North Carolina Car Dealer License Guide

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What Are the Different Types of North Carolina Car Dealer Licenses?

North Carolina’s Division of Motor Vehicles (NCDMV), part of the state’s Department of Transportation, issues dealer licenses in these categories:

  • New vehicle dealers
  • Used vehicle dealers
  • Distributors selling new vehicles to new vehicle dealers
  • Wholesalers selling used vehicles to used vehicle dealers
  • Manufacturers providing new vehicles to distributors

This article focuses on the process for obtaining a used vehicle dealer license in North Carolina.

What Are the Steps in the Licensing Process?

Here is an overview of the licensing process for used vehicle dealers.

  • Register your legal business entity with the state (specific registration and documentation requirements depend on the type of entity (e.g., sole proprietorship, partnership, LLC, corporation, etc.).
  • Complete a 12-hour pre-licensing course at some point during the 12 months before applying for a used vehicle dealer license. Retain the certificate of completion to submit with your license application.
  • Secure a permanent business location that meets state requirements and contact the county’s License and Theft Bureau office to schedule an inspection.
  • Purchase sufficient liability insurance to cover dealer plates.
  • Purchase Workers’ Compensation insurance if you will have employees.
  • Purchase a $50,000 North Carolina car dealer bond (plus another $25,000 for each additional showroom).
  • Complete the license application, get it notarized, and submit it, along with all required supporting documentation and payment of the required fee (currently $97) to NCDMV Vehicle Services, Dealer Unit in Raleigh.

Why Is a North Carolina Car Dealer Bond Required?

The binding requirement is for the protection of NCDMV and the public against financial losses resulting from the unlawful or unethical business conduct of licensed car dealers. The bond is a dealer’s pledge to be fully compliant with all applicable state laws governing vehicle sales in the state of North Carolina.

Any violation by the dealer (known as the bond’s “principal”) that causes financial harm to the state (the “obligee” requiring the bond) can result in the injured party filing a claim for damages against the North Carolina car dealer bond. The surety bond agreement legally obligates the principal to pay all valid claims.

How Are North Carolina Car Dealer Bond Claims Paid?

Although the terms of the surety bond agreement for a North Carolina dealer bond make the payment of valid claims solely the obligation of the bond’s principal, the third party to the agreement, the bond’s “surety,” guarantees that the principal will, in fact, pay all valid claims. Consequently, the surety typically pays claims initially, and the principal subsequently repays the principal for the resulting debt.

How Much Does a North Carolina Car Dealer Bond Cost?

The premium for a North Carolina car dealer bond is paid annually. It’s calculated by multiplying the required bond amount by the premium rate set by the surety based on an assessment of the principal’s creditworthiness. The principal’s personal credit score is considered a good measure of the risk the surety will be assuming in paying claims in advance and counting on the principal for repayment.

When you purchase a Nebraska car dealer bond, you’ll pay an annual premium that’s a small percentage of the required bond amount.  That percentage, the bond’s premium rate, is set by the surety for each bond, based largely on the principal’s personal credit score. That’s the best measure of the risk the surety is accepting in agreeing to pay claims on behalf of the principal and wait for repayment. A high credit core suggests that the risk of not being repaid by the principal is low, and vice versa.

The standard market rate for a principal with good credit is in the range of one to three percent, making the annual premium between $500 and $1,500 for a principal with a single showroom.

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