What is an auto dealer license in Minnesota
Types of auto dealer licenses in Minnesota
Step 1: Set up a physical location
Step 2: Get an auto dealer bond
Step 3: Get a limited liability insurance
Step 4: Compile required documents:
Step 5: Complete the dealer license application
TLDR: In the state of Minnesota, aspiring auto dealers who sell more than 5 vehicles annually must obtain a motor dealer license from the Minnesota Department of Public Safety’s Driver and Vehicle Services. In this comprehensive guide, we go through step by step how to get a Minnesota auto dealer license.
A motor dealer license in Minnesota is an official authorization granted by the state's Department of Public Safety (DPS) that allows an individual or a business entity to engage in the buying, selling, trading, or leasing of motor vehicles. This license is a legal requirement for anyone who intends to operate as a dealer within the state.
The issuance of a motor dealer license is subject to stringent regulations and requirements set forth by the Minnesota DPS. These regulations are designed to ensure that only qualified and reputable individuals or businesses are authorized to participate in the motor vehicle sales industry. The licensing process aims to protect consumers from potential fraud, unscrupulous practices, and ensure that vehicles sold meet safety and quality standards.
The Minnesota Department of Public Safety (DPS) issues various types of auto dealer licenses, tailored to suit the specific nature of dealers' businesses. These licenses are diversified to accommodate the different facets of the automotive industry within the state:
In Minnesota, a "Used Vehicle Dealer" refers to a licensed business entity that specializes in buying, selling, trading, or offering for sale used motor vehicles to the public. These dealerships deal exclusively with pre-owned vehicles and not new vehicles directly from manufacturers.
A New Vehicle Dealer refers to a type of auto dealer that specializes in selling brand-new motor vehicles directly from the manufacturer to consumers. These dealerships are authorized by automobile manufacturers to sell their latest models and offer a range of new vehicles to customers.
In Minnesota, a "Motor Vehicle Wholesaler" refers to a licensed business entity that engages in the wholesale buying and selling of motor vehicles. These wholesalers primarily deal with selling vehicles to other licensed dealers, rather than directly to the general public.
Dealer of Motorized Bicycle, Boat and Snowmobile Trailers: This refers to a specific type of motor dealer license that allows individuals or businesses to engage in the sale of trailers designed to transport motorized bicycles, boats, and snowmobiles. With this license, dealers are authorized to buy, sell, and trade trailers specifically meant for the transportation of these recreational vehicles. It is important to note that this license is distinct from licenses that cover the sale of the motorized vehicles themselves (e.g., motorized bicycles, boats, or snowmobiles).
A Broker dealer in Minnesota refers to an individual or a business entity that acts as an intermediary or middleman in facilitating vehicle sales between buyers and sellers. Unlike traditional auto dealerships that physically own and sell vehicles, a broker dealer does not take ownership of the vehicles they assist in selling. Instead, a broker dealer connects potential buyers with sellers and helps negotiate the terms of the sale on behalf of both parties. They may assist in locating specific vehicles that buyers are looking for or help sellers find interested buyers for their vehicles. Once a deal is reached, the broker dealer earns a commission or fee for their services.
An Auction Vehicle Dealer in Minnesota is a type of auto dealer that primarily operates in the business of buying and selling vehicles through auctions. These dealerships typically acquire vehicles from auctions and then sell them to other dealers, businesses, or individuals.
A lessor essentially acts as the owner of the vehicles and allows customers to use the vehicles for a specified period in exchange for regular lease payments. The lessor retains ownership of the leased vehicles throughout the lease term and typically remains responsible for maintaining the vehicles' ownership and registration. At the end of the lease term, the lessee may have the option to purchase the vehicle, return it, or enter into a new lease agreement for a different vehicle.
This license is issued to non-profit organizations who use the sell of vehicles as their primary way of raising funds.
In Minnesota, "Salvage Pool Vehicles" refer to motor vehicles that have been deemed salvage or totaled by insurance companies due to damage from accidents, natural disasters, or other significant incidents. These vehicles are considered to be in a condition where repair costs exceed a certain percentage of their pre-accident value.
In Minnesota, a "Scrap Metal Dealer" is an individual or business entity engaged in the purchase, collection, and resale of various types of scrap metal. Scrap metal refers to discarded or waste metal materials that are no longer in use, often obtained from old vehicles, appliances, machinery, construction materials, or other metal-containing objects.
A "Used Parts Dealer" in Minnesota refers to a business entity that specializes in selling pre-owned or second-hand automotive components to customers. These dealerships obtain their inventory by salvaging parts from used vehicles, dismantling them, inspecting the components for quality and functionality, and then offering them for resale.
Setting up a physical location is a crucial first step for anyone aspiring to establish a successful business. Having a physical location provides a tangible presence in the market and serves as a vital touchpoint for customers to interact with the business directly. Additionally it is a requirement and you are meant to adhere to some guidelines that we will list below.
Once you have set up your business location, complete the commercial location checklist.
To protect customers, the Minnesota Department of Public Safety (DPS) mandates that auto dealers acquire a $50,000 auto dealer surety bond. You can get the bond from a surety broker that specializes in surety bonds. They will either email or mail you a copy of the bond. You should then include the copy in your application to the DPS. This bond serves as a financial guarantee provided by an insurance company (surety) to the DPS (obligee) that the auto dealer (principal) will adhere to all state laws and regulations governing the auto dealer industry.
By obtaining the surety bond, auto dealers assure their compliance with the rules and demonstrate their commitment to fair business practices and the application of warranty policies for all clients. The bond acts as a safeguard for customers, providing them with recourse in case of any violations or misconduct by the dealer.
To acquire the surety bond, auto dealers must pay a premium, typically ranging from 1% to 3% of the total bond value. The premium amount is determined by the bonding company, taking into account factors such as the dealer's financial statements and credit score. A higher credit score often results in lower premium payments, making it an incentive for dealers to maintain good financial standing.
Limited liability insurance, often referred to as general liability insurance, is a vital safeguard tailored for auto dealerships. This specialized insurance is meticulously designed to shield auto dealerships from a wide array of potential claims and legal disputes that might emerge due to accidents, injuries, property damage, or alleged negligence associated with the dealership's operations or its staff. By doing so, it provides a robust defense for the dealership's assets, financial stability, and reputation, particularly when unexpected incidents occur.
For auto dealerships, securing limited liability insurance is a foundational and indispensable step in ensuring the smooth operation of the business. It offers comprehensive financial protection and strategic risk management for the dealership and its stakeholders, safeguarding against unforeseen scenarios that could otherwise jeopardize the dealership's financial health and long-term viability.
Here are some ways the insurance plays a crucial role to an auto dealer
You are required to get an insurance that covers at least $60,000 for every accident, $30,000 per person, or $10,000 for property damage. Next Insurance is a trusted place to obtain a limited liability insurance.
Once you have completed the previous steps and obtained all the necessary documents, you will need to compile them and also include some additional documentation in your application packet which will expound on below:
Congradulations on coming this far in your application. After compiling all your documents, the last thing you need to do is to complete the dealer application. Ensure you complete it carefully to prevent any delays in your application. You are also required to pay an application fee of $250 along with your application. Once you are done, submit this application along with the supporting documents by mail to:
Minnesota Department of Public Safety
Driver and Vehicle Services
445 Minnesota Street
St. Paul, MN
After reviewing your application, if the Minnesota Department of Public Safety’s Driver and Vehicle Services approves your application, you will receive your license in the mail and then you can legally start operating your auto dealer business in Minnesota!