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

What Are the Different Types of Michigan Vehicle Dealer Licenses?

There are twelve different classes of Michigan dealer licenses—Classes A through H plus Class R and Class w, but the three most common ones are:

  • Class A, New vehicle dealer
  • Class B, Used vehicle dealer
  • Class W, Wholesale dealer

This article focuses on obtaining a Class B license as a used car dealer, which is the most commonly issued dealer license in Michigan.

What Are the Steps in the Licensing Process?

Before submitting an application for a Michigan Class B dealer license you must:

  • Find a permanent business location and obtain zoning approval from the local zoning authority.
  • If you will not be providing repair services on the dealership premises, you must enter into an agreement with a repair facility that meets state requirements.
  • Schedule an appointment to be fingerprinted. Your dealer license application must be on file with the Secretary of State before you have your prints scanned.
  • Register your business with the Michigan Department of Treasury and obtain a sales tax number.
  • Purchase liability insurance and, if you will have employees, Workers’ Compensation insurance.
  • Purchase a Michigan car dealer bond in the amount of $10,000.
  • Complete the required used vehicle dealer pre-license training.

Submit your completed application packet and all supporting documentation to the Michigan Department of State, Bureau of Regulatory Services, Business Licensing and Regulation Division in Lansing. 

Why is a Michigan Car Dealer Bond Required?

A Michigan car dealer bond is required as financial protection for the state of Michigan and for the public. It guarantees that the dealer will comply with all state laws governing the sale of used vehicles.

But if the dealer fails to pay taxes, fees, or fines owed to the state, the bond provides a way for the state to recover the overdue amount. Consumers who have incurred a financial loss due to the unlawful or unethical business practices of a licensed car dealer, such as concealing previous flood damage or falsifying odometer readings, can also file a claim against the dealer’s bond.

How Are Michigan Car Dealer Bond Claims Paid?

The three parties to a Michigan used car dealer surety bond agreement, a legally binding contract, are known as the obligee, the principal, and the surety. The obligee is the Michigan Department of State, the principal is the dealer, and the surety is the company guaranteeing the bond.

That agreement legally obligates the principal, and only the principal, to pay all valid claims against the bond. However, the surety guarantees payment of those claim. That means that unless the principal pays a claim right away, the surety will pay it and then collect on that debt from the principal. 

How Much Does a Michigan Car Dealer Bond Cost?

The principal pays an annual premium that is only a small percentage of the required $10,000 bond amount. That percentage is the premium rate, which the surety assigns to each bond applicant based largely on their personal credit score. That’s the most reliable measure of the risk the surety will be assuming in potentially paying claims on behalf of the principal and waiting to be repaid. 

With good credit, the principal’s premium rate should be in the 1% to 3% range, or $100 to $300. A credit-challenged principal may pay a premium on the higher end of the spectrum for the same $10,000 bond amount.

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