South Dakota Car Dealer License Guide

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In this article, we’ll walk you through everything you need to get a South Dakota car dealer license.

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your South Dakota car dealer license bond needs.

What Are the Different Types of South Dakota Car Dealer Licenses?

South Dakota’s Motor Vehicle Division, part of the state’s Department of Revenue, issues licenses in several categories:

  • Vehicle dealer (selling new and used vehicles)
  • Used vehicle dealer
  • Mobile/manufactured home dealer
  • Motorcycle dealer
  • Snowmobile and/or boat dealer
  • Trailer dealer
  • Emergency vehicle dealer

The most common of these is a used vehicle dealer license, so that is the focus of this article.

What Are the Steps in the Licensing Process?

You can only apply for a dealer license after you have established your business as a legal entity and registered it with the IRS and the South Dakota Division of Business Services and have obtained a local business license if applicable.

Prior to filling out the license application, you’ll also need to:

  • Establish a permanent business location and get a zoning approval letter from the town or county.
  • Purchase at least $300,000 of public liability insurance.
  • Obtain Workers’ Compensation insurance if you will have employees.
  • Purchase a $25,000 South Dakota car dealer bond.

You’ll need to fill out the application in its entirety, as well as a separate application for dealer plates, and submit both, along with all required supporting documents and payment of the application fee (currently $300) to MVD in Pierre.

You will not receive your license until your site has passed an inspection by an MVD inspector.

Why is a South Dakota Car Dealer Bond Required?

The reasons behind the bonding requirement are to:

  • Guarantee the dealer’s compliance with all applicable South Dakota laws and regulations
  • Provide a way to compensate parties financially injured by a dealer’s unlawful or unethical business actions

Thus, a South Dakota car dealer bond provides financial protection for the state and the public and maintains consumer confidence in the retail vehicle sales industry.

How Are South Dakota Car Dealer Bond Claims Paid?

Of the three parties to the legally binding surety bond agreement for a South Dakota car dealer bond, only one, the dealer (the bond’s “principal”) bears any legal obligation to pay all legitimate claims against the bond. Both the state (the bond’s “obligee”) and the company guaranteeing the payment of claims (the bond’s “surety”) are indemnified against any liability for damages caused by the principal’s violation of the terms of the surety bond agreement.

Nonetheless, the surety typically will pay a valid claim initially and then be reimbursed by the principal. As the bond’s guarantor, the surety will pay a claim on behalf of the principal to ensure prompt compensation of the claimant. However, the obligation to pay claims still belongs to the principal, and the principal must repay the surety for the resulting debt.

How Much Does a South Dakota Car Dealer Bond Cost?

The annual premium for a South Dakota car dealer bond is a small percentage of the required $25,000 bond amount. That percentage is the bond’s premium rate, which is determined by the surety for each applicant based on an underwriting assessment of the risk of non-repayment for claims paid on behalf of the principal. The greater the risk, as measured by the principal’s personal credit score, the higher the premium rate.

While a principal with good credit will typically pay a premium rate in the range of 1% to 2%, someone with lesser credit could be assigned a premium rate that is higher than this. So, depending on your credit history, you could pay anywhere from $250 to $750 annually for a South Dakota car dealer bond.

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