Iowa 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 Iowa car dealer bond needs.

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

What Are the Different Types of Iowa Vehicle Dealer Licenses?

The Iowa Department of Transportation, Motor Vehicle Division issues different dealer licenses for retailers selling different types of new or used vehicles: cars, motor homes, towable RVs, trucks, motorcycles, low-speed vehicles, and motorized bicycles. 

This article focuses exclusively on getting licensed as a used car dealer, but the requirements for all dealer license types are nearly identical. 

What Are the Steps in the Licensing Process?

Before applying for an Indiana used car dealer license you’ll need to:

  • Get a Federal Employer Identification Number (FEIN)
  • Obtain a business permit from the Iowa Department of Revenue
  • Secure your business location and obtain a certificate from the local zoning office
  • Successfully complete 8 hours of pre-licensing training
  • Purchase liability insurance
  • Purchase an Iowa auto dealer bond in the amount of $75,000
  • Schedule an inspection of your dealership’s location by the Bureau of Investigation and Identity Protection

Once you have accomplished all of the above, go ahead and complete your Iowa Dealer License Application. Submit the completed application and all supporting documents, along with payment for the required fees, to the Office of Vehicle and Motor Carrier Services, Iowa Department of Transportation in Des Moines. 

Why is an Iowa Auto Dealer Bond Required?

The state of Iowa mandates the purchase of a $75,000 auto dealer bond as a requirement for licensing. The bond: 

  • Guarantees that the dealer operates in full compliance with all applicable Iowa statutes and pays all taxes and fees owed to the state
  • Protects the state of Iowa against being held liable for financial harm consumers experience as a result of a licensed dealer’s unlawful actions
  • Obligates the dealer to compensate consumers who have valid claims for such damages
  • Gives the state a way to recover unpaid taxes, fees, and fines owed by the dealer

Not maintaining an active auto dealer bond at all times can result in suspension or forfeiture of the dealer’s license.

How Are Iowa Auto Dealer Bond Claims Paid? 

The surety bond agreement for an Iowa auto dealer bond joins together three parties in a legally binding contract: 

  • The “obligee” requiring the bond is the Iowa MVD, 
  • The “principal” required to purchase the bond is the auto dealer, and 
  • The “surety” is the company guaranteeing the payment of claims. 

While the surety guarantees the payment of claims, it’s the principal who is legally obligated to pay all valid claims. To expedite the process, the surety typically pays a claim initially, which is essentially an extension of credit to the principal. The principal is obligated to repay the resulting debt to the surety. 

How Much Does an Iowa Auto Dealer Bond Cost?

The annual premium for an Iowa auto dealer bond is calculated by multiplying the $75,000 bond amount by the premium rate assigned to the principal by the surety. The main underwriting goal is to set the premium at a level that offsets the degree of risk the surety will be taking on in paying claims on behalf of the principal and waiting to be repaid. 

The principal’s personal credit score is the most reliable measure of that risk. A high credit score indicates a low risk of non-repayment by the principal and is rewarded with a premium rate in the range of one to three percent. Conversely, a low credit score suggests higher risk and results in a higher premium rate.

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