Minnesota Auto Dealer License Guide

Learn how to become licensed as a Minnesota 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 Minnesota.�

What Are the Different Types of Minnesota Auto Dealer Licenses?

Minnesota issues motor vehicle dealer licenses in 11 different classes, differentiated by the type(s) of vehicles sold (cars, truck, motorcycles, etc.) and how they are sold (retail, wholesale, auction, etc.). It should be no surprise that used auto dealer licenses, which permit the sale, lease, or auction of used vehicles only, are the most commonly issued licenses in Minnesota. They are also the focus of this article.

What Are the Steps in the Licensing Process?

The following overview assumes that you have already established your dealership as a legal business entity and registered it with the state for tax collection purposes. To obtain a used dealer license you will need to:

• Establish a permanent business location and obtain local zoning approval.
• Purchase liability insurance that provides the coverage required by the Minnesota Department of Public Safety, Driver and Vehicle Services (DVS).
• Purchase Workers� Compensation insurance if you will have employees.
• Purchase a $50,000 Minnesota auto dealer bond.
• Complete the license application and submit it, with all required supporting documents and payment of the application fee (currently $250 per location) and dealer plate fees (currently $86 per demo plate and $16 per in-transit plate) to DVS.

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

Why is a Minnesota Auto Dealer Bond Required?

A Minnesota auto dealer bond legally obligates the dealer who purchases it to:

1. Comply fully with all applicable laws regulating auto dealing, and
2. Pay valid claims for damages incurred as a result of the dealer�s noncompliance.

For example, the Minnesota Department of Motor Safety (the bond�s �obligee�) can file a claim to recover taxes and fees owed by the dealer (the bond�s �principal�). Consumers can file claims for financial damages resulting from the principal�s unlawful or unethical business practices, such as fraudulently altering a title or falsifying odometer readings. The third party to the legally binding surety bond agreement is the bond�s guarantor (known as the �surety�).

How Are Minnesota Auto Dealer Bond Claims Paid?

The principal is legally obligated to pay all valid claims, and the surety guarantees that the principal will pay them. Therefore, the surety normally pays a valid claim initially, on the principal�s behalf, and then collects reimbursement from the principal. The surety can take legal action to recover the claim amount (plus court costs and legal fees) if the principal does not repay the debt owed to the surety.

How Much Does a Minnesota Auto Dealer Bond Cost?

You�ll pay an annual premium that is only a small percentage of the $50,000 bond amount when you purchase or renew a Minnesota auto dealer bond. The surety determines what that percentage (the premium rate) will be for a given principal based on the principal�s personal credit score. This is the best measure of the risk the surety will be assuming in paying claims on the principal�s behalf.

There is an inverse relationship between the principal�s credit score and the risk to the surety. A high credit score equals low risk, and a low credit score equals high risk. As the risk of not being repaid by the principal lowers, so does the premium rate. Conversely, the higher the risk, the higher the premium rate will be. Depending on the principal�s credit, the annual premium for a $50,000 Minnesota auto dealer bond could be as low as $250 or as high as $4,500.