What Michigan requires to become an auto dealer
Michigan's Department of Energy, Great Lakes, and Environment (EGLE) issues auto dealer licenses through its Motor Vehicle Services Division. To get one, you must be at least 18 years old, have a physical location in Michigan where you will conduct business, pass a background check, and meet bonding requirements. You also need to show that you understand Michigan's motor vehicle sales laws.
The process takes roughly 4 to 8 weeks from the time you submit a complete process. You cannot legally sell more than five vehicles per year without a license, and selling beyond that threshold without one can result in fines and criminal charges.
Key Takeaways
- You must complete the EGLE Motor Vehicle Services Division process, provide proof of a Michigan business location, and pass a criminal background check.
- Michigan requires a surety bond—the amount depends on the type of dealer license you seek, ranging from $10,000 to $50,000 or more.
- You must pass a written test covering Michigan motor vehicle sales law, which you can study for using the official EGLE study guide.
- Your business location must meet zoning requirements and be open to the public during regular business hours.
- Once licensed, you must renew every two years and maintain compliance with record-keeping and disclosure rules.
Types of auto dealer licenses in Michigan
Michigan offers several license types depending on what you plan to sell. A new car dealer license allows you to sell new vehicles from a manufacturer. A used car dealer license covers the sale of used vehicles only. A motor home dealer license is for recreational vehicles. A salvage dealer license is for vehicles declared a total loss by insurance companies.
Most people starting out pursue a used car dealer license because the bonding requirement is lower and the startup costs are smaller. The license type you choose determines your bond amount and which specific rules explore to your sales practices.
The surety bond requirement
Every auto dealer in Michigan must obtain a surety bond from a licensed bonding company before EGLE will issue your license. The bond protects consumers if you fail to deliver a vehicle, mishandle their money, or violate sales laws. The bond amount varies: a used car dealer typically needs $10,000 to $25,000, while a new car dealer may need $50,000 or more.
You pay the bonding company a premium—usually 1 to 3 percent of the bond amount per year—to keep the bond active. For example, a $15,000 bond might cost $150 to $450 annually. The bonding company will run a background check and review your credit before issuing the bond. You cannot explore for your dealer license until you have the bond in place and can provide proof to EGLE.
Preparing your process and documents
Start by gathering the required paperwork. You will need a completed EGLE Motor Vehicle Services Division process form (available on the EGLE website), proof of your Michigan business location (a lease or deed), your surety bond certificate, a government-issued photo ID, and proof of your Social Security number or federal employer identification number (EIN).
Your business location must be a physical address—not a post office box—where you will display and sell vehicles and where customers can reach you during business hours. The location must comply with local zoning laws. If you rent, bring a copy of your lease showing the landlord's permission for auto sales. If you own the property, bring the deed. You will also need to show proof that utilities are connected and the space is ready for business.
EGLE may send an inspector to verify your location meets the requirements before approving your license. Make sure your lot or showroom is accessible to the public and that you have adequate space to display vehicles safely.
Passing the motor vehicle sales law test
Michigan requires all new dealer applicants to pass a written test on motor vehicle sales law. The test covers topics like disclosure requirements, odometer fraud, title transfer procedures, warranty obligations, and consumer protection rules. You can take the test at an EGLE office or at an approved testing center.
EGLE provides a free study guide on its website that outlines all the topics covered on the exam. The test typically has 50 to 75 multiple-choice questions, and you must score at least 70 percent to pass. You can retake the test if you do not pass on your first attempt, though you may have to wait a few days before scheduling another attempt.
Some applicants study the guide on their own; others take a pre-licensing course offered by community colleges or private training providers. Either approach is acceptable—EGLE does not require formal coursework, only that you pass the test.
Submitting your process to EGLE
Once you have your surety bond, passed the test, and gathered all documents, submit your completed process to the EGLE Motor Vehicle Services Division. You can mail it to the address listed on the EGLE website or deliver it in person to an EGLE office. Include copies of all required documents and keep originals for your records.
EGLE will review your process for completeness. If anything is missing or unclear, they will contact you and ask for corrections. Once they approve your process, you will receive your dealer license by mail. The license is valid for two years and must be renewed before it expires.
If EGLE denies your process, they will explain the reason in writing. Common reasons for denial include a failed background check, an inadequate surety bond, or a business location that does not meet zoning requirements. You can request a hearing to appeal the decision.
Ongoing compliance and renewal
After you receive your license, you must follow Michigan's dealer rules to keep it active. You must maintain accurate records of every vehicle you buy and sell, including the purchase price, sale price, odometer reading, and title information. You must provide buyers with a written disclosure of the vehicle's condition and any known defects. You must also handle title transfers correctly and within the required timeframe.
Your surety bond must remain active at all times. If your bonding company cancels the bond, you must obtain a replacement bond within 10 days or your license will be suspended. Your license expires two years from the date of issue. To renew, you must submit a renewal process, proof that your bond is still active, and the renewal fee to EGLE at least 30 days before expiration.
EGLE conducts random audits of dealer records and may inspect your location without notice. If you violate sales laws—for example, by selling a vehicle with a rolled-back odometer or failing to disclose a known defect—EGLE can fine you, suspend your license, or revoke it permanently.
Frequently Asked Questions
Do I need a business license from my city or county before explore for a dealer license?
Requirements vary by city and county. Some require a local business license or zoning permit before you can operate. Contact your city or county clerk's office to find out what is needed in your area. EGLE will not issue a dealer license if your location violates local zoning rules, so resolve any local requirements first.
Can I sell cars from my home or a residential driveway?
No. Michigan requires a commercial location that is open to the public. Residential properties are not permitted. Your location must be zoned for automotive sales or be in a commercial area where such use is allowed. Check with your local zoning office before signing a lease.
What happens if I sell more than five cars without a license?
Selling vehicles without a license is illegal in Michigan. You can face civil fines up to $500 per vehicle sold and criminal charges. If you plan to sell more than five vehicles per year, you must obtain a dealer license before making any sales.
How much does the surety bond cost per year?
Bond premiums typically range from 1 to 3 percent of the bond amount annually. A $15,000 bond might cost $150 to $450 per year, depending on your credit and the bonding company's rates. Shop around with multiple bonding companies to find the best price.
Can I get a dealer license if I have a criminal record?
It depends on the nature and age of the conviction. EGLE reviews each process individually. Certain felonies—especially fraud, theft, or motor vehicle-related crimes—may result in denial. Contact EGLE before explore if you have concerns about your background.