of U.S. citizenship, lawful permanent residence or federal authorization to be present; a REAL ID-compliant or Tennessee license or ID works. A dealer handling the registration must submit a copy. From July 1, 2027, proof of insurance is also needed. Renewals are exempt from the citizenship proof.
Your next step
Get the one-page Tennessee new dealer checklist: every form, fee and office on this page, in the order you will need them, sent to your email.
When your application is filed, you can set up your lot in LeftLane or book a LeftLane demo while you wait for the Commission. LeftLane is a dealer management system for independent and buy-here-pay-here dealers, it runs in any browser, and real people answer the phone at 512-222-9549.
Sources
- TMVC: main page, dealer license, fees and fee notice
- TMVC: salesperson, auction, renewal, bond form and news
- TDCI: disciplinary actions, September 2026
- Rules chapter 0960-01, Secretary of State, June 2026
- T.C.A. 55-17-114, 55-17-125, 55-4-226, 47-11-102 and 39-13-606
- Public Chapters 540, 704, 954 and 1077 of 2026
- Revenue: sales tax, business license, business tax, titles, EZ Tags and dealership manual
- Revenue: Notice 26-15 and Notice 26-16
- TDFI: industrial loan and thrift; Attorney General: consumer
- Comptroller: personal property; Montgomery County Assessor
- Davidson County Clerk; Shelby County: zoning letter
This guide is general information for dealers, not legal advice. Rules and fees change. Confirm with the agency or a licensed attorney in your state before you act.