How to Get a Dealers License in Illinois: Bond, Fees, and Inspection

To get a dealer license in Illinois, you register a business entity, secure a location that meets the state’s physical and zoning standards, post a $50,000 surety bond, carry liability insurance at the required minimums, complete an eight-hour prelicensing course (used vehicle dealers only) or hold a franchise agreement (new vehicle dealers only), and submit a notarized application with fees to the Secretary of State’s Dealer/Remitter Licensing Section in Springfield. A field investigator then inspects your location before the license issues. Anyone selling five or more vehicles in a calendar year needs this license.

New Dealer or Used Dealer

Illinois splits dealer licensing into two tracks. New vehicle dealers are licensed under 625 ILCS 5/5-101; used vehicle dealers under 625 ILCS 5/5-102.¹ The practical difference comes down to two things. New vehicle dealers must hold a franchise agreement with a manufacturer or authorized distributor, and without it the Secretary of State will deny the application under Section 5-501.² Used vehicle dealers skip the franchise requirement but must complete prelicensing training that new dealers do not.

Fees, bond amount, insurance minimums, and location standards are the same on both tracks.

Register Your Business and Tax Accounts

Before you apply, form a business entity on file with the Illinois Secretary of State: a corporation, LLC, or partnership. Register with the Illinois Department of Revenue and obtain an Illinois Business Tax number. You will be collecting and remitting sales tax on every vehicle transaction, so this piece is not optional.

Location and Zoning

The physical location trips up more applicants than any other requirement. Illinois requires a permanent, fixed place of business zoned for vehicle sales. The facility must include a dedicated office where you keep business records and a display area for the vehicles. A permanent sign with the dealership name has to be visible from the road, and if you stay open after dark, the sign must be illuminated.³ A home address will not pass. Neither will a storage lot with no office structure.

Confirm zoning with the local municipality before you sign a lease or buy property. Many commercial zones prohibit outdoor vehicle display, and finding out after you have paid for signage and improvements means starting over.

Prelicensing Course for Used Vehicle Dealers

Used vehicle dealer applicants must complete at least eight hours of prelicensing education before submitting the application.⁴ The Secretary of State approves both the providers and the curricula, so verify the course is on the approved list before you enroll. Approved courses cover title handling, consumer disclosure obligations, record-keeping, and the federal Used Car Rule, which requires a Buyers Guide on every used vehicle offered for sale.⁵

Keep the completion certificate. It goes in the application package. New vehicle dealer applicants are exempt from this training.

Surety Bond

Both new and used dealers must post a $50,000 surety bond for each location.¹⁶ The bond runs to the People of the State of Illinois and protects the state and consumers if you fail to properly handle title fees, registration fees, or taxes. It must be issued by an insurer authorized to do business in Illinois and remain in force through at least December 31 of the license year.

You do not pay $50,000 out of pocket. You pay an annual premium to a surety company based on your credit and financials. Applicants with strong credit and CPA-prepared financials typically pay 1% to 1.5% of the bond amount, or $500 to $750 a year. Weaker credit pushes the rate to 2.5% to 3%, or $1,250 to $1,500 annually. A certificate of deposit in the same amount is an alternative if you cannot secure a bond.

Liability Insurance

Every dealer must carry liability insurance meeting these minimums:

$100,000 for bodily injury or death of one person
$300,000 for bodily injury or death of two or more people in a single crash
$50,000 for property damage

The policy must cover each location and must not expire before December 31 of the license year.⁶ The statute makes your coverage primary during test drives, regardless of whether the potential buyer carries their own insurance.

Standard commercial general liability policies often exclude vehicle-related risks. Most dealers buy a garage liability policy, which is built for the automotive industry and covers premises liability, damage to customer vehicles in your care, and products liability on vehicles you sell. Talk to an agent who works with dealerships before buying a generic commercial policy.

Fees

The license fee for your primary location is $1,000. Apply after June 15 and it drops to $500. Each additional location costs $50, or $25 after June 15.⁶ Fees are refundable only if the Secretary of State denies the application.

Additional costs to budget for:

Certificate of title: $165 per original title⁷
Dealer plates, purchased separately, with costs varying by plate type
Surety bond premium of roughly $500 to $1,500 per year depending on credit
Liability insurance premium, which varies by coverage and claims history
Prelicensing course tuition, which varies by provider (used dealers only)

Expect to invest several thousand dollars before you sell your first vehicle. The prorated license fee makes a mid-year start cheaper on the licensing side, but the bond and insurance costs do not change.

Assemble and Submit the Application

The application form is available on the Secretary of State’s Dealer and Remitter publications page. It asks for your business name, ownership structure, the types of vehicles you intend to sell, your Federal Employer Identification Number, and your Illinois Business Tax number. New vehicle dealers must also attach the franchise agreement.

A complete package includes:

The completed, notarized application form
Surety bond certificate, or documentation of the certificate of deposit
Certificate of insurance showing the required minimums
Prelicensing course completion certificate (used dealers only)
Applicable license fees
Franchise agreement (new dealers only)

Mail everything to:

Illinois Secretary of State
Dealer/Remitter Licensing Section
501 S. Second St., Rm. 069
Springfield, IL 62756-7000⁸

Incomplete packages get mailed back and reset your timeline. Recheck every signature, fee amount, and expiration date before you seal the envelope.

The Facility Inspection

After the paperwork clears review, a field investigator will contact you to schedule an on-site visit. The investigator confirms that the location is a genuine, operating place of business, not a residential property, a P.O. box, or a vacant lot. They check the office, signage, display area, and record-keeping setup against the statute and administrative code.

This is the final gate. Missing signage, no dedicated office, or unresolved zoning problems must be corrected before the license issues. Getting the location fully ready before mailing the application spares you a failed inspection and another round of waiting.

From submission to receiving your license and dealer plates in the mail, plan for roughly four to eight weeks, depending on volume at the Springfield office.

Common Reasons Applications Are Denied

Section 5-501 gives the Secretary of State broad authority to deny a dealer license. The reasons applications fail most often:

The facility does not meet the physical requirements for office, signage, or display area.
A new vehicle dealer applicant lacks a valid franchise agreement.
The application contains a material misstatement, or an applicant has a history of fraudulent vehicle transactions.
Required documents (bond, insurance certificate, training certificate) are missing.
An applicant has three or more violations in a calendar year of the Consumer Fraud Act, Motor Vehicle Retail Installment Sales Act, or related statutes.
An applicant had a dealer license denied, suspended, or revoked within the past three years.

Owners, partners, officers, and anyone holding a 10% or greater ownership stake are each evaluated individually. A disqualifying issue with one of them can sink the whole application.²

Renewal and Ongoing Duties

Your dealer license expires December 31 each year. Renewal requires keeping the surety bond and liability insurance current and paying the renewal fee. Both bond and policy must run through at least December 31 of the renewal year. A brief lapse puts the license at risk.

Once operating, you must properly assign a certificate of title to every purchaser.⁶ Failure to transmit title fees, registration fees, or taxes to the state is separately listed as grounds for revocation under Section 5-501. Illinois also caps the documentary preparation fee dealers can charge customers, with the maximum adjusted annually by the Attorney General’s office. Check the current year’s cap before setting your fee schedule.

Federal Obligations Once You Are Operating

Getting the state license is the first hurdle. Federal law adds obligations that apply the day you open. Two are worth flagging before you start, because they require setup work.

Cash reporting: If you receive more than $10,000 in cash in a single transaction or a series of related transactions, you must file IRS Form 8300 within 15 days, and by January 31 of the following year send a written statement to each person named on the form.⁹

Financing rules: If you arrange or provide financing, including buy-here-pay-here, the FTC Safeguards Rule requires a written information security program with a designated qualified individual, risk assessment, encryption, multifactor authentication, penetration testing, and a written incident response plan, plus notice to the FTC within 30 days of a data breach.¹⁰ The Truth in Lending Act requires specific written disclosures (APR, finance charge, amount financed, total payments, late fees, prepayment penalty terms) before a financing contract is signed.¹¹ The Gramm-Leach-Bliley Act adds a privacy notice requirement covering how customer data is collected, used, and shared.¹²

Employees: The Fair Labor Standards Act carves out an overtime exemption for salespeople, parts clerks, and mechanics at automobile dealerships under Section 13(b)(10)(A), though minimum wage still applies when commissions are settled each pay period.¹³ Set up compensation with an employment attorney before your first hire; back-pay claims can far exceed the wages at issue.

1
Illinois General Assembly. 625 ILCS 5/5-101 – New Vehicle Dealers Must Be Licensed
2
Illinois General Assembly. 625 ILCS 5/5-501 – Denial, Suspension or Revocation or Cancellation of a License
3
Legal Information Institute. Illinois Admin Code Title 92, 1020.10 – Dealers Established Place of Business
4
FindLaw. Illinois Code 625 ILCS 5/5-102.5 – Used Vehicle Dealer Prelicensing Education Program Courses
5
Federal Trade Commission. Dealers Guide to the Used Car Rule
6
Illinois General Assembly. 625 ILCS 5/5-102 – Used Vehicle Dealers Must Be Licensed
7
ILSOS.gov. Fees
8
ILSOS.gov. Dealers and Remitters
9
Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,000
10
Federal Trade Commission. Automobile Dealers and the FTCs Safeguards Rule Frequently Asked Questions
11
Consumer Financial Protection Bureau. What Is a Truth-in-Lending Disclosure for an Auto Loan
12
Federal Trade Commission. How To Comply with the Privacy of Consumer Financial Information Rule of the Gramm-Leach-Bliley Act
13
U.S. Department of Labor. Fact Sheet: Automobile Dealers Under the Fair Labor Standards Act (FLSA)