Virginia Car Dealer License Guide

  • Home
  • Virginia Car Dealer License Guide

In this article, we’ll walk you through everything you need to get a Virginia car dealer license.

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your Virginia car dealer license bond needs.

What Are the Different Types of Virginia Car Dealer Licenses?

In Virginia, the Motor Vehicle Dealer Board, operating under the auspices of the Department of Motor Vehicles issues two main types of dealer licenses: independent dealer-operator and franchise dealer-operator. This article addresses the licensing of independent dealer-operators selling used motor vehicles on a retail basis.

What Are the Steps in the Licensing Process?

There are a number of requirements that must be met before submitting an application for a Virginia dealer-operator license:

  • Register your business with the IRS to obtain a Federal Employer Identification Number.
  • Establish a permanent location for your dealership that meets local zoning requirements.
  • Successfully complete the two-day pre-licensing course offered by the Virginia Community College System and the Virginia Independent Automobile Dealers Association (VIADA).
  • Pass the dealer-operator portion of the Dealer-Operator and Salesperson’s Test, which can be taken at any DMV Customer Service Center.
  • Purchase liability insurance for each dealer plate.
  • Purchase Workers’ Compensation insurance if your dealership will have employees.

Complete the application in its entirety and mail it, along with all supporting documentation and payment of all fees, to the Virginia DMV, at any service center or at the main office.

You must purchase a $50,000 Virginia car dealer bond within 30 days of submitting your completed application.  The bond must remain in force for the first three years that your dealership is in operation after receiving your initial license.

Why is a Virginia Car Dealer Bond Required?

It is possible that the Commonwealth and/or consumers could experience a financial loss due to a dealer-operator violating the laws or regulations governing motor sales in Virginia. The bonding requirement is intended to ensure that operator/dealers comply fully with those laws and regulations or compensate any injured parties for damages incurred as a result of a violation, such as failing to remit sales taxes to the state or misrepresenting the condition of a vehicle or falsifying odometer readings. In the event of a violation, the injured party has the right to file a claim against the dealer-operator’s Virginia car dealer bond.

How Are Virginia Car Dealer Bond Claims Paid?

To understand how Virginia car dealer bond claims are paid, it’s important to understand that a surety bond agreement is a legally binding contract involving three parties: an “obligee” that requires the bond, a “principal” required to purchase the bond, and a “surety” that guarantees the bond. In the case of a Virginia car dealer bond, the obligee is the Commonwealth of Virginia the principal is the dealer-operator, who is legally obligated to pay all valid claims against the bond, and the surety is the company selling the bond and guaranteeing the principal’s payment of claims.

Although the legal obligation to pay valid claims belongs entirely to the principal, as the guarantor, the surety typically will pay a claim on the principal’s behalf. But that does not relieve the principal of the obligation to pay; it merely shifts it to repaying the surety.  The surety is indemnified against any responsibility for claims and can take legal action to secure repayment if the principal fails to reimburse the surety within a reasonable period of time.

How Much Does a Virginia Car Dealer Bond Cost?

The surety will determine the premium rate for each bond based on the underwriters’ assessment of the risk that the principal will not reimburse the surety for claims paid on the principal’s behalf.  It’s all about creditworthiness as measured by the principal’s personal credit score.

A high credit score is indicative of a low level of risk, so the premium rate could be as low as one to two percent, making the annual premium for the $50,000 bond somewhere between $500 and $1,000. On the other hand, a low credit score is a warning sign that results in a higher premium rate and an annual premium that could be as around $1,500.

Get A Quote

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