Michigan Dealer Plate Laws: Uses, Records, and Penalties

Michigan dealer plate laws let a licensed vehicle dealer move, demonstrate, and deliver inventory on public roads without registering each vehicle individually, but the Michigan Vehicle Code draws tight lines around who may use the plates, for what, and for how long. Step outside those lines and the violation is a misdemeanor, with plate forfeiture and license action on top of any criminal penalty.

Who Qualifies for Dealer Plates

Only licensed dealers receive special plates. Anyone who buys, sells, or deals in five or more titled vehicles within a 12-month period must obtain a dealer license from the Secretary of State before doing business.¹

Once licensed, the dealer applies to the Secretary of State for one or more plates by submitting proof of bona fide dealer status. New and used vehicle dealers must apply for at least two plates as a condition of licensing.¹ Each plate carries its own distinguishing number and stays valid for the term of the dealer’s license.² The Secretary of State decides how many plates a dealer reasonably needs based on the scope of the business, so a high-volume operation gets more plates than a small lot.³

What You Can Use Dealer Plates For

Dealer plates exist for one job: letting dealers move and display inventory without individually registering every vehicle. A dealer who owns a vehicle required to be registered may operate it on public roads without registration so long as the vehicle displays a valid dealer plate. For this purpose, “dealer” also includes the dealership’s employees, servants, and agents.³

In practice, that covers moving inventory between lots, driving a vehicle to an auction, and demonstrating vehicles to potential buyers. Only people the dealership has authorized may drive a plated vehicle.

The Two 72-Hour Rules

Michigan has two distinct 72-hour windows, and dealers routinely confuse them.

The first covers test drives. A prospective buyer or lessee may drive a dealer-plated vehicle on public roads for demonstration purposes for up to 72 hours.³

The second kicks in after the sale. Once a vehicle is actually sold or leased, the buyer or lessee may operate it with the dealer’s plate for up to 72 hours after taking possession. During that window, the buyer must carry proof of the sale date, and the registration application must already be filed in the buyer’s name. The dealer and the buyer share responsibility for returning the plate within those 72 hours. Failing to return the plate, or failing to make a reasonable effort to recover it, is a misdemeanor and can lead to revocation of the dealer’s license.³

What Dealer Plates Cannot Be Used For

Dealer plates cannot be placed on service cars or wreckers operated as part of the dealership’s business, even when the dealership owns those vehicles.³ Personal use by a dealer or an employee — commuting, errands, family driving — is also outside what the plates authorize unless it ties directly to selling or demonstrating inventory. And no one outside the dealership’s authorized circle may drive a plated vehicle at all.

Charity and Civic Event Loans

A regular dealer plate is not the right plate for a parade or a golf tournament. Vehicles loaned or donated by a licensed new vehicle dealer for golf tournaments, charity events, or public civic events get a separate temporary civic event license plate. The dealer applies to the Secretary of State before the event, providing the event name, dates, number of vehicles, and anticipated VINs, along with a $10 fee per plate. Approved uses include parades, transporting dignitaries, and supporting event volunteers.³

Records You Have to Keep

Dealers must maintain written records showing which vehicles carried dealer plates, who drove them, and when. Manufacturers and transporters face the same duty, and the records must be open to inspection by any peace officer.² Gaps in the log are one of the easiest things for an auditor or officer to flag, and missing entries invite the inference that plates were used improperly.

The Secretary of State can also review a dealership to verify that plate usage matches the rules and that the number of plates issued still reflects actual sales volume. Dealerships that fall short during a review may face corrective action requirements, mandatory training, heightened oversight on future inspections, or immediate penalties.

Penalties for Misusing a Dealer Plate

The consequences come from more than one direction.

Criminal Penalty

Violating the dealer plate provisions of the Vehicle Code is a misdemeanor. Under MCL 257.256, the penalty is imprisonment of up to 90 days, a fine of up to $100, or both.⁴ The fine looks modest, but the criminal record and the knock-on effects for the license make even one charge expensive. Separate misdemeanor liability applies when a buyer or dealer fails to return a plate within the 72-hour post-sale window.³

Forfeiture and License Action

Any unauthorized use of a dealer plate triggers forfeiture of the right to use special plates. After notice and a hearing, the Secretary of State may suspend or cancel the dealer’s plate privileges and require that all plates be surrendered or repossessed by the state.³ For a business whose model depends on moving inventory freely, losing the plates can hurt more than the fine. Repeated or serious violations can also lead to revocation of the dealer license itself under the Secretary of State’s broader enforcement authority.

Responding to a Violation Notice

Because the Secretary of State must provide notice and a hearing before suspending or canceling plate privileges, dealers get a real opportunity to present evidence.³ A dealer who can show that an apparent violation came from a clerical mistake, a miscommunication with an employee, or an honest misunderstanding of the 72-hour rule stands a better chance of avoiding the harshest outcome. Clean records are the strongest asset in that hearing, because they turn a disputed account into a paper trail.

Employee Personal Use and the IRS

When a dealer lets an employee use a dealer-plated vehicle for personal driving, the personal use is taxable compensation. The IRS addressed this directly in Revenue Procedure 2001-56, which provides two simplified methods dealerships can use instead of tracking every personal mile.

Under the partial exclusion method for full-time salespeople, the dealership calculates the average sales price of vehicles sold in the prior calendar year and uses a lookup table to determine a daily inclusion amount. That daily figure is added to the salesperson’s taxable income for each day the vehicle was available for personal use. The daily amounts run from $3 for vehicles averaging under $15,000 to $21 for vehicles averaging $75,000 or more.⁵

A separate full exclusion method allows the dealership to avoid imputing any income, but only if the vehicle is used primarily for sales purposes and personal use is genuinely minimal. The recordkeeping here mirrors the plate-usage logs the Secretary of State already expects.

Driving a Dealer-Plated Vehicle Out of State

Michigan participates in multistate reciprocity agreements governing the interstate operation of dealer-plated vehicles. Those agreements generally allow a Michigan dealer to drive a dealer-plated vehicle in a cooperating state without separately registering it there, and vice versa. Michigan reserves the right to limit which plate types qualify and under what conditions. Dealers who regularly move inventory across state lines should confirm that the destination state honors Michigan dealer plates, because participation is not identical state to state, and some states impose their own restrictions on out-of-state plates.

1
Michigan Legislature. Michigan Code 257.248 – Dealer License
2
Michigan Legislature. Michigan Code 257.244-257.247 – Special Plates to Manufacturers, Transporters, Dealers
3
Michigan Legislature. Michigan Code 257.244 – Special Plates
4
Michigan Legislature. Michigan Code 257.256 – Penalties
5
Internal Revenue Service. Revenue Procedure 2001-56