North Carolina Auto Dealer License Guide

Learn how to become licensed as a North Carolina 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 North Carolina.�

What Are the Different Types of North Carolina Auto Dealer Licenses?

North Carolina�s Department of Transportation, Division of Motor Vehicles (NCDMV) issues motor vehicle dealer licenses in five classes: dealer, wholesale dealer, factory branch, distributor, and manufacturer. The most common of these is the dealer license, which is the focus of this article.

What Are the Steps in the Licensing Process?

To obtain a dealer license for the sale of used vehicles, you will need to:

• Form a legal business entity and register it with the North Carolina Secretary of State.
• Complete an approved pre-licensing course during the 2 months prior to applying for a dealer license.
• Establish a permanent business location and get it approved by local zoning authorities.
• Purchase liability insurance that meets the requirements of NCDMV.
• Purchase Workers� Compensation insurance if you will have employees.
• Purchase a $50,000 North Carolina auto dealer bond for the main location and a $25,000 bond for each additional location.
• Contact the local DMV License and Theft Bureau to schedule an inspection of the dealership�s location.
• Undergo a background screening.
• Complete the license application, get it notarized, and submit it, with required supporting documents and payment of the application fee (currently $97) and dealer plate fees (currently $38.75 for the first five plates) to NCDMV Vehicle Services, Dealer unit in Raleigh.

North Carolina dealer licenses must be renewed annually.

Why is a North Carolina Auto Dealer Bond Required?

North Carolina auto dealer bonds play an important role in maintaining a safe and orderly vehicle market in North Carolina. They require dealers to operate in full compliance with applicable state laws and to pay claims for financial damages resulting from noncompliance.

The bond�s �obligee,� NCDMV, can file a claim against a dealer�s bond to recover unpaid taxes and fees. And any consumer who has been harmed financially by a dealer�s unlawful act, such as fraudulent alteration of a vehicle title or deliberate misrepresentation of a vehicle�s condition, can also file a claim. The dealer (known as the bond�s �principal�) is legally obligated to pay all claims determined by the bond�s guarantor (the �surety�) to be valid.

How Are North Carolina Auto Dealer Bond Claims Paid?

Although the principal bears full legal responsibility for paying valid claims against a North Carolina auto dealer bond, the surety guarantees that they will be paid. Therefore, the normal practice is for the surety to pay a claim initially, essentially extending credit to the principal, to be repaid at a later date.

If the principal fails to repay that debt, the surety can take legal action to recover the funds.

How Much Does a North Carolina Auto Dealer Bond Cost?

The cost of a North Carolina auto dealer bond is the result of multiplying the $50,000 bond amount by the premium rate assigned by the surety through an underwriting process. The main underwriting concern is the risk that the principal won�t repay the surety for claims paid on the principal�s behalf.

The most reliable indicator of that risk is the principal�s personal credit score, though other factors are also taken into account. The higher the principal�s credit score, the lower the risk and the lower the premium rate. A principal with lesser credit presents a higher risk and will be assigned a higher premium rate. The average principal will pay a premium rate in the range of one to three percent, making their annual premium anywhere from $500 to $1,500.