In Virginia, a person is normally allowed to sell a maximum of four motor vehicles in the span of 12 consecutive months without the presumption of being a motor vehicle dealer.
Once a person offers five or more vehicles for sale in a period of 12 months, this person is presumed to be a motor vehicle dealer in Virginia.
That difference is important: the law does not state that everyone is free to sell four vehicles in a year. Rather, four vehicles is best understood as the threshold for the presumption set forth in the applicable statute and not an automatic exemption or a safe harbor.
In Virginia, typically, you are allowed to sell up to 4 motor vehicles within a given 12-month time span without falling under the law, which determines that you are acting as a dealer. However, even smaller sales can require you to possess a dealer’s license in case you buy your vehicles for resale purposes instead of performing a mere retail activity.
The Five-Vehicle Presumption
Virginia Code § 46.2-1500 presents a very broad definition of a motor vehicle dealer. Under this statute, anyone buying cars for resale, selling motor vehicles, facilitating transactions in which vehicles change hands, or otherwise partially or fully engaging in vehicle commerce is considered a motor vehicle dealer. The statute even provides some evidence in favor of that: it states that selling, displaying, or offering at least five motor vehicles during one year leads to an assumption that this person acts as a dealer.
Therefore, the practical answer is:
In most cases, an individual may not sell more than four of their own vehicles within a 12-month time span before the dealer presumption applies.
The period mentioned does not always mean the month of January through December. Rather, it is a moving window of 12 months. For instance, if you sell three vehicles from August to December and sell two more vehicles in the spring, you can count all five sales in one 12 month period.
The statute is not limited to merely taking note of completed transactions. It also counts vehicles offered for sale, displayed or permitted to be displayed by someone. Therefore, if you post 5 vehicles for sale online or have them sit on your property with for sale signs, it is likely that you belong in the statute’s universe even if you complete fewer than 5 transactions.
Selling Fewer Than Five Cars Can Still Require a License
One of the often ignored things is that the five-vehicle rule is a presumption; it does not state the only circumstances in which a person qualifies as a dealer.
You may be regarded as a dealer even after a few transactions, if facts and circumstances prove your continuous involvement in buying and selling automobiles. For example, a person may habitually purchase vehicles with the intention to resell them, advertise the business of selling vehicles or have the vehicles sold for someone else, negotiate sales for a fee or constantly engage in quick reselling of vehicles. Virginia’s legal definition considers a person a dealer if he or she buys vehicles for eventual resale, even if he or she does not own these vehicles.
For instance, a person buying three cheap cars at an auction and doing minor repairs on them before selling them to make some money might be at a higher risk of being required to get licensed than a person disposing of four cars picked up over years of personal or family use.
Take into consideration that the aim and structure of an operation are important, not simply the number of transferred titles.
What Happens at Five Vehicles?
According to the statute, a person who sells or offers to sell five vehicles is not automatically a dealer. Under the law, the person is only presumed to be a dealer unless he proves otherwise. The person selling the cars has to explain convincingly that the transaction in question is a bona fide private sale and not a sale by a dealer.
It may include vehicle registration records, records of automobile insurance, maintenance receipts, evidence of heavy personal usage, date of acquisition, and a reason for selling many vehicles, for example, sale of a part of a personal collection, distribution of family property, or sale induced by a change in financial situation.
Because disproving the presumption may involve some kind of investigation or court process, it may not be wise to count on it. Hence, any person who regularly buys and sells cars should check car dealer licensing before the fifth sale.
Titles Must Be Properly Transferred
Also, private sellers are warned against title jumping, which means selling a car before obtaining the title in their name. Virginia law does not allow the sale of a used vehicle without the proper title in the name of the seller unless the seller is a licensed car dealer or has the lawful authority to perform such a transaction.
Under the standard private sale procedure, Virginia DMV guides a seller to fill out the title transfer, include the details of the buyer, mention the actual odometer reading, include the sale date and selling price, remove the license plates, inform DMV regarding the transfer of ownership and inform the insurance provider.
Penalties for Unlicensed Dealer Activity
Under Virginia law, it is prohibited to operate as a motor vehicle dealer unless you have the required license. Engaging in business as a dealer without the required license is a Class 1 misdemeanor. Other penalties that may apply include improper titles, incorrect disclosures regarding odometers, tax problems, fraud, and violations of consumer protection laws.
Bottom Line
For most residents living in Virginia, there is an effective limit of four vehicles in every 12-month period. If an individual sells five or more vehicles in a 12-month period, that individual is presumed to be a dealer under the law. However, even selling one, two, three, or four vehicles may require a dealer license if the individual is buying them for resale or is otherwise engaged in a vehicle sales business.
If you want to get involved in car flipping, vehicle auctions, consignment car sales, or selling vehicles for other people, contact the Virginia Motor Vehicle Dealer Board or a Virginia lawyer before you proceed with any plans. The information in this paragraph is general in nature; it should not be taken as legal advice for your situation.
