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

What Are the Different Types of Colorado Auto Dealer Licenses?

Colorado’s Auto Industry Division, part of the Department of Revenue, issues seven different types of dealer licenses:

  • Franchised Dealer (new motor vehicles)
  • Used Dealer
  • Wholesaler
  • Wholesale Auction
  • Franchise Powersport Vehicle Dealer (new vehicles)
  • Used Powersport Vehicle Dealer
  • Wholesale Powersport Vehicle Dealer

Regardless of the type of license you’re seeking, you’ll need to meet certain eligibility requirements related to net worth, credit standing, and criminal history.

What Are the Steps in the Licensing Process?

Prior to applying for an auto dealer license you must complete the pre-licensing education requirements and pass the online Auto Industry Mastery Examination. You’ll also need to obtain a Sales Tax License if you don’t already have one, purchase a $50,000 Colorado auto dealer bond, and gather certain documents that you will need to submit along with your auto dealer license application. Those documents include: financial statements, a business plan, photographs of the business location, business formation documents (such as articles of incorporation), and so on.

Once those steps have been accomplished, all you need to do is:

  1. Complete the application found on the Department of Revenue (DOR) website. It includes several different affidavits that must be completed as well.
  2. Pay the required license fee and submit the completed application and all required supporting documents to DOR.

Why is a Colorado Auto Dealer Bond Required?

There are several reasons for the requirement to purchase a Colorado auto dealer bond. The bond:

  • Serves as the dealer’s pledge to do business in compliance with state laws governing auto sales.
  • Indemnifies the state of Colorado against any liability for damages stemming from the unlawful actions of licensed auto dealers.
  • Provides a source of funds for compensating consumers who have experienced a financial loss as a result of the dealer’s violation of the terms of the surety bond agreement.

The power of a surety bond lies in the fact that it is a legally binding contract among the three parties involved:

  • The state of Colorado (the “obligee” requiring the bond)
  • The auto dealer (the “principal” purchasing the bond and accepting the legal obligation to pay valid claims against the bond)
  • The company guaranteeing the bond (the “surety”).

How Are Colorado Auto Dealer Bond Claims Paid?

Although the legal obligation to pay claims belongs entirely to the principal, the surety guarantees payment and typically expedites the resolution of a valid claim by paying it initially, on behalf of the principal.  The principal’s legal obligation then shifts to repaying that debt to the surety.

How Much Does a Colorado Auto Dealer Bond Cost?

The annual premium for a Colorado auto dealer bond is a small percentage of the required bond amount of $50,000. The surety establishes that premium rate for each bond applicant based on how creditworthy the underwriters find the individual to be. The main concern is the risk of not being repaid by the principal for claims paid by the surety on the principal’s behalf.

A high personal credit score should earn the principal a premium rate that’s in the range of one to three percent. Lesser credit can result in a substantially higher premium rate.

Our surety bond professionals will get you the Colorado auto dealer bond you need at a competitive rate.