In this article, we’ll walk you through everything you need to get a Washington car dealer license.
What Are the Different Types of Washington Car Dealer Licenses?
The Washington Department of Licensing issues dealer licenses in these main categories:
- Motor Vehicle Dealer (selling new or used vehicles on a retail or wholesale basis)
- Motor Vehicle Dealer Subagency (an additional location for a motor vehicle dealer)
- Motor Vehicle Wholesaler (selling used vehicles only to other dealers)
Other dealer licenses issued in the state of Washington include licenses to sell mobile homes and trailers, boats, off-road vehicles, and snowmobiles.
This article focuses on the licensing of retail motor vehicle dealers.
What Are the Steps in the Licensing Process?
Before completing a dealer license application, you must have set up a legal business entity and registered it with the IRS to obtain a Federal Employer Identification Number (FEIN) and with the Washington Department of Revenue to obtain a state tax number.
You’ll also need to accomplish the following before filling out a dealer license application:
- Secure a permanent business location that meets local zoning requirements.
- Complete a state-approved 8-hour dealer education course for new dealers.
- Purchase a $30,000 Washington car dealer bond.
You’ll need to fill out the application in its entirety. The application includes a personal financial statement and a personal criminal history statement.
Submit the completed application, along with all required supporting documents and payment of the license fee (currently $975) to the Department of Licensing.
Why is a Washington Car Dealer Bond Required?
Washington car dealer bonds provide protection for the state of Washington and the car-buying public. They do this by requiring car dealers to:
- Comply with all state laws governing vehicle sales, and
- Pay damages to parties injured financially by their noncompliance.
Dealers must have an active bond in force at all times to avoid loss of their license to operate.
How Are Washington Car Dealer Bond Claims Paid?
There are three parties to a Washington car dealer surety bond agreement:
- The state of Washington (the “obligee” requiring the bond),
- The dealer (the “principal” purchasing the bond), and
- The company guaranteeing the bond (the “surety).
The bond agreement is a legally binding contract that obligates the principal to pay all valid claims for damages. But as the bond’s guarantor, the surety ensures prompt compensation of claimants by paying a legitimate claim initially, on behalf of the principal. This creates a debt that the principal is then obligated to repay to the surety. Failure to do so can result in the surety taking legal action against the principal.
How Much Does a Washington Car Dealer Bond Cost?
Applications for a Washington car dealer bond are subject to underwriting. The surety’s main concern is the possibility that the principal might not readily repay the debt created by paying a claim on the principal’s behalf. Therefore, the key underwriting factor is the principal’s creditworthiness as measured by the individual’s personal credit score.
With great credit, the principal will pay a premium rate that could be as low as 1%, making the annual bond premium only $300. At the other end of the credit spectrum, the premium rate could be around 3%, for an annual premium of $900.
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