North Dakota 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 North Dakota car dealer bond needs.

What Are the Different Types of North Dakota Vehicle Dealer Licenses?

North Dakota’s Department of Transportation, Motor Vehicle Division (NDMVD) issues the following types of dealership licenses:

  • New or Used Motor Vehicle Dealer
  • Motor-Powered Recreational (MPR) Vehicle Dealer
  • Trailer Dealer
  • Mobile Home and Manufactured Home Dealer

Our focus here is on the licensing of used car dealers.

What Are the Steps in the Licensing Process?

The licensing process in North Dakota is relatively simple, assuming that you have already established a legal business entity and registered it properly with the IRS and the North Dakota Tax Commission. The major steps are outlined below.

  • Secure a permanent business location that meets state requirements and local zoning rules. It must pass an inspection before your used vehicle dealer license will be issued.
  • Purchase liability insurance to cover your dealer plates.
  • If you will have employees, purchase Workers’ Compensation insurance.
  • Purchase a North Dakota car dealer bond in the amount of $25,000.
  • Fill out the application and submit it to NDMVD in Bismarck along with the required supporting documents and payment of the inspection fee and application fee (both currently $100) and $20 for each dealer plate beyond the first, which is free of charge.

Why is a North Dakota Car Dealer Bond Required?

A North Dakota car dealer bond is a legally binding, three-way contract among an “obligee,” a “principal,” and a “surety.”

  • The state of North Dakota is the obligee requiring the bond.
  • The dealer is the principal purchasing the bond.
  • The surety is the company guaranteeing payment of claims.

In purchasing the bond, the principal is pledging to do business in compliance with all applicable North Dakota statutes. Failure to do so (for example, not remitting sales taxes to the state or falsifying odometer readings) can be grounds for a claim against the bond by any party experiencing a financial loss as a result. Thus, a North Dakota car dealer bond provides financial protection for the state and the public.

How Are North Dakota Car Dealer Bond Claims Paid?

The surety bond agreement makes the principal solely responsible for paying valid claims against the bond. However, the surety guarantees that the principal will pay them, so in practice the surety will expedite matters by paying a claim initially and then collecting reimbursement of the claim amount from the principal. The surety can take legal action against a principal who fails to repay the debt resulting from the surety’s initial payment of a valid claim.

How Much Does a North Dakota Car Dealer Bond Cost?

The annual premium for a North Dakota car dealer bond is a small percentage of the required $25,000 bond amount (also known as the bond’s “penal sum”), which is the maximum amount that will be paid out on a single claim. That percentage is the premium rate, and it’s determined on a case-by-case basis depending largely on the principal’s personal credit score.

The main underwriting concern is the risk that the principal might not repay the surety for claims paid on the principal’s behalf. A high credit score suggests that the risk to the surety is low, resulting in a low premium rate. The reverse is also true. A low credit score suggests higher risk and results in a higher premium rate.

With good credit, the premium rate typically is in the range of one to two percent, which means that the annual premium for a $25,000 bond would be somewhere between $250 and $500.

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