How to Get a Dealers License in Michigan: Bond, Costs, and Rules

To get a dealer’s license in Michigan, you apply to the Michigan Department of State using the Original Vehicle Dealer License Application (Form AR-0032), pay a $160 fee, and meet the requirements for the dealer class you want. Most retail dealers also need to post a $25,000 surety bond, pass a criminal background check, and prove they have a qualifying business location before the Department will approve the license.¹

The order matters. Form your business entity first, line up a location that meets the statutory requirements, then start the application. Getting the sequence wrong is the most common reason new dealers lose weeks on their timeline.

Pick Your License Class First

Michigan issues ten classes of vehicle dealer licenses, and the class you choose decides what you can sell, who you can sell it to, whether you need a bond, and what your location has to look like. The application form and the $160 fee are the same across all classes, but almost nothing else is.¹

The classes most new applicants choose from:

Class A — New Vehicle Dealer. Requires a franchise agreement or contract with the manufacturer.
Class B — Used Vehicle Dealer. Sells used vehicles to the public and to other licensed dealers.
Class D — Broker. Brings buyers and sellers together for compensation without taking title to the vehicle.
Class W — Wholesaler. Buys and sells used vehicles only to and from other licensed dealers. No sales to the public.

The remaining classes cover specialized roles: Class C (used vehicle parts), Class R (automotive recycler), Class E (distressed vehicle transporter, limited to selling only to Class C, F, or R dealers), Class F (scrap metal processor), Class G (salvage pool for insurance companies), and Class H (out-of-state salvage dealers operating on a wholesale basis in Michigan).¹

Operating outside the scope of your license violates the Michigan Vehicle Code, so pick deliberately. A wholesaler who sells one car to a retail customer is in trouble; a Class B dealer selling only to other dealers is simply overpaying for their location.

What Your Location Must Have

For Class A and Class B dealers, Michigan statute spells out the physical location requirements in detail, and the Department will inspect the premises before approving your license. Meet these before you apply.

Building. A permanently enclosed building that is not a residence, tent, or temporary structure. It must be owned, leased, or rented by the dealership and continuously occupied for the business of buying and selling vehicles.²
Office. At least 150 square feet inside the building, with standard office furniture, working utilities, a working restroom, and a telephone listed in the dealership’s name.²
Display lot. At least 1,300 square feet of land to display a minimum of 10 vehicles, plus 650 square feet for customer parking. Both areas must be adequately surfaced and well-lit during business hours.²
Sign. An exterior sign showing the dealership name, permanently affixed to the building or land, with letters clearly visible from the roadway.
Hours. Posted regular hours of at least 30 hours per week for at least 48 weeks per year, with at least 15 of those hours between 8 a.m. and 5 p.m., Monday through Friday.²
Repair facility. A registered repair facility on site, or a written servicing agreement with a registered repair facility within a 10-mile radius.

Other classes have different physical requirements. A Class W wholesaler, for example, does not need a customer-facing display lot. The Vehicle Dealer Application Packet from the Department of State spells out the requirements for each class.

Zoning is a separate check. Your local zoning authority has to sign a Zoning Approval Form, and that signature has to be dated within 90 days of the Department receiving your application.³ If zoning is going to be a fight, start it early.

The $25,000 Surety Bond

Class A, B, and D dealers must secure a $25,000 surety bond before the Department will approve the application.⁴ Classes C, E, F, G, R, and W are exempt.³

The bond protects consumers, lenders, and government agencies from monetary losses caused by fraud or misrepresentation in your vehicle business. It also covers sales or use tax deficiencies during the year the bond is in force. A surety will pay only after a court judgment or a final administrative order from the Secretary of State, and payouts are capped at the bond amount.⁴

You don’t post $25,000 in cash. You buy the bond from a surety, and you pay an annual premium. Premiums on a $25,000 dealer bond typically run from about 0.75% to 10% of the bond amount, which works out to roughly $188 to $2,500 per year. Credit score and business history drive where you land.

Insurance You Need to Carry

Any license class that qualifies for dealer plates requires no-fault fleet insurance covering every vehicle operated under those plates. Proof of coverage goes in with the application for those classes.¹

Most dealerships also carry garage liability insurance for bodily injury and property damage from business operations, including test drives and lot movements. It is not called out as a separate licensing prerequisite in the Michigan Vehicle Code, but operating without adequate liability coverage can trigger administrative action if the Department determines you cannot meet your obligations.

If you have employees, Michigan’s Worker’s Disability Compensation Act requires workers’ compensation insurance. Letting required coverage lapse can lead to fines, suspension, or revocation.

Documents to Gather Before You Apply

The specific documents depend on your class, but most applicants need the following ready before they file:

The completed Original Vehicle Dealer License Application (Form AR-0032).³
Articles of Incorporation or Assumed Name Filing for the business.
A Federal Employer Identification Number. The IRS issues these free online in minutes, but form your business entity with the state first; applying for an EIN before your entity is officially registered can delay things.⁵
Zoning Approval Form signed within the last 90 days.³
Proof of the $25,000 surety bond, if your class requires one.
Proof of no-fault fleet insurance, if your class qualifies for dealer plates.

After the Department receives your application, it sends instructions for the criminal background check, which includes fingerprinting through IdentoGO.³ A location inspection follows for classes that require one.

What It Actually Costs

The state application fee is $160 for every class.¹ On top of that, budget for:

Surety bond premium of roughly $188 to $2,500 per year for Class A, B, and D dealers.
Background check and fingerprinting fees charged by IdentoGO.
No-fault fleet insurance premiums.
Business entity filing fees with the state.
Rent, build-out, signage, and lot preparation to meet the location requirements.

The $160 is the smallest number on the list by a wide margin. The location is almost always the biggest.

Federal Rules That Apply the Day You Open

Your Michigan license is only part of what makes you legal to sell cars. Several federal rules apply the moment your doors open, and the agencies that enforce them have no connection to the Department of State.

Used car dealers must display an FTC Buyers Guide window sticker on every used vehicle offered for sale, showing year, make, model, VIN, and whether the vehicle is sold with a warranty or “as is.”⁶ Federal odometer disclosure rules require an accurate mileage statement at transfer, with records kept for five years.⁷ Any cash transaction over $10,000 triggers IRS Form 8300, filed electronically within 15 days.⁸

Because auto dealers handle financing, the FTC treats them as financial institutions under the Safeguards Rule, which requires a written information security program with a designated qualified individual, risk assessment, encryption, multi-factor authentication, staff training, annual penetration tests, and vulnerability scans every six months.⁹ The companion Red Flags Rule requires a written identity theft prevention program.¹⁰ Build time into your pre-opening plan for these; they are not optional and they take real work to implement.

Renewing Your Michigan Dealer License

Michigan dealer licenses expire on December 31 of the last year the license is valid, and dealers must renew annually. The Secretary of State can issue renewals for up to four years at a time. File your renewal application at least 30 days before the current license expires.⁴

If you submit the renewal on or before the expiration date, you can keep operating while it is pending. If you mail it in, keep proof of mailing; the Department may ask for it. Letting the expiration date pass with no pending renewal means you are operating without a license.

1
Michigan Department of State. Vehicle Dealers
2
Michigan Legislature. Michigan Vehicle Code MCL 257.14
3
State of Michigan. Vehicle Dealer Application Packet
4
Michigan Legislature. Michigan Vehicle Code MCL 257.248
5
Internal Revenue Service. Get an Employer Identification Number
6
eCFR. 16 CFR Part 455 – Used Motor Vehicle Trade Regulation Rule
7
eCFR. 49 CFR Part 580 – Odometer Disclosure Requirements
8
Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,000
9
Federal Trade Commission. FTC Safeguards Rule: What Your Business Needs to Know
10
Federal Trade Commission. Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business