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Every state requires auto dealers to be licensed, and most also require a surety bond. If you’re thinking of applying for a Michigan auto dealer license, keep reading to learn more about the process, and apply online for the bond you need today.
Who Needs A Michigan Dealer License?
In Michigan, an auto dealer license is required if a person plans buys, sells, leases, negotiates the leases, brokers, or deals in five or more vehicles in a 12-month period. Michigan law defines vehicles as any that need to be titled and include trailer coaches and trailers weighing over 2,500 pounds.
The state of Michigan licenses auto dealers by class, and there are three types of licensees that need a surety bond:
- Class A—New vehicle dealer license, allowing dealers to buy and sell new vehicles under a franchise agreement or manufacturer contract
- Class B—Used vehicle dealer license under which dealers can buy and sell used vehicles
- Class D—Broker license, allowing the licensee to bring a buyer and seller together, negotiate the terms of a transaction, or display vehicles for sale; and allowing the licensee to conduct vehicle auctions
Classes C, E, F, G, H, R, and W of the Michigan auto dealer license do not need a surety bond, and you can read about them here. This post will focus on licensing for new and used auto dealers.
Dealer License Requirements
New and used auto dealers are licensed through the Michigan Secretary of State. There are several prerequisites for Michigan auto dealer licensing:
- Copy of Articles of Incorporation or Assumed Name Filing
- Fingerprints for all business owners, partners, corporate officers and/or directors
- Michigan No-fault fleet type insurance
- Registered repair facility or an agreement with one
- At least two dealer plates
- Zoning and municipal approval
- $10,000 surety bond
- $75 license fee
New auto dealers must also have a franchise agreement with a vehicle manufacturer.�Both new and used auto dealer applicants also need an established place of business that adheres to the provisions of Section 257.14 of the Michigan Vehicle Code. Some of those provisions include the following:
- Must be primarily for conducting the business of an auto dealer and cannot be a residence
- Place where business records are kept
- At least 1,300 square feet of land space that can display a minimum of ten vehicles, plus 650 square feet of customer parking
- Building of at least 150 square feet
- Permanent, visible sign displaying dealership’s name
- Clearly displayed hours of operation (no less than 30 hours per week)
Read the MVC section for a more detailed list of dealership requirements. Make sure to complete the entire application packet to expedite the licensing process. Dealers’ licenses must be renewed each year by December 31, or a new application will need to be submitted.
Dealer Surety Bond Requirements
New and used Michigan auto dealers and brokers need a $10,000 surety bond. The surety bond is the dealer’s promise not to engage in unethical business practices, like misrepresenting the condition of a vehicle they are selling. It’s also a promise that the dealer is adhering and will continue to adhere to the rules and regulations they are governed by. That means the bond is a guarantee that the dealer will pay all appropriate taxes, continue to renew their license, and never engage in fraud.
Interested in becoming a licensed Michigan auto dealer? Get started by getting your surety bond!