Kentucky 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 Kentucky auto dealer bond needs.

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

What Are the Different Types of Kentucky Auto Dealer Licenses?

The Kentucky Motor Vehicle Commission issues a number of different types of auto dealer licenses depending on the specific kinds of vehicles sold:

  • New motor vehicle dealer
  • Supplemental lot license (for new motor vehicle dealers only)
  • Used motor vehicle dealer
  • Motor vehicle leasing dealer
  • Wholesale motor vehicle dealer
  • Motor vehicle auction dealer
  • Motorcycle dealer
  • Automotive mobility vehicle dealer
  • Restricted/mobility dealer
  • Restricted/automotive recycling dealer
  • Recreational camper dealer

This article focuses on the licensing of used motor vehicle dealers, which is the most common type of license issued in Kentucky.

What Are the Steps in the Licensing Process?

A single downloadable application is used for all license types. All applicable sections must be completed in full, including the financial statement and authorization for a criminal background check. 

Key steps in the licensing process for used car dealers are:

  • Securing a permanent business location and taking photographs, including signage
  • Obtaining a Federal Employer Identification Number from the IRS
  • Registering the business name with the Department of Revenue and obtaining a sales tax permit number
  • Purchasing a Kentucky auto dealer bond in an amount that will be determined by the Commission 
  • Purchasing the required amount of liability insurance
  • Paying the processing fee (currently $175) and criminal background check fee ($25 per person)
  • Mailing the completed application and all supporting materials to the Commission

Why is a Kentucky Auto Dealer Bond Required?

Once you submit your license application package, the Commission (the “obligee” requiring the bond) will determine the amount of the surety bond you must purchase. That determination is based on your prior sales history and financial circumstances and can be as little as $15,000 or as much as $100,000. You will be notified of your required bond amount.

The purpose of a Kentucky auto dealer bond is to protect both the Commission and the public against financial loss resulting from a licensed dealer’s violation of the rules and regulations governing the sale of motor vehicles in Kentucky. The bond is the dealer’s pledge to comply with all applicable state laws. Any violation, such as not paying taxes owed to the state or falsifying odometer readings, can result in a claim being filed against the bond by the injured party.

How Are Kentucky Auto Dealer Bond Claims Paid?

The dealer (the bond’s “principal”) is legally obligated to pay all valid claims. The company (the bond’s “surety”) guaranteeing the payment of claims will determine the validity of a claim before authorizing payment. 

While the principal is responsible for paying all valid claims, it’s the surety that is guaranteeing payment. So typically, the surety will expedite matters by paying claims initially, on behalf of the principal. That payment creates a debt owed by the principal—a debt that the principal is required by law to repay. 

How Much Does a Kentucky Auto Dealer Bond Cost?

The annual premium for a Kentucky auto dealer bond is only a small percentage of the required bond amount. The obligee establishes the required bond amount, but the surety sets the premium rate based on an underwriting evaluation of the principal’s creditworthiness. The surety’s main concern, of course, is being repaid in a timely manner for claims paid on behalf of the principal. 

A principal with a high personal credit score presents a low risk of non-repayment, so the premium rate will be low, potentially as low as one percent. A low personal credit score is cause for concern about the risk that paying claims on the principal’s behalf could entail, so the premium rate will probably be much higher.

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