Mississippi Auto Dealer License Guide

Learn how to become licensed as a Mississippi 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 Mississippi. 

What Are the Different Types of Mississippi Auto Dealer Licenses?

The Mississippi Motor Vehicle Commission (MMVC) issues new car dealer licenses. The Mississippi Department of Revenue issues used car dealer and wholesale dealer licenses. This article focuses on the most commonly issued dealer license—the used car dealer license.

What Are the Steps in the Licensing Process?

Before you can apply for a dealer license you must first establish a legal business entity and register it with the IRS, the Mississippi Secretary of State, and the Department of Revenue. When you have accomplished those tasks, the remaining steps are to:

1. Establish a permanent business location and obtain local zoning approval.
2. Successfully complete a dealer education class offered by the Mississippi Independent Auto Dealers Association (MIADA).
3. Purchase liability insurance for the vehicles in your inventory.
4. If you will have employees, purchase Workers’ Compensation insurance.
5. Purchase a $15,000 Mississippi car dealer bond.
6. Download the license application packet. Complete it in its entirety and gather all required supporting documents. Submit everything to DOR, along with payment of the permit fee (currently $100) and dealer tag fees.

Why is a Mississippi Auto Dealer Bond Required?

When you purchase a Mississippi auto dealer bond, you are guaranteeing to operate your dealership in compliance with the Mississippi Administrative Code. As the bond’s “principal,” you bear the full legal obligation to pay valid claims for damages resulting from your noncompliant business practice.

As the bond’s “obligee,” DOR can file a claim against the bond to recover unpaid taxes and fees owed by the principal. Consumers also have the right to file claims, most commonly for losses due to such unlawful and unethical practices as fraudulently altering titles, falsifying odometer readings, or misrepresenting a vehicle’s condition.

How Are Mississippi Auto Dealer Bond Claims Paid?

The third party to a Mississippi auto dealer bond is the bond’s guarantor (the “surety”). The surety guarantees the payment of valid claims by the principal, but the legal obligation to pay them belongs to the principal alone. Typically, the surety will pay a claim initially and then collects reimbursement from the principal. A principal who does not repay that debt can be sued by the surety. The surety, like the obligee, is indemnified against liability for damages caused by the principal.

How Much Does a Mississippi Auto Dealer Bond Cost?

The annual premium for a Mississippi car dealer bond is the result of multiplying the $15,000 bond amount by the premium rate Mississippi car dealer bonds are sold on the basis of an annual premium. The premium is calculated by multiplying the $15,000 bond amount by a premium rate that the surety establishes for each principal.

The biggest underwriting concern is the risk the surety will be taking on in guaranteeing the payment of claims by the principal, specifically the risk that the principal will not reimburse the surety for claims paid on the principal’s behalf. The most reliable measure of that risk is the principal’s personal credit history.

A high credit score correlates with a low risk to the surety. Most principals will pay a premium rate in the range of one to three percent, making the annual bond premium between $150 and $450. A principal with poor credit will typically pay a higher premium rate.