Wisconsin Auto Dealer Bond: A Comprehensive Guide

This guide provides information for insurance agents to help new and pre-owned car dealership owners on Wisconsin Auto Dealer bonds

At a Glance:

• Average Cost: $100 per year or $10 per month
• Bond Amount:
  • $50,000 for retail new and used dealers (most common)
  • $25,000 for auction, wholesale, salvage and recreational vehicle dealers
  • $5,000 for moped dealers
• Who Needs It: All individuals and businesses that sell or deal in five or more motor vehicles a year
• Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
• Who Regulates Dealers in Wisconsin: The Wisconsin Department of Transportation, Division of Motor Vehicles (DMV)

Background

Wisconsin Statutes Chapter 218 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DMV. The Wisconsin legislature enacted the license and regulations to ensure that dealers engage in ethical business practices and remit required taxes and fees. In order to provide financial security for the enforcement of the license law, dealers must purchase and maintain either a $50,000, $25,000 or $5,000 motor vehicle dealer surety bond to be eligible for licensure.

What is the Purpose of the Wisconsin Auto Dealer Bond?

Wisconsin requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the Motor Vehicle Dealer License. The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations and that the dealer will pay all required taxes and fees to the State of Wisconsin. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

How Can an Insurance Agent Obtain a Wisconsin Auto Dealer Bond?

BondExchange makes obtaining a Wisconsin Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Not an agent? Then let us pair you with one!

Click the above image to find a BX Agent near you

How Much Does the Wisconsin Auto Dealer Bond Cost?

The $50,000 Wisconsin auto dealer bond costs between $300 to $2,500 for a 1 year term or $30 to $250 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost.

$50,000 Wisconsin Auto Dealer Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Wisconsin Define “Motor Vehicle Dealer”?

To paraphrase Wisconsin Statute 218.0101, Wisconsin defines a motor vehicle dealer as any person or business entity engaged in the business of selling or exchanging motor vehicles either directly or indirectly. Exemptions to this definition include:

• Any person appointed by or acting under the judgement of a court order
• Public officers performing official duties
• Companies selling repossessed motor vehicles

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How Do Auto Dealers Apply for a License in Wisconsin?

The process for applying for a motor vehicle dealer license in Wisconsin is pretty complex. Below are the general guidelines, but dealers should refer to the Wisconsin Right Way Manual for details on the process.

License Period – The dealer license period is valid for two years and expires on the odd-numbered month closest to the month the license was issued.

Step 1 – Determine the License Type

Wisconsin requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of the Wisconsin Dealer License.

• • Retail License – Dealers who sell or lease new or used motor vehicles to the public
  • Buyer – Allows the dealer to bid on and purchase vehicles at wholesale auctions. Buyers must purchase the vehicles on behalf of their employer.
  • Manufacturer/Distributor or Importer – Allows dealers to manufacture and distribute motor vehicles to retail dealers. The license also allows the holder to import vehicles into the US.
  • Representative – Sells vehicles wholesale on behalf of a licensed manufacturer/distributor or importer
  • Moped – Dealers who sell or exchange motor vehicles considered to be mopeds as defined here.
  • Motorcycle – Dealers who sell or exchange motorcycles.
  • Recreational Vehicle – Dealers who sell or exchange RVs
  • Salesperson – Sell motor vehicles to the public on behalf of a license retail dealer
  • Salvage Dealer – Buys or sells vehicles for the purpose of wrecking, processing, scrapping, recycling or dismantling
  • Wholesale Auction – Allows dealers to auction motor vehicles wholesale
  • Wholesale – Dealers who sell or exchange motor vehicles solely to licensed dealers and not the public

***The Retail License is the most common dealer license. The following steps will focus specifically on completing the Retail License Application.***

Step 2 – Establish a Location

Before dealers can obtain their dealer license they must first buy or lease a permanent business location. The location must meet the following minimum requirements:

• • Contains office space
  • Is not a residence
  • Contains a 12 by 20 foot indoor display area with an adjacent display lot
  • Has a permanent business sign and has the hours operation posted near the entrance to the building
  • Contains a service department or has a licensed service agreement with a licensed service facility within 50 miles of the business location
  • Motorcycle only dealers need a lot large enough to display or repair at least three motorcycles

Step 3 – Obtain Zoning Approval

Dealers must obtain approval from their local zoning official that their business location is in compliance with all zoning regulations.

Step 4 – Acquire a Sales Tax Number

All dealers are required to have a sales tax seller permit. Dealers can request the permit by calling the Wisconsin Department of Revenue at 608-266-2776 or visiting their website here.

Step 5 – Purchase and File a Surety Bond

Dealers must purchase and maintain either a $50,000, $25,000 or $5,000 motor vehicle dealer bond.

Step 6 – Complete the Application

All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

Wisconsin Dept. of Transportation
Dealer & Agent Section
P.O. Box 7909
Madison, WI 53707-7909

• • 6.a Federal Employer Identification Number – Dealer must have a Federal EIN to receive their license. Dealers can apply for a Federal EIN from the IRS here.
  • 6.b Business Type – Corporations must submit a copy of their articles of incorporation. An LLC or LLP must submit a copy of their articles of organization.
  • 6.c Salesperson – Dealers are required to either be a licensed salesperson or have at least one licensed salesperson in their employ.
  • 6.d Rental Agreement – Dealers who do not own their business location must submit a copy of their lease.
  • 6.e Certificate of Appointment – Dealers who sell new vehicles must submit a copy of their franchise agreement authorizing them to sell each make and model of new vehicles
  • 6.f Dealer Plates – Dealers can submit their Dealer Plate Application with their dealer license application.

Step 7 – Pay Fees

Dealers can determine the amount of fees they must pay on the application form. The following fees are associated with the dealer license:

• • $40 license fee
  • $40 for each additional branch location
  • $2 sublot license fee
  • $8 Salesperson License fee
  • $150 fee for initial two dealer plates
  • $10 fee for each additional dealer plate

How Does a Wisconsin Motor Vehicle Dealer Renew Their License?

The dealer license period is valid for two years and expires on the odd numbered month closest to the month the license was issued. The Wisconsin DOT will mail dealers a renewal packet two months prior to the license expiration date. Dealers can complete the packet and mail the renewal application and fees to the following address:

Wisconsin Dept. of Transportation
Dealer & Agent Section
P.O. Box 7909
Madison, WI 53707-7909

How Do Wisconsin Auto Dealers File Their Bond?

The $50,000, $25,000, and $5,000 surety bonds all require signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:

• Date bond will be executed
• Bond amount
• Legal name of entity/individual(s) buying the bond
• Physical address where the business will operate
• Surety company’s name, address and signature
• Witness signatures for both the principal and surety

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Wisconsin Dept. of Transportation
Dealer & Agent Section
P.O. Box 7909
Madison, WI 53707-7909

What Can Dealers Do to Avoid Claims Against the Wisconsin Auto Dealer Bond?

To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not sell any vehicle with a faulty or altered odometer
• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay sellers of vehicles promptly and in full
• Pay taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
• Do not engage in any illegal selling practices
• Register for and renew the dealer license biennially
• Adhere to the dealer license plate regulations approved by the state
• Pay the license application fees

What Other Insurance Products Can Agents Offer Dealers in Wisconsin?

Wisconsin does not require dealers to obtain comprehensive liability insurance on all vehicles with dealer plates. However, most reputable dealers will obtain liability insurance anyway. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Wisconsin Motor Vehicle Dealer Customers?

Wisconsin conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed on the DOT site here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What Other States Require Auto Dealer Bonds?

All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.