Alabama Dealer Tags: Eligible Drivers, Permits, and Penalties

Alabama dealer tags are the license plates that a licensed motor vehicle dealer can put on inventory vehicles for demonstration, transport, and limited loaner use. A standard automobile dealer plate costs $25, a motorcycle dealer plate costs $17, and the total number a dealership can buy is capped based on whether it sells new or used vehicles and how much title volume it moved the prior year. Misuse starts at a $200 fine and can rise to Class A misdemeanor charges when false information is used to obtain plates.

What You Need Before ALDOR Will Issue Plates

The Alabama Department of Revenue (ALDOR) will not release a single dealer plate until a dealership has three things on file: a regulatory license, a privilege license, and a surety bond backed by qualifying insurance.

The regulatory license application runs through ALDOR’s online Partner Registration Portal. Once approved, the dealer visits the county licensing office to buy the privilege license issued under Section 40-12-51 or Section 40-12-169 for new and used car dealers, or Section 40-12-62 for motorcycle dealers.¹ Both licenses have to be shown before ALDOR issues plates.²

Every licensee posts a continuous $50,000 surety bond with ALDOR. That same bond serves as the designated-agent bond Alabama requires of dealers processing title work on the department’s behalf.²

Insurance is a blanket motor vehicle liability policy covering all vehicles associated with the business. Minimum limits are $25,000 per person for bodily injury, $50,000 combined bodily injury per accident, and $25,000 for property damage per accident, or a combined single limit of $75,000.² Letting the policy lapse triggers a $5,000 civil penalty on its own.³

Plate Types, Fees, and How Many You Can Buy

Alabama issues standard dealer plates, seven-day dealer transit plates, and seven-day auction transit plates. Standard plates do the day-to-day work of a dealership.

A standard automobile dealer plate costs $25. A motorcycle dealer plate costs $17.⁴ These fees are not refundable and not prorated.

How many standard plates a dealership can hold depends on its license class and prior-year title volume:

New motor vehicle dealers can buy up to 35 combined automobile and motorcycle dealer plates.
Used motor vehicle dealers can buy up to 10 combined automobile and motorcycle dealer plates.
Any new or used dealer that completed 300 or more Alabama title transfers during the previous regulatory license year can buy up to 25 additional plates on top of the base cap.¹

Dealer transit plates are seven-day plates available to licensed new and used dealers on application to ALDOR, for short-term transport of inventory. They carry the same restrictions as standard dealer plates: no tow trucks, no rental vehicles, no service vehicles.¹

Who Can Drive a Vehicle Wearing a Dealer Plate

A dealer plate can only go on a vehicle the dealership owns and currently holds in inventory. Within that limit, the people authorized to operate it are prospective buyers, dealership owners, partners, corporate officers, and dealership employees.¹

A prospective buyer can keep a vehicle with a dealer plate for a test drive or demonstration for up to 72 hours. That is a hard cap. Extended customer possession beyond three days is where enforcement problems tend to start.¹

Two other uses count as “dealer demonstrator” activity and are allowed. A dealership can put a dealer plate on a loaner car provided at no charge to a customer whose vehicle is being serviced or repaired, and on a vehicle lent to a high school for driver education. In both cases the dealer cannot charge a fee for use of the vehicle.¹

What Dealer Plates Cannot Be Used For

Dealer plates cannot go on any vehicle used by the dealership as a rental, lease, tow truck, service truck or van, or for any other commercial purpose.¹ A dealer plate on the flatbed that hauls trade-ins back to the lot is a violation even if the dealership owns the flatbed outright.

Using a dealer plate to sidestep normal registration and ad valorem tax is separately prohibited. No new ad valorem tax lien attaches while a vehicle sits in dealer inventory, but that protection ends the moment the vehicle is sold.⁵ A sold vehicle must be titled, registered, and taxed in the buyer’s name. Leaving a dealer plate on a vehicle after sale to avoid those obligations is the misuse pattern that draws the harshest penalties.

Heavy Truck Demonstrations Need a Written Permit

If the vehicle being demonstrated is a truck or truck tractor with more than two axles on the power unit, or a gross weight above 26,000 pounds, the dealer must issue a written permit for the trip. The demonstration is limited to a single payload trip of no more than 72 hours.¹

The permit has to include the vehicle’s make, model, year, and VIN, the full name and address of the dealership and the prospective customer, and the exact date and time it was issued. The plate and permit are only valid for genuine demonstration. If the truck is really being loaned or rented to the operator for another reason, the permit does not hold up.¹

Penalties for Misuse

Alabama uses a tiered penalty structure. A first offense carries a $200 fine. Each additional violation carries a $500 fine.³

The stakes rise sharply where ALDOR finds that someone made false statements or filed documents with incorrect information to obtain dealer, motorcycle dealer, dealer transit, auction transit, or manufacturer plates. That conduct is a Class A misdemeanor under Alabama law, exposing the person to jail time and criminal fines. ALDOR can also assess a separate $1,000 civil penalty on top of whatever the criminal court imposes.³ Letting the required blanket liability policy lapse is a standalone $5,000 civil penalty.

The 20-Day Window and Existing Liens

Anyone acquiring a new or used vehicle in Alabama, dealers included, has 20 calendar days from the date of acquisition to purchase a license tag or plate.¹ For a retail buyer driving off a lot, that is a tight window and it puts pressure on the dealer to move title and tax paperwork quickly.

The inventory protection on ad valorem tax is narrower than dealers sometimes assume. No new lien attaches while the vehicle is in dealer inventory, but any lien that existed before the dealer acquired the vehicle stays in place until it is paid.⁵

1
Alabama Legislature. Alabama Code 40-12-264 – Time Limit for Purchase of Tags or Plates; Dealer Plates; Manufacturer Plates
2
Alabama Department of Revenue. Dealer Licenses and Dealer License Plates
3
Alabama Department of Revenue. Are There Any Restrictions on the Number of Dealer, Dealer Transit and Manufacturer Plates That Can Be Obtained?
4
Alabama Department of Revenue. What Are the Fees Associated With the Plates?
5
Alabama Administrative Code. Alabama Administrative Code 810-4-1-.18