Dealer Plates vs. MT Registration Clarification (Different Inquiry!)

Hi all,

I'm sure there are already various threads on the subject, and I'm not going to debate MT registration - we all know the pros and cons of it.

However, DO have a question about something related to it!

 

When discussing & exploring the subject of saving sales tax on exotics - it has been mentioned/some have thought: what about if you already are/or plan to become, a licensed car dealer??

 

Let me present a scenario to you:

 

For those in the know - How would this situation work??

You ARE a dealer. You have dealer plates, of course. You want to buy (BUT FINANCE PART OF) a luxury or exotic car.

You need to have a lender approve your creditworthiness, and put loan in YOUR OWN PERSONAL NAME.

However, due to lien, you of course need full coverage insurance. Just like all your other personal vehicle policies, the insurance is in YOUR OWN PERSONAL NAME. Let’s just say your name is Joe Smith. So, you simply add “X” vehicle (let’s say it is a Veyron in this case) to your personal policy, insuring with comp & collision, etc. Good to go!! Now, Joe Smith has a loan IN HIS NAME for half the worth of this vehicle (Veyron), and Joe Smith also has comp & collision insurance IN HIS NAME for “X” vehicle (Veyron.)

 

Lastly - registration. Joe Smith is the sole managing member of his dealer, say “ABC CARS LLC.” Auto Dealers can be issued a “TITLE ONLY/NO REGISTRATION” at DMV, avoiding sales tax & registration, but receiving no plates. Then, any auto dealer (in this case ABC CARS LLC), would own any vehicle that is “Titled Only” in the dealer name.

 

Joe Smith decides he will use an ABC CARS LLC dealer plate to drive his Veyron around, and he is happy.

So, Joe Smith gets a “Title Only” on “X” vehicle that he purchased above (Veyron!), and uses his dealer plate to drive the car.

 

When Joe Smith and ABC CARS LLC got the “Title Only”, of course the electronic lien was notated (for the lienholder.) When said lienholder receives/looks at title of “X” (Veyron), they are going to see, and or previously know, three (3) things:

 

1. JOE SMITH got a loan in his name for half the worth of his Veyron.

2. JOE SMITH maintains and carries comp & collision insurance on the Veyron, per his state law, at the coverages reqd by insurance company. The Veyron is in addition to his Kia Optima (that his wife mostly drives), and his “other car” (say a Honda Accord). Three cars total on the personal policy. Note: the Optima and Accord are properly registered, taxes were paid & have regular plates - they don’t use dealer plates. Joe just didn’t want to pay tax on the Veyron! *Second Note*: of course this is slightly simplified. You don't insure your Veyron with Geico, next to your Accord. You likely use a specialty company. But you get the point.*

3. ABC CARS LLC, “owns” the Veyron - NOT Joe Smith, with whatever lienholder listed on there as well with ABC CARS LLC.

 

So: What does the lienholder say about this slight discrepency (between loan/named insuranced/titled owner)????? No big deal???

So I guess the bottom line is can you you drive with the dealer plates, have the car titled in the dealership name, insure it privately? Personally......I would get an ok in writing from your insurance company. What happens if your car is stolen or in a wreck....do you want to give them a reason not to pay the claim?

In general, the insurance follows the plates. The dealer pays to insure the plates......the deductibles are generally quit high. The plates we had only covered comp...no collision....

You cannot insure a car that you do not own. Either the dealership owns it, or you own it. You also cannot get a loan on a car that is going to go through your dealership, that is considered floor planning. Finance companies will not finance a car in a dealership name, with you as the cosigner.

 

My suggestion, find a bank that will floor plan your dealership. First, you have to have a brick and mortar dealership. This will require a surety bond, a physical location, liability and garage insurance, an office of 100 sq/ft, a verified phone number (land line only), and a filing cabinet. Once you have these things, and you get approved, you can then apply for a floor plan line with a lender. You can also get a line through Manheim Auctions/NextGear. The caveat to this is that while you will be paying interest only on your car at a rate of around 3-3.5% or so, you will have a curtailment period. Likely it will be 120 days, NextGear is 90 days I believe. If they don't hit your for the full amount, you will be required to infuse capital into the car, to lower the borrowed amount.

 

Not sure if that jives with what you were talking about. My guess is you have a buddy with a store that will allow you to run cars through his place, which is fine, but you have to use his insurance and you will not be able to get a loan on the car (Veyron or otherwise). I am saying this because I see it happen very often, where a wealthy guy will piggy back off of his buddy's license to avoid paying the sales tax/property tax/registration fees.

 

Also, I don't have a problem with that, just mentioning it. I think the taxes are too damn high.

You cannot insure a car that you do not own. Either the dealership owns it, or you own it. You also cannot get a loan on a car that is going to go through your dealership, that is considered floor planning. Finance companies will not finance a car in a dealership name, with you as the cosigner.

 

My suggestion, find a bank that will floor plan your dealership. First, you have to have a brick and mortar dealership. This will require a surety bond, a physical location, liability and garage insurance, an office of 100 sq/ft, a verified phone number (land line only), and a filing cabinet. Once you have these things, and you get approved, you can then apply for a floor plan line with a lender. You can also get a line through Manheim Auctions/NextGear. The caveat to this is that while you will be paying interest only on your car at a rate of around 3-3.5% or so, you will have a curtailment period. Likely it will be 120 days, NextGear is 90 days I believe. If they don't hit your for the full amount, you will be required to infuse capital into the car, to lower the borrowed amount.

 

Not sure if that jives with what you were talking about. My guess is you have a buddy with a store that will allow you to run cars through his place, which is fine, but you have to use his insurance and you will not be able to get a loan on the car (Veyron or otherwise). I am saying this because I see it happen very often, where a wealthy guy will piggy back off of his buddy's license to avoid paying the sales tax/property tax/registration fees.

 

Also, I don't have a problem with that, just mentioning it. I think the taxes are too damn high.

 

 

Couldn't he get a dealership License for wholesaling only? Does that require a brick and Mortar location?

Couldn't he get a dealership License for wholesaling only? Does that require a brick and Mortar location?

 

It used to. Each state is different to an extent, but they have all tightened down. They used to have a brokers license that I was investigating in California. California caught on and killed it. Most states now do not differentiate between the two in regards to location, only in the liability and they way they are allowed to sell. As I said though, you would have to check with your state.

 

Most of this stems from states recognizing that people are trying to take advantage of the system. Most states are, or were, broke from the recession. That economic event spawned the laws some of the states came up with, as they could no longer afford to not have the revenue. The physical location is what killed this for most people, as that made the costs too high for the guy that was buying a few exotics a year.

 

It is an interesting discussion though. I know there are guys here that have either investigated it heavily, or they have actually done it. I would be curious to hear what people think, if they are willing to share it.

The problem with dealer plates is most jurisdictions have laws surrounding their usage. If caught doing it for personnel use, stiff penalties can be applied. In greedy California. They have penalties including tax evasion and avoiding their smog test, etc.........