Illinois Car Dealer License Guide

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Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Illinois auto dealer bond needs. Learn how to get a Illinois car dealer license, and contact us today to request a quote on the bond you need.

What Are the Different Types of Illinois Auto Dealer Licenses?

In Illinois, auto dealers are licensed by the Secretary of State, Vehicle Services Department, Dealer Licensing Section. The main types of licenses are:

  • New and used vehicles
  • Used vehicles only
  • Motorcycles
  • Trailers
  • Community-based manufactured homes
  • Manufactured home dealer
  • Salvage dealer
  • Buy here pay here used vehicle dealer

The focus of this guide is on obtaining a used vehicles only license.

What Are the Steps in the Licensing Process?

Before applying for your dealer license, you’ll need to:

  • Secure a permanent business location that meets the requirements of the Illinois Administrative Code, Section 1020.10.
  • Complete eight hours of pre-licensing training conducted by the Secretary of State’s office.
  • Register as a retailer with the Illinois Department of Revenue and obtain a tax number.
  • Purchase general liability insurance for the dealership and obtain a certificate of insurance.
  • Purchase an Illinois auto dealer bond in the amount of $20,000.

Gather documentation proving that you have accomplished all of the above. Submit it with your completed Illinois dealer license application and all required fees to the Vehicle Services Department, Dealer Licensing Section for processing. Once your application has been approved, the Secretary of State’s office will send an inspector out to make sure your business location complies with all state requirements.

Why is an Illinois Auto Dealer Bond Required?

An Illinois auto dealer bond:

  • Is the dealer’s guarantee to do business in compliance with all applicable Illinois statutes governing auto sales.
  • Indemnifies the state of Illinois against any liability for damages caused by the unlawful actions of auto dealers licensed by the state.
  • Provides a way for the state to collect unpaid taxes, fines, or fees owed by the dealership or to compensate consumers who have been harmed financially by the dealer’s violation of the terms of the surety bond agreement.

All three parties to the surety bond agreement for an Illinois auto dealer bond are legally obligated to abide by its terms. These three parties are:

  • The state of Illinois (the bond’s “obligee”),
  • The auto dealer (the “principal,” who bears full legal responsibility for paying valid claims against the bond), and
  • The company guaranteeing the bond (known as the “surety”).

If there are no claims against the bond, the bonding requirement may be lifted after the first 36 months that the dealership is in operation.

How Are Illinois Auto Dealer Bond Claims Paid?

Unless the principal pays a claim promptly once notified by the surety that the claim is valid, the surety will go ahead and pay it on behalf of the principal. But that payment doesn’t change the principal’s obligation to pay all valid claims; the principal’s obligation extends to reimbursing the surety for paying the claim initially.

How Much Does an Illinois Auto Dealer Bond Cost?

The annual premium for an Illinois auto dealer bond is a small percentage of the $20,000 bond amount. That surety determines what that percentage (the premium rate) will be based on the underwriters’ assessment of the risk associated with paying claims on the principal’s behalf and waiting to be repaid. That assessment relies heavily on the principal’s personal credit score.

Good credit means that the risk to the surety most likely is low and is rewarded with a low premium rate, typically in the range of one to two percent. With lesser credit, the premium rate can be significantly higher.

Our surety bond professionals will get you the Illinois auto dealer bond you need at a competitive rate.