Washington Auto Dealer License Guide

Learn how to become licensed as a Washington 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 Washington. 

What Are the Different Types of Washington Auto Dealer Licenses?

The Washington Department of Licensing (DOL) issues the following auto dealer licenses:

• Motor Vehicle Dealer (selling new or used vehicles retail or wholesale)
• Motor Vehicle Dealer Subagency (New or used vehicles)
• Motor Vehicle Wholesaler: (no retail sales)

What Are the Steps in the Licensing Process?

The Department of Revenue’s Business Licensing Service (BLS) processes applications for an auto dealer license and issue a business license. The license issued by the Department of Licensing is treated as an endorsement to that business license.

The following is an overview of what you’ll need to do to apply for a motor vehicle dealer license in the state of Washington:

• Establish your dealership as a legal business entity and register it with the Internal Revenue Service and with the Washington Department of Taxation.
• Secure a permanent location for your dealership, one that meets all DOL requirements.
• If you will be selling any used vehicles, complete an accredited 8-hour education course offered by the Washington State Independent Auto Dealers Association.
• Purchase a $30,000 Washington auto dealer bond. For further information about the bonding requirement and other required documents, visit the Department of Licensing
• Complete the online business license application on the Department of Revenue website or download the application package, complete it, and submit it by mail.
• Submit the completed application, along with all required supporting documents and payment of the license fee.

Why is a Washington Auto Dealer Bond Required?

The bonding requirement for auto dealers is for the protection of the state of Washington and the auto-buying public. Purchasing a Washington auto dealer bond is a pledge to abide by all applicable regulatory requirements or compensate anyone financially harmed by your noncompliance.

How Are Washington Auto Dealer Bond Claims Paid?

There are three parties to a Washington auto dealer bond, which is a legally binding contract among them. They are known as the “obligee” (the Washington State DOL), the “principal” (the dealer purchasing the bond), and the “surety” (the bond’s guarantor). The full legal responsibility for paying valid claims against the bond rests with the principal.

Nonetheless, as the bond’s guarantor, the surety typically pays a valid claim right away, on behalf of the principal, and waits to be reimbursed by the principal by a certain date. The surety has the option of taking the matter to court if the principal does not repay the amount of a claim paid on the principal’s behalf.

How Much Does a Washington Auto Dealer Bond Cost?

What you will pay as the annual premium for a Washington auto dealer bond depends largely on your personal credit score. The surety’s main concern is the risk of not being repaid for any claims paid on your behalf. If your credit is good, the assumption is that you pay your bills on time, which means the risk to the surety is low, and you premium rate should be low as well, most likely below three percent. Someone with poor credit presents a higher risk and will pay a higher premium rate.

Multiply the $30,000 bond amount by your premium rate, and that’s the annual premium you’ll pay for your Washington auto dealer bond.