Uniform Vehicle Dealer Bond

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Who Is Required To Purchase an Auto Dealer Bond In Michigan?

Michigan has 10 classes of dealers that require a license:

• Class A - New vehicle dealers under a franchise agreement
• Class B - User vehicle dealers
• Class C - Use vehicle parts dealers
• Class D - Auto brokers
• Class E - Distressed vehicle transporter
• Class F - Vehicle dismantler
• Class G - Vehicle salvager
• Class H - Freight salvage dealer
• Class R - Automotive recycler
• Class W - Wholesaler

The Department of State only requires Class A (new vehicle dealers), Class B (user vehicle dealers), and Class D (auto brokers) to purchase an auto dealer bond before they can start selling vehicles.

Michigan's Dealer Licenses Are Independent

All of these licenses are independent with their own application process and requirements. This means if you're a new vehicle dealer and you want to sell used vehicles as well, you'll need to obtain the Class B license.

This also means you'll have to purchase an auto dealer bond for the franchised dealership and another bond for the used dealership.

Why is a Michigan Motor Vehicle Dealer Bond Required?

The Michigan Department of State requires dealerships to get licensed, proving they have:

• Passed the required examinations
• Established the appropriate contracts and agreements
• Registered their business or business name with the state
• Purchased the minimum levels of liability insurance
• Purchased the required surety bond

The Department of State is trying to ensure the public has access to the most reputable vehicles dealers who will service and add value to their community.

And even though obtaining a license is required, there will always be a small number of dealerships who will purposefully harm their customers to increase profits:

Examples of customer harm or fraudulent acts include:

• Improperly transferring a title
• Selling vehicles with no title
• Misrepresenting vehicle information like milage, manufacture year, or condition
• Stealing customer deposits
• Failing to pay the correct sales taxes to the Michigan Department of Treasury

The auto dealer bond is the required level of customer fiscal protection, provided by the dealership.

The dealer bond is your commitment, your guarantee, that you will follow the rules and give your customers the best service.

How Much Does a Michigan Auto Dealer Bond Cost?

Michigan's Department of State requires the following bond amount for Class A, B, and D dealerships:

The price of each dealer bond requires a quoted rate from a surety. The surety is the insurance company that underwrites surety bonds.

A surety will conduct their own assessment of an applicants risk using primarily these factors:

• The personal credit of the owner or owners
• Business industry and experience
• Prior bond claims if any owner was previously licensed with a bond claim

Because a surety conducts their own independent analysis, the price they quote will be different from other sureties.

This is why it's important to work with a surety agency like Surety Bonds Direct.

We'll find you the lowest possible price by price shopping with our network of A-rated sureties.

Example pricing is shown in the table below. The rates are from really good to about average.

Don't Wait - Get Your Price

Having Surety Bonds Direct price shop for you, costs nothing.

And once you have your price, you'll be able to make a decision that's best for your business. Price quotes are good for 30 days before they need to be re-quoted.

How Long Does a Michigan Auto Dealer Bond Last?

Auto dealer bonds in Michigan have a bond term of 12 months, from the effective date.

You choose the bond's effective date when you purchase your bond. Typically this would be the day you submit your application to the Division.

As the anniversary of the effective date (the expiration date) arrives, the bond needs to be renewed to keep it active.

Renewing your bond is easy.

Your bond specialist will contact you 30 to 45 days in advance to make sure the renewal premium is paid on time so your bond remains active.

Once you pay the renewal premium, you don't have to do anything else. Your bond is active and you can continue selling vehicles.

What Happens After You Purchase Your Bond

Purchasing a Michigan auto dealer bond is as easy as completing an online checkout form.

After your purchase, our bond issuance team will prepare your bond with the appropriate signatures, seals, and power of attorney so the Department of State will accept the bond.

Because it's a legal document, there are strict requirements for how it needs to be filled out. Our issuance team will ensure this is done correctly the first time.

Motor Vehicle Dealer Bonds And Getting Your Michigan Business License/Registration

If this is your first time getting licensed in Michigan as a vehicle dealer, read our blog post outlining the 9 steps to get your Michigan auto dealer license.

At a high level, the steps are:

• Determine your dealer license type or types
• Establish your place of business and dealership space
• Purchase the required minimum liability insurance policies
• Purchase the auto dealer surety bond (if required)
• Apply and purchase your dealer plates (if applicable)
• Meet the background check requirements
• Submit your application for review

Additional Michigan Motor Vehicle Dealer Bond Resources & Links

Michigan Department of State Business Licensing and Regulation Division Original Vehicle Dealer License Application Instruction Booklet

Michigan Department of State Uniform Vehicle Dealer Surety Bond Form