Michigan dealership laws sit on two levels: a state layer run by the Secretary of State, the Motor Vehicle Franchise Act, and the Michigan Consumer Protection Act, and a federal layer enforced by the FTC, IRS, and EPA. A Michigan dealer has to be licensed and bonded, deal honestly with buyers, disclose financing terms, protect customer data, report large cash sales, and stay clear of emissions tampering. Miss any of these and the consequences range from a $250 consumer lawsuit to license revocation, federal fines, and in the worst cases criminal charges.
Getting and Keeping a Dealer License
You cannot sell vehicles in Michigan without a dealer license from the Secretary of State. The application asks for your business location, ownership structure, and background information on every owner, partner, or principal officer. You also have to submit written verification from your local zoning authority that the site meets municipal and zoning requirements.1Michigan Legislature. MCL Section 257.248
First-time applicants go through a full investigation. The Secretary of State reviews each owner’s or officer’s history, record, and associations to decide whether the applicant has the business reputation and character to run a dealership. Renewals skip the investigation, but the initial screening is thorough.1Michigan Legislature. MCL Section 257.248
Every new or used vehicle dealer applicant must post a $25,000 surety bond. The bond protects buyers, sellers, lessees, financing agencies, and government entities against monetary losses caused by fraud, cheating, or misrepresentation by the dealer or the dealer’s employees. Claiming against the bond requires a court judgment or a final administrative order finding that fraud, cheating, or misrepresentation happened.1Michigan Legislature. MCL Section 257.248
The premises get checked too. The Secretary of State may inspect the dealership to confirm it has a permanent office, adequate signage, and a suitable display area, and the facility must comply with local building and zoning codes.
Franchise Dealer Protections
New vehicle franchise dealers get two additional statutes on their side: the Franchise Investment Law and the Motor Vehicle Franchise Act.
Disclosure Before You Sign
The Franchise Investment Law requires the franchisor to give you a detailed disclosure statement at least 10 business days before you sign any binding agreement or pay any money. The disclosure has to cover the franchisor’s identity, business form, financial condition, litigation history, and the terms of the franchise relationship. The law is broadly construed to protect franchisees and prohibits any scheme, misrepresentation, or practice that would operate as fraud in the sale of a franchise.2Michigan Legislature. Michigan Code 445.1501 et seq. – Franchise Investment Law
Termination Rules
The Motor Vehicle Franchise Act blocks manufacturers from terminating, canceling, or refusing to renew a dealer agreement without good cause. The manufacturer carries the burden of proving good faith, proper notice, and legitimate grounds.3Michigan Legislature. Motor Vehicle Franchise Act – Act 118 of 1981
Notice periods depend on the reason. Standard terminations require at least 90 days’ notice. Terminations for dealer insolvency, a seven-day business closure, a felony conviction, license revocation, or fraud against the manufacturer require only 15 days. When a manufacturer discontinues a product line or stops distributing it in Michigan, the dealer gets at least 12 months’ notice.4Michigan Legislature. MCL Section 445.1570 – Motor Vehicle Franchise Act (Excerpt)
Before terminating for an alleged breach, the manufacturer must give the dealer a reasonable opportunity to cure. Manufacturers who skip the cure step expose themselves to legal challenge.3Michigan Legislature. Motor Vehicle Franchise Act – Act 118 of 1981
Selling to Customers Without Getting Sued
Michigan Consumer Protection Act
The Michigan Consumer Protection Act makes it illegal to engage in unfair, unconscionable, or deceptive practices in any trade or commercial transaction. For a dealership that reaches from how you describe a vehicle’s condition through how you handle financing paperwork. A buyer who suffers a loss from a violation can sue for actual damages or $250, whichever is greater, plus reasonable attorney fees.5Michigan Legislature. Michigan Compiled Laws Act 331 of 1976
The Michigan Attorney General enforces these protections and can bring its own lawsuits. Consumer complaints often trigger investigations, and repeat violations can lead to injunctions restricting how a dealership operates.
Michigan Lemon Law Scope
The Michigan Lemon Law covers new motor vehicles still under the manufacturer’s express warranty at purchase or lease. The statute’s definition of “consumer” includes lessees along with purchasers, as long as the vehicle is used for personal, family, or household purposes.6Michigan Legislature. MCL Section 257.1401
If a new vehicle has a substantial defect the manufacturer cannot fix after four repair attempts for the same problem, or the vehicle is out of service for repairs for 30 or more days during the first year after delivery, the manufacturer must replace the vehicle or refund the purchase price. Used vehicles and commercial fleet purchases generally fall outside the statute.
Odometer Disclosure
At every ownership transfer, federal law requires the seller to disclose the odometer reading on the title document. The disclosure must include the mileage, transfer date, vehicle identification details, and a certification stating whether the reading reflects actual mileage, exceeds the odometer’s mechanical limit, or is unreliable. False information or a missing disclosure can bring fines and imprisonment.7eCFR. 49 CFR Part 580 – Odometer Disclosure Requirements
Lease returns follow a parallel rule: the lessee must give the lessor a signed mileage statement with the same certifications. Dealerships taking lease returns need a system to collect and keep these documents.
Advertising and Pricing
Two advertising practices get dealerships in trouble under Michigan law. The Consumer Protection Act prohibits advertising goods or services with the intent not to sell them as represented, and it prohibits advertising without enough stock to meet reasonable demand unless you clearly disclose that quantities are limited right next to the advertised item.8Michigan Legislature. MCL Section 445.903 – Michigan Consumer Protection Act (Excerpt)
Federal enforcement has tightened. In March 2026 the FTC sent warning letters to 97 dealership groups reinforcing that an advertised price must be the total price including all mandatory fees. The letters flagged four practices as potentially illegal: advertising a price that leaves out required charges; advertising a low price that requires dealer financing or an added down payment; advertising a price built on rebates or incentives not available to every buyer; and requiring buyers to purchase add-ons not reflected in the sticker price.9Federal Trade Commission. FTC Warns 97 Auto Dealership Groups About Deceptive Pricing
Every used vehicle on the lot needs a federal Buyers Guide sticker on the window. The sticker must show the make, model, year, and VIN, and the warranty status: as-is, dealer warranty, or still under the manufacturer’s warranty. It must also prompt the buyer to consider an independent mechanic’s inspection and to check the vehicle history report and open recalls. Removing the sticker before the sale, except for a test drive, violates federal law.10Federal Trade Commission. Buyers Guide
Handling Customer Money and Data
Federal law treats auto dealers as financial institutions, which brings a set of serious obligations on top of state law.
Safeguards Rule
The FTC’s Safeguards Rule requires every dealership to develop, implement, and maintain a written information security program covering administrative, technical, and physical safeguards. The program must be scaled to the dealership’s size and the sensitivity of the customer data. At a minimum you need encryption of customer information at rest and in transit, access controls limiting who can view records, and multifactor authentication for anyone accessing your information systems.11Federal Trade Commission. Automobile Dealers and the FTC’s Safeguards Rule Frequently Asked Questions
Using a third-party provider does not shift responsibility. Your contract must require the provider to encrypt customer information. A breach involving unencrypted information of 500 or more consumers must be reported to the FTC within 30 days of discovery.11Federal Trade Commission. Automobile Dealers and the FTC’s Safeguards Rule Frequently Asked Questions
Truth in Lending Disclosures
When you arrange financing, the federal Truth in Lending Act requires written disclosures before the buyer signs the loan contract. The disclosure must show the annual percentage rate, the total finance charge over the life of the loan, the amount financed, and the total of all payments, along with the number of payments, late fees, and any prepayment penalty. Handing over a blank form to be completed later does not satisfy the law.12Consumer Financial Protection Bureau. What is a Truth-in-Lending Disclosure for an Auto Loan
Cash Over $10,000
Any cash payment over $10,000 must be reported to the IRS and FinCEN on Form 8300 within 15 days of receiving the cash. Structured payments count: if a buyer makes multiple cash installments totaling more than $10,000 within a year of the first payment, you file once the cumulative amount crosses the threshold. You must also send written notice to the customer identified on the form by January 31 of the following year.13Internal Revenue Service. IRS Form 8300 Reference Guide
Dealerships required to file 10 or more information returns of any type in a calendar year must submit Form 8300 electronically. OFAC compliance is separate: U.S. businesses are responsible for not transacting with individuals on the Specially Designated Nationals list. OFAC does not prescribe a specific screening method for dealers, but a risk-based compliance program that includes sanctions list screening is the standard expectation.14Office of Foreign Assets Control. OFAC Consolidated Frequently Asked Questions
Clean Vehicle Credit Transfers
Since 2024, buyers of qualifying new and previously owned clean vehicles can transfer their federal tax credit to the dealership at the point of sale, turning it into an instant discount. Offering the transfer is optional, but if you sell qualifying vehicles you must register with the IRS and report every qualifying sale through IRS Energy Credits Online whether or not the buyer elects to transfer.15Internal Revenue Service. Topic H – Frequently Asked Questions About Transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit
If you offer the transfer, you provide the buyer with a written disclosure at or before the time of sale showing the MSRP (or sale price for used vehicles), the maximum credit amount, any other available incentives, and the income limits that apply. You submit a time-of-sale report through IRS Energy Credits Online within three calendar days. After a 48-hour void window, the IRS typically deposits the credit into your account by direct deposit within 72 business hours.15Internal Revenue Service. Topic H – Frequently Asked Questions About Transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit
One useful detail: you are not required to verify a buyer’s income eligibility, and you do not have to repay the advance payment if the buyer turns out to exceed the income limits. The program runs through December 31, 2032.
Emissions and Defeat Devices
The Clean Air Act makes it illegal to remove, disable, or tamper with a vehicle’s emissions control equipment. It also prohibits manufacturing, selling, or installing defeat devices, meaning parts whose primary purpose is to bypass emissions controls. Dealerships that sell or install these devices face civil penalties of at least $4,819 per device sold or per vehicle tampered with, and dealers may face significantly higher penalties than aftermarket parts sellers.16United States Environmental Protection Agency. Aftermarket Defeat Devices and Tampering are Illegal and Undermine Vehicle Emissions Controls
This reaches further than many dealers assume. Performance modifications requested by buyers, aftermarket exhaust systems, and engine tuning products can cross the line if they affect emissions controls. The EPA has pursued enforcement actions against dealerships, not only against parts manufacturers, so a “the customer asked for it” position offers no protection.
What Violations Cost
Michigan enforcement is layered. The Secretary of State monitors dealership activity and can impose administrative penalties, including fines, license suspension, and license revocation, for violations of the Michigan Vehicle Code.1Michigan Legislature. MCL Section 257.248
On the civil side, individual consumers can sue under the Michigan Consumer Protection Act for actual damages or $250, whichever is greater, plus attorney fees. The Attorney General can bring civil actions seeking injunctions and penalties against dealerships engaged in a pattern of deceptive conduct.5Michigan Legislature. Michigan Compiled Laws Act 331 of 1976
Criminal penalties apply to the most serious violations: fraud, forgery, and intentional misrepresentation in sales transactions. Federal violations add their own consequences. Failing to file Form 8300 draws IRS penalties. Safeguards Rule violations bring FTC enforcement actions. Emissions tampering triggers EPA civil penalties that compound per vehicle. The dealers who end up in the deepest trouble are usually the ones who treat federal compliance as optional while focusing only on their state license.