New York Auto Dealer License Guide

Learn how to become licensed as a New York 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 New York. 

 What Are the Different Types of New York Auto Dealer Licenses?

New York issues motor vehicle dealer licenses in three categories: Retail, New (permits the sale of new vehicles only); Retail, Other (for selling used vehicles only and buying/selling autos and other motor vehicles on a wholesale basis); and Wholesale (selling only to other dealers, not to the public). The most common of these is the Retail, Other license which is the focus of this article.

What Are the Steps in the Licensing Process?

There are certain tasks you must complete before you can submit an application for a new dealership, specifically:

• Register your business with the Department of State (corporations and LLCs) and obtain a filing receipt, or register with the county clerk (partnerships and sole proprietors operating under an assumed name) and obtain a Business Certificate of Assumed Name.
• Obtain a Federal Employer Identification Number (FEIN) from the IRS.
• Obtain a Certificate of Authority and Tax ID number from the New York State Department of Taxation and Finance (DTF), which can be done on the DTF website.
• Establish a permanent business location and obtain proof of permission to operate at that location.
• Purchase Workers’ Compensation insurance.
• Purchase a New York auto dealer surety bond in the amount of $20,000 if this is your initial license and have no sales history. (The required bond amount for dealers who sold more than 50 vehicles in the prior calendar year is $100,000.)
• Complete the Original Facility application.

When all of these steps have been accomplished, submit the completed application and all other required documents to the New York State DMV along with a check for the required application and registration fees to the NYS DMV Bureau of Consumer and Facility Services, Application Unit in Albany.

After being processed in Albany, your application will be sent to your regional DMV office for review. During the review period, an Automotive Facilities Inspector will be sent out to your location. Receiving your dealer license is contingent upon the inspector’s approval.  Your license must be renewed every two years.

Why is a New York Auto Dealer Bond Required?

A New York auto dealer bond protects the state and the public against financial harm from the unlawful business practices of some dealers. The terms of the bond obligate dealers to operate in compliance with applicable statutory requirements and to compensate parties incurring monetary losses because of their failure to do so. The bond must be renewed at every license renewal so there is always an active bond in force.

How Are New York Auto Dealer Bond Claims Paid?

Of the three parties to a New York auto dealer bond — the “obligee” (DMV), the “principal” (the dealer), and the “surety” (the bond’s guarantor) — it’s the principal that bears the full legal responsibility for paying valid claims. However, as the guarantor, the surety normally pays a claim initially and is repaid later by the principal. The surety can sue the principal, if necessary, to recover the amount of the claim.

How Much Does a New York Auto Dealer Bond Cost?

The annual premium for a New York auto bond is the product of multiplying the $20,000 or $100,000 bond amount by the premium rate established by the surety. This is largely based on the principal’s personal credit score. That’s the best measure of the risk that a given principal might not repay the surety for claims paid on the principal’s behalf.

A high credit score suggests a low risk level, which should result in a low premium rate. The opposite is also true, and a principal with lesser credit will pay a higher premium rate. The average bond purchaser will pay a premium rate that’s between one and three percent.