Indiana Auto Dealer License Guide

Learn how to become licensed as an Indiana auto dealer, and speak with an Single Source Insurance agent today about purchasing the bond you’ll need to operate as an auto dealer in Indiana. 

What Are the Different Types of Indiana Auto Dealer Licenses?

The Office of the Secretary of State, Dealer Division, issues eight different types of dealer licenses classified according to the types of vehicles sold and how they are sold. The most common of these is the “dealer” license, which is required for anyone selling 12 or more vehicles in the preceding 12-month period.

The dealer license permits the sale or new and used vehicles or used vehicles only. This article focuses on obtaining a dealer license, which is the most common license type in Indiana.

What Are the Steps in the Licensing Process?

If you are applying for your initial license rather than renewing an existing one, you’ll first need to establish your dealership as a legal business entity and register it with the Indiana Department of Revenue to obtain a Retail Merchant Certificate. You’ll also need to obtain a Federal Employer Identification Number from the IRS.

There are several other things you’ll need to do before completing the license application through the Dealer Portal on the Secretary of State (SOS) website, including:

• Establishing a permanent business location and obtaining local zoning approval
• Undergoing an FBI National Background Check
• Purchase liability insurance to cover the vehicles you’ll have in inventory
• Purchase Workers’ Compensation insurance if you will have employees
• Purchase a $25,000 Indiana auto dealer bond

You must submit documentation showing that you have accomplished all of the above, along with your completed application and payment of the license fee (currently $30), and dealer plate fee (currently $125 for the first two plates).

Indiana dealer licenses of all types expire one year from the date of issuance.

Why is an Indiana Auto Dealer Bond Required?

An Indiana auto dealer bond protects the SOS Dealer Division (the bond’s “obligee”) against liability for damages resulting from a licensed auto dealer’s unlawful or unethical acts. First, the bond requires a licensed dealer (the bond’s “principal”) to operate in full compliance with the laws governing auto trading in Indiana. Second, it obligates the principal to pay valid claims submitted by the obligee or other party financially harmed by the principal’s violation of the terms of the surety bond agreement. The bond’s “surety,” the third party to that agreement, guarantees the payment of claims.

How Are Indiana Auto Dealer Bond Claims Paid?

As the bond’s principal, you bear the full legal obligation to pay all claims that the surety declares legitimate. But having guaranteed the payment of claims, the surety will typically pay them initially and give you some time to repay that amount. Not repaying that debt can result in the surety suing to recover the funds.

How Much Does an Indiana Auto Dealer Bond Cost?

You will pay only a small percentage of the $25,000 bond amount when you purchase an Indiana auto dealer bond. That percentage is the bond’s premium rate, which is set by the surety based on an underwriting assessment of the risk of not being repaid readily for claims paid on your behalf. That assessment relies heavily on your personal credit score.

If your credit score is high, the risk is assumed to be low, which should result in a low premium rate, conceivable less than one percent. On the other hand, if you’ve had credit problem in the past, the risk level is higher, and your premium rate will be higher as well. The average premium rate is in the range of one to three percent.