Indiana 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 your Indiana car dealer license bond needs.

Learn how to get an Indiana car dealer license, and contact us today to request a quote on the bond you need.

What Are the Different Types of Indiana Car Dealer Licenses?

The Indiana Secretary of State is responsible for licensing car dealers operating within the state. You must have a license if you sell vehicles for a profit. You are allowed to sell up to 12 vehicles per year without being licensed as a dealer as long as the vehicles you sell are registered to you and driven primarily by you, a family member, or some other member of your household.

There are eight different types of Indiana vehicle dealer licenses, but this article addresses only the licensing of used car dealers, which is the most commonly issued dealer license. 

What Are the Steps in the Licensing Process?

Most of the required forms can be downloaded from the Indiana dealer licensing webpage. In addition to completing all the necessary forms, you’ll need to include certain supporting documentation with your application package:

  • Background Check completed within the last 90 days
  • Business entity documentation
  • Proof of liability insurance
  • Indiana Motor vehicle dealer surety bond in the amount of $25,000
  • Photo Identification
  • Photos of the Location
  • Retail Merchant Certificate and tax number from the Indiana Department of Revenue
  • Local zoning approval (Zoning Affidavit)

Submit your completed application and other required documents to the Office of the Indiana Secretary of State, Auto Dealer Services Division, in Indianapolis.

Why is an Indiana Car Dealer Bond Required?

An Indiana car dealer bond (officially called an Indiana Motor Vehicle Merchandising Bond) is a type of license and permit surety bond that serves as the dealer’s pledge to comply with all applicable Indiana statutes. It protects the state of Indiana against the loss of revenue due to the dealer’s nonpayment of taxes, fees, or fines. It also relieves the state of any liability for financial losses consumers incur due to the dealer’s unlawful or unethical business practices. Finally, it provides a source of funds for paying claims filed by the state or by consumers.

Failing to maintain an active Indiana car dealer bond in force at all times can lead to suspension or revocation of the dealer’s license.

How Are Indiana Car Dealer Bond Claims Paid?

An Indiana car dealer bond is a legally binding contract among:

  • The Indiana Secretary of State (the “obligee” requiring the bond),
  • The used car dealer (the “principal” required to purchase the bond), and 
  • The company guaranteeing the bond (the “surety”). 

The terms of the surety bond agreement make the principal entirely responsible for paying valid claims against the bond. Once the surety determines that a claim is valid and must be paid, the principal is legally obligated to pay it.

The surety guarantees the payment of claims and will pay the claim initially on behalf of the principal. That does not relieve the principal of the obligation to pay; the obligation simply shifts to repaying the surety. If the principal fails to repay that debt, the surety can take legal action against the principal.

How Much Does an Indiana Car Dealer Bond Cost?

Two factors enter into the calculation of the annual premium for an Indiana car dealer bond: the $25,000 bond amount established by the obligee and the premium rate set by the surety on a case-by-case basis. 

The main underwriting concern is the degree of risk involved in paying claims on behalf of the principal and waiting for reimbursement. The best metric for assessing that risk is the principal’s personal credit score. 

A high credit score suggest that the risk to the surety is low, so the surety has the confidence to assign a low premium rate. The reverse is also true; a low credit score indicates greater risk and will result in a higher premium rate. A principal with good credit may pay a premium rate as low as one percent, or $250 for the $25,000 Indiana car dealer bond.

Our surety bond professionals will get you the Indiana car dealer bond you need at a competitive rate.