If you want to sell more than five motor vehicles per year in the State of Michigan, you need to get a Michigan dealers license. The Michigan Department of State oversees the licensing process and has numerous requirements for licensed auto dealers.
In this guide, we will break down the licensing requirements and the steps you need to take to get your Michigan dealers license.
Step 1: Determine license type
The first step to getting your dealer license is to determine what type of license you need. Michigan offers the following types of dealer licenses:
- Class A (New Vehicle Dealer) License: Lets dealers sell new or used motor vehicles
- Class B (Used Vehicle Dealer) License: Lets dealer sell used motor vehicles only
- Class C (Used Vehicle Parts Dealer) License: Lets dealers sell parts from used motor vehicles
- Class D (Broker) License: Lets the licensee serve as an intermediary between buyers and sellers.
- Class W (Wholesaler) License: Lets dealers sell used motor vehicles to other dealers
- Class E (Distressed Vehicle Transporter) License: Lets dealers buy, sell, or transport motor vehicles to dealers (Class C,F, and R)
- Class F (Vehicle Scrap Metal Processor) License: Lets the licensee process vehicles into scrap metal
- Class G (Vehicle Salvage Pool) License: Lets dealers hold and display distressed motor vehicles
- Class H (Foreign Salvage Dealer License: Lets dealers licensed in other states sell wholesale parts in Michigan
- Class R (Automotive Recycler) License: Lets dealers sell component parts for older models
Step 2: Get your business location
The next step is to set up your business location so that it meets all the Department of State guidelines. Below are the requirements for your permanent place of business:
- Must be for commercial use only
- Meet local zoning requirements
- At least 650 square feet of space for customer parking
- Have a repair facility or contract agreement with a repair facility less than 10 miles away
- Signage must display the business’ hours of operation
- Publicly listed telephone number
- A space at least 1,300 square feet in size to display a minimum of 10 vehicles
- An office at least 150 square feet in size to store business records and documents
Step 3: Register your business
All car dealerships are required to register their business with the Michigan Department of Licensing and Regulatory Affairs. You can find more details and all the necessary paperwork on the Michigan.gov website.
If your business plans to have employees, you will need to provide your Federal Employee Identification number during the registration process. You can get your EIN online through the IRS website.
Auto dealerships must also get a Michigan Sales Tax number from the Michigan Department of Treasury.
Step 4: Complete the pre-license dealer training program
If you need a Class A or Class B dealer license, you must complete a pre-licensing education course prior to submitting your application. The training takes place online at pre-scheduled training dates.
You can register for the training within the dealer services section of your online secretary of state account.
Step 5: Get a surety bond and insurance
Class A, B and D dealers are required to post a Michigan surety bond before applying for a dealer license. The bonds give financial protection to the state and the public in the event they are damaged by the dealers’ actions.
The required bond amount for Michigan auto dealer bonds is $10,000. You only have to pay a small percentage of the $10,000 as a premium. Before the surety company issues the bond, they will evaluate your industry experience, creditworthiness, and other factors to determine your exact premium. This typically ranges from 1% to 5% of the bond amount.
In addition to the surety bond, Class A and Class B dealers must get no-fault fleet insurance coverage.
Step 6: Submit dealer license application
Once you’ve met all the Department of State requirements, you can complete your dealer license application. You can find the application forms here on the SOS website. When you complete the form, you’ll have to gather the following supporting documents:
- Copy of Franchise Agreement (Class A dealers)
- Servicing Agreement (Dealers without repair facility)
- Copies of fingerprints
- Designated Branch Office form
- Municipality Approval form
Your application must include a $75 application fee along with an additional $10 for each dealer plate. Class A and Class B dealers must purchase at least two dealer plates.
Once you have everything together, you can send the application to the following address:
Michigan Department of State
Business Licensing Section
Lansing, MI 48918
Step 7: Pass the location inspection
The last step to getting your Michigan dealers license is to pass an inspection of your business location. Once the Department of State reviews your application, they will contact you to set up an appointment with an inspector. If your business location meets all the requirements, the Department of State will issue your license.
Michigan dealers license frequently asked questions
How do you renew a Michigan dealers license?
Michigan dealers licenses expire annually on December 31st. You can renew the license online using the Secretary of State web portal or by mailing the form.
If you miss the expiration date by more than 30 days you must complete the renewal by mail.
You can find out more about the renewal process by visiting the Dealer & SVA Renewal Instructions sheet.
How much does a dealer license cost in Michigan?
Michigan auto dealers must pay a $75 application fee to receive a license. Dealers also need to get a surety bond which can cost as low as $100.
How many cars can you sell in Michigan without a dealers license?
Individuals and businesses can sell up to four motor vehicles per year without a dealer license. If a dealer sells five or more vehicles, they must get a license from the Michigan Secretary of State.
How EZ Surety Bonds can help with a Michigan dealers license
These are the steps you must take to get your Michigan dealers license. When you are ready to get the process started, EZ Surety Bonds can help you get your auto dealer bond quickly and conveniently. Apply online today or get in touch to learn more.