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

What Are the Different Types of Minnesota Car Dealer Licenses?

The Minnesota Department of Public Safety, Driver and Vehicle Services (DVS) issues licenses to Minnesota vehicle dealers in 11 categories, depending on the specific kinds of vehicles sold and to whom they are sold. The most common license types are

  • New vehicle dealer licenses
  • Used vehicle dealer licenses
  • Wholesale dealer licenses

Our focus here is on obtaining a license as a used motor vehicle dealer.

What Are the Steps in the Licensing Process?

The application currently used to apply for a Minnesota dealer license can be downloaded, filled out, and submitted by mail, along with supporting documents, to DVS in St. Paul. In 2021, Minnesota is transitioning to an online application process.

This discussion assumes that you have already formed a legal business entity, registered it with the IRS and the state, and obtained a Federal Employer Identification Number and Minnesota Tax ID number. Subsequent steps in the licensing process for used car dealers in Minnesota include:

  • Establishing a permanent business location that meets state requirements and obtaining zoning approval
  • Purchasing the required amount of liability insurance on all vehicles with dealer plates
  • Purchasing Workers’ Compensation insurance if you will have employees
  • Purchasing a Minnesota car dealer bond in the amount of $50,000
  • Paying the application fee (currently $250)

Why is a Minnesota Car Dealer Bond Required?

A Minnesota car dealer bond protects financial protection for both the state (represented by DSV) and the public. Specifically, it is a dealer’s guarantee to do business in compliance with all applicable state laws and compensate any party with a valid claim for damages incurred as a result of the dealer’s violation of those law. Examples of such violations include failing to pay taxes, fees, or fines owed to the state, misrepresentation of the condition of a vehicle, or odometer tampering.

How Are Minnesota Car Dealer Bond Claims Paid?

Of the three parties brought together in the legally binding surety bond agreement for a Minnesota car dealer bond, only the dealer (known as the bond’s “principal”) bears the legal obligation to pay valid claims against the bond. Both DSV (the bond’s “obligee”) and the company guaranteeing the bond (the bond’s “surety”) are indemnified against liability for paying claims.

That being said, the surety guarantees the principal’s payment of claims. So, if the principal does not make prompt payment to a claimant, the surety will do so and the principal’s legal obligation then shifts to repaying that debt to the surety. The surety has the right to take legal action against a principal who fails to repay the debt created by the surety’s payment of a claim on the principal’s behalf.

How Much Does a Minnesota Car Dealer Bond Cost?

Minnesota car dealer bonds are sold for an annual premium that is a small percentage of the required $50,000 bond amount (also known as the bond’s “penal sum”). The surety determines what that percentage, the premium rate, will be after an underwriting assessment of the risk associated with paying claims on the principal’s behalf. 

The main factor considered by the underwriters is the principal’s personal credit score, which is the best measure of the risk that the principal won’t repay the surety readily. A high credit score suggests that the risk to the surety is low, so the premium rate will most likely be in the standard market rate range of one to three percent, making the annual premium anywhere from $500 to $1,500. A principal seen as less creditworthy will pay a higher premium rate.

Our surety bond professionals will get you the Minnesota car dealer bond you need at a competitive rate.