Car Dealer License Guide
Table of Contents
- First Things First
- Who Needs A Dealer License?
- Steps To Get A Dealer License
- Felonies and Convictions
- About the Motor Vehicle Dealer Bond
- Frequently Asked Questions
First Things First
What you need to know
We put together this guide as a starting point for how to get a car dealer license.
Please note that we, Surety Solutions, A Gallagher Company, are just the surety bonding agency that issues the surety bond, otherwise known as the Motor Vehicle Dealer Bond, that you need to get licensed. The rest of the footwork, paperwork, and requirements must be completed by you, and then must be turned into your state’s licensing department.
All steps, requirements, and regulations should be cross-checked with your state’s licensing board before submitting.
Who Needs A Dealer License?
When you can sell a car without a license
All states allow the owner of a vehicle, as shown on the title, to legally sell that vehicle without a dealer license. To do this, the vehicle must:
- be titled in your name (or business name)
- have been used for personal, household, family, or business purposes
If you do not put a title into your name before selling it, you are committing the illegal act of title-jumping. Read about the dangers here.
Most states have a cap to how many vehicles you can sell per year before you must get a dealer license. Check with your state’s licensing board about this cap.
When you need a dealer license
You need a dealer license if you want to flip cars for a profit. This guide will provide you with what you need to get started.
Still not sure if you need a dealer license? Check out our video or read our full length post “Do I Need a Dealer License To Sell Cars”.
Steps To Get A Dealer License
The Basic Steps
The following steps are just a basic overview of what might be required of you.
1. Contact your local DMV to find out your license requirements
Every state will have different requirements for you to get a dealer license. Contact your local DMV or DOL (Department of Licensing) to get the correct requirements.
Be sure you are applying for the correct license type. There are many license types including but not limited to:
- New vehicle dealers
- Used vehicle dealers
- Wholesale vehicle dealers
- Motorcycle/ATV/Trailer dealers
- Auction dealers
2. Meet requirements
We made a step-by-step tutorials on how to meet your requirements: Find out your state requirements.
Requirements usually include completing an application and getting your location and business approved. It might also include:
- Registering your business
- Meeting zoning requirements
- Attending a pre-licensing seminar
- Providing proof of insurance
- Passing a background check
3. Purchase your Motor Vehicle Dealer Bond and insurance
For more information on the Motor Vehicle Dealer Bond, please see the Motor Vehicle Dealer Bond section on this page (below).
4. Submit paperwork, requirements, and any fees to your state’s licensing board
Send your car dealer license application, car dealer bond, proof of insurance, and all other necessary papers to your local DMV or Auto Dealer Licensing Service Department…and wait to be approved!
For more information:
- We wrote an extended post on how to get a dealer license here.
- We also wrote state-specific tutorials at this link.
The rest of this guide will touch on common questions and concerns related to getting a dealer license.
Felonies and Convictions
Getting a license with a felony is not impossible
Getting a car dealer license with a felony is not impossible. There are cases where you will have a more difficult time getting a car dealer license with a previous felony.
For example, if you have been convicted of a motor vehicle dealer crime, you will more than likely not be granted a license.
If you have been convicted of a non-violent, non-motor vehicle dealer crime, this most likely will not affect your ability to get approved for a dealer license.
Note that many states prevent a felony conviction from acting as an automatic bar to employment.
Crimes that could affect your ability to get a dealer license
- Felony convictions relating to persons, property, or fraud
- Automotive crimes such as:
- Odometer tampering
- Auto theft
- Title forgery
Crimes that most likely will not affect your ability to get a dealer license
- Non-violent crimes such as:
What to do if you have a felony on your record
If you are worried about a previous felony on your record, consider applying for what’s called an “abbreviated application”.
An abbreviated application will allow you to see if you would be granted a license before going through all the other requirements.
Not all states allow for abbreviated applications, though, so be sure to check your state’s licensing board or DMV staff about this option.
About the Motor Vehicle Dealer Bond
What is a Motor Vehicle Dealer Bond?
A Motor Vehicle Dealer Bond (also known as an Auto Dealer Bond, Dealer Bond, or MVD Bond) is a type of surety bond that auto dealers need before they can get licensed.
This is not the same as insurance. In fact, the bond does not protect you (the dealer). It protects your customers.
Think of an Auto Dealer Bond as insurance for your customers, paid by you.
If someone feels you are not fulfilling your obligations as a dealer, they can make a claim against your bond, kind of like someone can make a claim against your insurance policy if you hit their car.
If you follow the rules of the industry and sell vehicles ethically and honestly, you probably will not see any claims against your bond.
What happens if a claim is made against my bond?
If a claim is filed against your bond, the surety company expects you to take care of the claim. If you fail to do this, the Surety will usually start an investigation to determine the claim’s validity. They will reach out to both you and the claimant.
One of two things will happen:
- The surety company will investigate the claim and determine it to be invalid. No further action will be taken with the investigation, but you might be liable for any costs the Surety incurred during the investigation process.
- The surety company will investigate the claim and determine it to be valid.
If the surety company finds the claim to be valid, they will remind you of your obligations under the bond and ask you to settle the claim. Usually this involves compensating the claimant for any financial loss or damages incurred.
If you fulfill the claim, the claim process ends.
If you fail to fulfill the claim, the surety company will step in and pay the claim for you. The surety company will then come to you for reimbursement of the settlement and any legal costs associated with it.
This is one way a surety bond differs from an insurance policy. While an insurance company does not expect to be paid back for a claim, a surety company does. You are responsible for cooperating with the surety company during the entire claim process. You are also responsible for paying back the surety company every penny they pay out on a claim, including all costs associated with the claim.
Learn more about the motor vehicle dealer bond claim process and how to avoid it.
How much does the bond cost?
The bond amount is set by your state. You can find out your bond amount with our interactive calculator. Bond amounts generally range from $5,000 – $100,000.
You do not need to pay the full bond amount to get bonded.
You will pay a portion of the bond amount, generally somewhere between 1-15% of the bond amount. The rate you pay is largely based off your personal credit score. You can learn more here.
Here’s an approximate price chart in relation to credit scores to help you better understand what you might pay.
These are not monthly prices. Usually, you pay for your bond per year.
If you want to know exactly what you’d pay, you can get a free quote here.
If you are worried about paying for your bond, or if you have bad credit, it’s okay. Our best advice is to apply for your dealer bond anyway. It is 100% free and it starts a conversation with a surety company.
Frequently Asked Questions
Can I use my house as a dealer lot?
Many states have statutes that specifically state your dealership location cannot be a residence. Some states are less ridgid. You should contact your state’s licensing board about location requirements.
For answers to other questions including:
- How much does a dealer license cost?
- What kind of dealer licenses are there?
- How long does it take to get licensed?
Please read our Motor Vehicle Dealer License FAQ.
View our free step-by-step tutorials
Learn how to get a dealer license in every state!
Very smooth process and very responsive to all of our questions. Would recommend to anyone looking for a surety bond. Glad we decided to go with them from the start.
Great people to work with, friendly, extremely efficient, and did I say great prices!