Michigan Auto Dealers License Guide
In Michigan, individuals and businesses that engage in five or more motor vehicle transactions during a year are required to get auto dealer’s licenses. This means that if you want to become an auto dealer or open a car dealership in the state, you will be required to get a dealer’s license.
Obtaining a Michigan dealer license requires you to submit certain documents, pay a fee, obtain insurance, and secure a Michigan auto dealer bond. To learn more about this process and the requirements, read below.
What Is a Michigan Dealer License?
A dealer’s license is issued by the Michigan Department of State to applicants who meet the state’s requirements. People who intend to sell vehicles must secure auto dealer’s licenses to legally operate their businesses.
Michigan Dealer License Types
Michigan issues 10 different auto dealer’s licenses based on the applicant’s intended role within the industry, including the following:
• Class A license for new vehicle dealers
• Class B license for used vehicle dealers
• Class C license for used vehicle parts dealers
• Class D license for motor vehicle brokers
• Class E license for distressed vehicle transporters
• Class F license for motor vehicle scrap metal processors
• Class G license for motor vehicle salvage pool dealers
• Class H license for foreign salvage motor vehicle dealers
• Class R license for automotive recyclers
• Class W license for a wholesale dealer
If you plan to operate any of these types of businesses, you will need to get the appropriate dealer’s license in Michigan. Doing so will require you to complete an application and submit it to the Secretary of State. You will also need to meet the other eligibility criteria before a license can be issued to you. The requirements for getting a license are detailed later in this article.
Is It Worth Getting a Dealer’s License?
If you intend to sell, buy, lease, or broker five or more vehicles during a year, you are required to obtain a Michigan auto dealer’s license. This license is required by the state for you to legally operate your business. If you fail to get a license and are required to do so, you could face penalties, fines, and the forced closure of your business.
Who Needs a Dealer License in Michigan?
Under Mich. Veh. Code § 257.248, anyone who participates in the lease or sale of five or more vehicles, directly or indirectly, in Michigan in 12 months must get an auto dealer’s license. The particular type of dealer’s license that you might need will depend on the type of business you intend to operate as previously described.
Michigan Dealer License Requirements
Before you can obtain a motor vehicle dealer’s license in Michigan, you must meet several conditions and perform all of the following tasks:
• Complete and submit the application.
• Submit a zoning approval form unless you are applying for a Class H license.
• Secure a place of business that meets the state’s requirements.
• Submit a copy of your business’s articles of incorporation or other business creation document filed with the state.
• Get fingerprinted and submit your signed receipt.
• Pay the dealer’s license fee.
Different classes of licenses also have specific requirements, including the following:
• Class A – Submit a copy of the franchise agreement with the manufacturer.
• Class A and Class B – Submit a completed dealer selection form.
• Class A and Class B – Have a registered repair facility or an agreement with a facility that is registered.
• Class A and Class B – Have a minimum of two dealer plates.
• Class A, Class B, and Class D – Purchase a $10,000 Michigan auto dealer bond.
• Class A, Class B, and Class W – Submit proof of Michigan no-fault fleet insurance.
• Class C and Class R – Submit a copy of your workers’ compensation insurance or the notice of exclusion.
For any questions about obtaining an auto dealer license in Michigan, you can refer to the Department of State’s instruction booklet for original vehicle dealer license applications.
The following chart from the Secretary of State’s website should help you understand what you need to do when you are preparing to apply for your auto dealer’s license in Michigan.
How Do You Get a Dealer’s License in Michigan?
To get a dealer’s license in Michigan, follow the steps below.
1. Figure Out Your License Type
The first step is to figure out which type of auto dealer license you need based on how you intend to operate your business. If you plan to operate more than one type, you will need to obtain a license for each one.
2. Secure a Permanent Location for Your Business/h3>
Michigan auto dealers are required to purchase or lease permanent locations for their businesses that meet all of the following requirements:
• Includes an enclosed building that will only be used for commercial purposes
• All records and documents stored on-site
• Must include a furnished office of a minimum of 150 square feet, and it must also include a functioning bathroom
• Telephone number must be listed in the name of the business
• Must have a well-lit display area of a minimum of 1,300 square feet that can hold at least 10 vehicles
• Must have a customer parking area of at least 650 square feet
• Business hours of operation must be posted
• Must include a registered repair facility or have a contract with a facility that is located within 10 miles of the business
3. Erect a Permanent Sign
Michigan requires auto dealers to have permanent signs erected that are visible from the closest street. This sign must display your business name.
4. Secure Zoning Approval From the Zoning Authority
Before you can open your business, you must first secure zoning approval from the local zoning authority. This approval certifies that your business location complies with the relevant zoning regulations, and you will need to submit a copy of the zoning approval form with your application for a dealer’s license.
5. Attend and Complete the Required Dealer Training Course
If you intend to get a Class A or Class B dealer’s license, you will be required to complete a training course before you submit your application for your license. You can register for a class on the Secretary of State’s website.
6. Secure a Motor Vehicle Dealer Surety Bond
Certain auto dealers are required to purchase and maintain motor vehicle dealer surety bonds of at least $10,000 before they can secure their licenses. Class A, Class B, Class D, and Class H dealers are all required to purchase and maintain surety bonds. The other classes are exempt from the requirement to obtain surety bonds.
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7. Secure No-Fault Fleet Insurance
If you intend to get a Class A or Class B motor vehicle dealer’s license, you must purchase no-fault fleet insurance and submit a certificate of insurance when you submit your application. The insurance you obtain must have minimum liability limits of $20,000 per injured person, $40,000 per accident, and $10,000 for property damage.
8. Complete and Submit the Application
Complete and submit the dealer application form on the Secretary of State website and mail it to the following address:
Michigan Department of State
Business Licensing Section
Lansing, MI 48918
Your application packet should include all of the following:
• Municipal approval
• Sales tax number from the Michigan Department of Treasury
• Franchise agreement if you are applying for a Class A dealer license
• Designated branch office form stating where transactions will occur
• A minimum of two dealer plates for a Class A or Class B license
• Servicing agreement with a repair facility if you do not have a registered facility located at your business
9. Submit the Fees
You will need to submit an application fee of $75 and an additional fee of $10 for each dealer plate you request.
10. Pass the Business Inspection
Before your dealer’s license will be issued, your business location must pass an inspection.
In addition to these steps, you should also refer to the instruction booklet from the Secretary of State to ensure that you meet all of the requirements for the particular type of license you intend to apply for.
Once you obtain a motor vehicle dealer’s license, it will expire on Dec. 31. You will need to complete the steps for a license renewal before its expiration date to keep your license and your ability to continue operating your business in good standing. You can renew your license online or by mail.
How Much Does It Cost to Get a Dealer’s License in Michigan?
The application fee for licensed dealers in Michigan is $75. You will also need to pay $10 for each dealer plate you request. The bond cost will vary, depending on your credit score and other factors. You can anticipate paying between $100 and $300 for a $10,000 motor vehicle dealer bond in Michigan.
Submitting a Michigan Motor Vehicle Dealer Bond
If you want to get a motor vehicle dealer’s license to sell new or used vehicles or to become a broker, you will be required to purchase a $10,000 Michigan motor vehicle dealer bond. An auto dealer bond is required by the state to protect both the state and your customers and guarantee that you will comply with the law while operating your business.
To get a surety bond, you will need to purchase one from a surety company. The company that issues the bond to you provides the guarantee to the state and your customers. If a claim is filed against your bond, the surety company will provide financial compensation if you fail to pay it. However, you will be ultimately responsible for any valid claims that might be filed.
If you want to become an auto dealer in Michigan, ensure you meet the requirements for the type of license you need. Once you secure your license, you should always comply with the law and operate your business ethically to maintain your auto dealer bond and keep your license intact.