How to get an Auto Dealer License in Illinois

TLDR: In Illinois, a Motor Vehicle Dealer License is essential if you want to sell more than 5 vehicles in a year. It is not an easy process to obtain a motor vehicle dealer license. Below we will outline the steps you need to obtain a motor vehicle dealer license.

What is a Motor Dealer License in Illinois? 

If you buy, sell, or trade more than 5 vehicles in a 12-month period in the state of Illinois, then you are legally required to obtain a motor dealer license. There are serious penalties for buying, selling, or trading more than 5 cars without a license, including jail time. In this article, we explore the specific steps that one needs to take to get a dealer license in Illinois. 

Popular Types of Motor Dealer Licenses in Illinois

There are a few types of popular motor vehicle dealer licenses in Illinois: 

• Franchise dealer license – Dealers who sell new cars
• New and used car license – Dealers who sell new and old motor vehicles
• Used-only dealer license – Dealers who only sell used cars
• Motorcycle dealer license – Dealers who only sell motorcycles
• Mobile homes and trailer dealer license – Dealers who sell trailers, RVs, and mobile homes
• Salvage dealer license – Dealers who sell salvage cars on behalf of insurance companies
• Buy here, pay here dealer license – Dealers who sell used cars and offer buyers financial options that don’t need third-party lenders

Step 1: Determine Your Business Corporate Structure 

Your first step is to register a business for your auto dealership. In Illinois, all dealer licenses must be tied to a business. To register a business, there are a few corporate structure options, each with their own pros and cons: Limited Liability Company (LLC), S Corporations, and Sole Proprietorships. You should pick the corporate structure that best suits your own personal situation. Generally speaking, a sole proprietorship is the easiest to get started with for small businesses; corporations make it easier to fundraise and LLCs are somewhere in between. 

Step 2: Register your business

In order to move forward, it is necessary for you to register your business and obtain a business license. You can do this . According to the regulations set forth by the Illinois Secretary of State, you are required to obtain a registration statement of approval from the Illinois Department of Revenue.

Additionally, you will need to provide a comprehensive list of the individuals serving as directors, officers, and shareholders within your business, particularly those who possess a business ownership stake of over 10%. 

Furthermore, it is imperative to demonstrate that your business is in good standing with the Secretary of State. You may purchase a certificate of good standing from the Illinois Secretary of State online for around $25 ($5 for non-profits).

Step 3: Set up a Physical Business Location

Prior to commencing the application process, it is essential to have a designated physical location for your business where you can store your vehicles and maintain all relevant records. Your business premises must adhere to the following criteria:

• An office space where you store all your records and books
• Working, safe electrical lights
• A display lot with sections for new and used cars
• A visible sign showing the hours of operation, which are at least four consecutive hours for five days weekly
• A functional telephone or landline registered under your business name and listed in the local area's directory.
• A public display of your dealership’s name on the building or front door
• Have a permanent sign indicating the business’s name and visible from the nearest public road
• A fixed sign showing the name of the business that is visible from the closest public road
• Meet the local zoning requirements

Step 4: Purchase Liability Insurance

Obtaining liability insurance is a mandatory requirement for obtaining a dealer license in Illinois. Your insurance coverage should meet the specified minimum limits, which are as follows:

• $100,000 for bodily injury or death of an individual
• $300,000 for bodily injury or death of two or more individuals in a single accident 
• $50,000 for property damage

This particular requirement does not extend to dealers who are involved in the sale of mobile homes and trailers. The insurance policy should remain valid until at least December 31 of the year following the initial issuance of the license, without any earlier expiration dates.

Step 5: Complete a Dealer Training Course

If you are applying for a used car dealer license for the first time, you must undergo and complete an eight-hour dealer training course. This course is usually offered by the Illinois Secretary of State’s Vehicle Services.

The training runs from 8am to 5pm and covers topics like licensure requirements, applicable taxes, and consumer protection laws. You should bring a receipt with your confirmation number, pen, and paper to the class.

Step 6: Undergo a Criminal Background Check

As part of the application procedure, it is compulsory to undergo a criminal background check through a vendor approved by the Illinois State Police. For a list of approved vendors in Illinois, dealers can reach out to the Illinois State Police Bureau of Identification at (815) 740-5160 or by emailing ISP.BOI.CUSTOMER.SUPPORT@illinois.gov.

It is crucial to have no records of forcible felonies within the ten-year period preceding the application in order for you to be approved. A receipt from an approved vendor certified by the Illinois State Police, confirming the completion of the criminal background check, must be included with the motor vehicle dealer application.

Step 7: Get an Illinois Auto Dealer Surety Bond

To protect your customers, the Illinois Secretary of State requires you to have a $50,000 surety bond per business location. An auto dealer surety bond guarantees that you will comply with all state laws concerning you and your business, outlined in the Illinois Administrative Code.

A surety bond is a financial guarantee made by the surety (insurance company) toward the obligee (Illinois Secretary of State) that the principal (auto dealer) won’t violate rules and regulations governing the auto dealer industry.

The Illinois auto dealer bond serves as a safeguard for your customers, guaranteeing fair business practices and the application of warranty policies to all clients. Acquiring the surety bond involves paying a premium, typically ranging from 1% to 3% of the total bond value. The premium amount is determined by the bonding company, considering factors such as your financial statements and credit score. A higher credit score results in lower premium payments.

Step 8: Compile the Necessary Documents

Once you get to this point, you are required to complete the Illinois vehicle dealer license application. This application must be notarized.  After completing the application, compile the following documents to send alongside the application.

• Statement of approval from the Illinois Department of Revenue to prove business registration
• Surety bond form or certificate of deposit in the Secretary of State’s name and business name
• A receipt confirming the completion of a criminal background check from a vendor approved by the Illinois State Police.
• A filled-out notice of proper zoning form
• Proof of good standing with the Secretary of State’s Department of Business Services
• Hazard Waste General Number if you want to run a repair shop. You can contact the Illinois Environmental Protection Agency for this
• A copy of the manufacturers’ franchise agreement if you intend to sell new cars
• Insurance certificate with your business name and expiry date
• Copy of your lease or proof of property
• Proof of training program completion

Step 9: Submit Your Application and Pay Fees

After completing the application form and gathering all the required documents, the next thing to do is to submit them to the Illinois Vehicle Service Department through:

Secretary of State
Vehicle Services Department
Dealer Licensing Section
501 S. Second St., Rm. 069
Springfield, IL 62756

You must also pay any applicable fees when submitting the application form and the accompanying documents. These fees include licensing fees, fees to get plates, and the certificate of authority annual fees.

Step 9: Pass an Inspection

Once the application is lodged by the designated agent candidate and the requisite fees have been settled, a representative from the office of the Illinois Secretary of State will reach out to the dealer to arrange an inspection of your business premises. This inspection is conducted to verify that the dealer's business establishment meets all the necessary minimum requirements.

Summary

Obtaining a motor vehicle dealer license in Illinois is a comprehensive process that requires careful planning and adherence to specific requirements. By following the steps outlined in this guide, you can navigate through the application process successfully.

If you have any questions about this process, feel free to get in touch with us. We offer guidance and access to reputable bonding companies that can help you secure the necessary bond to protect your customers and comply with state regulations.

If you have any further questions or need assistance, feel free to reach out to SuretyNow or explore our resources for more information. Good luck with your journey to becoming a licensed motor vehicle dealer in Illinois!

FAQS

Can I Get a Dealer License Without a Car Lot in Illinois?

It is possible to obtain an auto dealer license in Illinois even without a designated lot, as long as you have an established business location. The zoning department will assess and determine the suitability of your location for selling cars, while the DMV will inspect to confirm that the location can be utilized for car sales.

How Much Does An Illinois Dealer License Cost?

Illinois motor vehicle license fees differ depending on how many locations you have and when you are getting the license. The associated fees include:

• $1,000 Certificate of Authority annual fee for used and new car dealers applying before June 15th
• $500 Certificate of Authority annual fee for community plus non-community-based mobile home and trailer dealers applying before June 15th
• $500 licensing fee for used and new car dealers applying after June 15th
• $250 licensing fee for community plus non-community-based mobile home and trailer dealers applying after June 15th
• $25 Purchase of Certificate of Good Standing

If you are applying for additional locations:

• $100 annual fee for franchised auto dealers applying before June 15th
• $50 licensing fee for franchised car dealers applying after June 15th
• $50 annual fee for used car dealers applying before June 15th
• $25 fee for used car dealers applying after June 15th

For license plates:

• $45 for a master plate set
• $13 for a set of seven duplicate dealer plates
• $151 for a set of eight or more plates

Once you have submitted all the necessary documents and made the required payments, your application will undergo a review process. Within a timeframe of two to four weeks, you will receive your license upon completion of this process.

How do I Renew my Illinois Motor Vehicle Dealer License?

Regardless of the date of issuance, all Illinois dealer licenses have a standardized expiration on December 31st. To avoid incurring extra fees, it is essential to renew your license before the expiration date. Licensed dealers typically receive renewal reminders in September each year, accompanied by a detailed renewal instructions packet providing a step-by-step guide.

Upon completing the renewal application, it should be submitted along with the bond continuation certificate to:

Secretary of State
Vehicle Services Department
Dealer Licensing Section
501 S. Second St., Rm. 069
Springfield, IL 62756

Who Needs an Illinois Dealer License?

According to Illinois Vehicle Code 625 ILCS 5/5-102, individuals who sell more than five cars per year are required to hold a valid dealer license.

Do I Need to Be an Illinois Resident to Get a Dealer’s License?

The regulations specified in the Illinois vehicle code lay out the necessary criteria and procedures for acquiring automotive dealer licenses within the state. However, these provisions do not extend to non-residents who engage in car dealer activities if they utilize in-transit plates on state highways or possess a valid license from another state.

Where can I buy an Illinois Motor Vehicle Surety Bond? 

You can buy an Illinois Motor Vehicle Surety Bond at any major surety agency that is licensed in the state of Illinois.