How to Get a Colorado Dealer License

Published: Apr 14, 2016
Getting your Colorado dealer license just got easier

In most states across the US, starting an auto dealership requires obtaining a dealer license from the authority regulating your trade. The same principle applies to the state of Colorado, where you need a Colorado dealer license to operate legally if you want to sell more than three vehicles per year.

The licensing process might sound overwhelming, but in fact, there are a few basic steps that you need to go through. Most importantly, you need to meet a range of requirements set by the Auto Industry Commission of the Colorado Department of Revenue. Among others, they include posting a Colorado auto dealer bond.

We’ve compiled the main steps for getting a Colorado dealer license so that you can get prepared and go through the process with ease.

Understanding the licensing process

Before you delve into the nitty-gritty details of licensing requirements, it’s important to understand the whole process and the need for licensing. The state asks dealers to uphold certain standards so that customers are protected and ensured a smooth car buying experience.

In the case of Colorado, anyone who wants to deal with more than three new (or new and used) vehicles annually needs to get a Colorado dealer license. To qualify for applying, you need to have a net worth of $100,000, a Vantage score of at least 701 through Experian, and a satisfying criminal background check. It makes sense to submit a dealer license application only if you meet these criteria.

The types of Colorado dealer license available are:

  • Franchised Dealer
  • Used Dealer
  • Wholesaler
  • Wholesale Auction
  • Franchise Powersport Vehicle Dealer
  • Used Powersport Vehicle Dealer
  • Wholesale Powersport Vehicle Dealer

Meeting the Colorado dealer license requirements

To obtain your Colorado dealer license, you need to meet a list of requirements.

Along with your Colorado dealer license application, you will need to provide a set of documents proving your compliance with the license requirements. Depending on the type of license you would like to get, you will be asked to submit most of the following:

  • Pre-licensing Education Certificate
  • Addendum for each owner, partner, member, or officer
  • Mastery Examination Affidavit (DR 2097)
  • Secure Verifiable Identification for all involved parties
  • Affidavit on Restriction on Public Benefits for all owners, partners, members or officers (DR 4679)
  • Statement of Financial Condition for the applicant and all owners (DR 2114)
  • Certificate of Good Standing from the Colorado Secretary of State (may apply)
  • Constituent Filed Document (may apply)
  • Bylaws/Operating Agreement (may apply)
  • Trade Name (may apply)
  • Business Plan
  • Proof of ownership or lease
  • Place of Business Affidavit (DR 2044)
  • Photographs of Location
  • Franchise Agreement (if applicable)
  • Dealer Plate Affidavit (DR 2640)
  • Sales Tax License
  • $50,000 auto dealer bond for dealer/wholesaler and $5,000 for small trailer dealers

The full list of requirements is available on the Colorado Department of Revenue’s website.

You are also required to pay annual licensing fees, which depend on the type of license you’re issued and range from $84 to $455. The licensing period runs from July 1st to June 30th of each year.

Your Colorado auto dealer bond

Obtaining most required documents entails following the typical procedures, but getting an auto dealer bond might be a novelty for aspiring dealers.

The purpose of the surety bond required for obtaining a Colorado dealer license is to safeguard the interests of the state and its citizens. It functions as a guarantee that your dealership will follow state rules. If you fail to do so, a claim can be made against your bond – which can mean compensation for affected parties.

For most license types, you need to post a $50,000 Colorado auto dealer bond. The amount sounds considerable, but in fact, you need to pay a fraction of it to get bonded. The usual bond premiums are between 1%-3% for the standard bonding market. This means your actual surety bond cost might be as low as $500-$1,500.

You can get the exact bond price once you file a complete bond application with your surety. It will assess the strength of your finances and thus decide the bond premium. A good credit score and solid overall indicators will mean a lower bond cost.

With this overview, you can start your licensing process with ease. Ready to go? Apply online today to get a free Colorado auto dealer bond quote! For any questions, don’t hesitate to call us at 877.514.5146 or send your inquiry to info@suretybonds.org.

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Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.