Starting your own business can be a daunting task. The piles of documents you have to carefully fill out, seem to deal with God knows how many insurance policies and bonds and must comply with numerous state requirements. It seems like a daunting task, doesn’t it?
Not if you operate in Maryland. The state has one of the most straightforward licensing procedures. There are a few intricacies, which might indeed scare young entrepreneurs, we admit. But follow our summary of the process below, and you will be well on your way to obtaining a Maryland Dealers License hassle-free.
The Many Types of Dealer Licenses
Your first step towards getting licensed should be choosing the license that’s right for your business. The Maryland Motor Vehicle Administration offers licensing options for all kinds of vehicle businesses ranging from car dealerships to motorcycle dealerships. There’s even a special licensing program for wholesale dealers in particular.
If you are interested in wholesale dealership, it’s important to note that such dealers are only permitted to purchase vehicles from the public, but selling them to the public is illegal. All of their sales and exchanges may only come from other dealers.
The state of Maryland requires New or Used Vehicle Dealers, Motorcycle Dealers, and Trailer Dealers to have locations suitable for their retail activities. Wholesale Dealers and Emergency Vehicle Dealers, on the other hand, can operate just from offices.
The All-Important Auto Dealer Bond
All motor vehicle dealers are required to have proper bonding. Auto Dealer Bonds are a type of surety bond that is not to be confused with insurance policies. Unlike insurance, which protects your property, the auto dealer bond serves as a guarantee that your business employs ethical operational practices and complies with state laws and regulations. In case of a breach of terms, a legal process is triggered resulting in obligation for you and the surety with which you have underwritten the bond.
The value of the bond will depend on the type and number of vehicles you sell. To find out what your specific figures will be, simply contact the state and they will provide you with the rules and regulations. The annual premium for auto dealer bonds, i.e. the cost to you, typically ranges between 1% and 5% of the bond value.
Getting Bonded with Bad Credit
Many entrepreneurs might initially be discouraged from starting car dealership business due to refusal from bonding companies because of bad credit history. However, bonding for high-risk applicants is certainly available. In cases in which the applicant has a credit score lower than 650, the premium is higher than usual and typically ranges from 5% to 15%.
Collateral is required for bonding if your score is lower than 600. Bonding is totally restricted only if you are late with child support payments or you are in open bankruptcy.
Getting The Required Paperwork
The registration process uses similar forms across the board, no matter what kind of license you need, with only minor variations. The Maryland MVA provides individual packages for every type of license offered that includes all the needed paperwork. Keep in mind that the state will require not only an auto dealer bond, but also valid Worker’s Compensation insurance coverage.
Furthermore, all license applications, excluding Used Vehicle Dealers and Wholesale Dealers, are required to provide a franchise letter showing evidence of your credentials to sell vehicles on your premises. The licensing fee is $250 and it applies to all new dealers.
Once obtained, the auto dealer license is valid for two years and you will automatically receive a renewal package up to 60 days before it expires. If you go out of business or need to change your license, the MVA provides all the necessary forms online.
It’s as Easy as 1.. 2.. 3.. 4…
Reviewing what we’ve shared so far, all you need to apply for an auto dealer license in Maryland are these 4 simple things:
- Registration Forms (available on the MVA website)
- Auto Dealer Bond (get a quote today)
- Worker’s Compensation Insurance (more info on the Worker’s Compensation Commission site)
- Franchise letter (not required for Used Car or Wholesale dealers)
So what are you waiting for? Get licensed today, and you can finally turn your dream business into a successful reality.