Kentucky Dealer License: Full Guide [2020]

Published: Nov 21, 2019
kentucky dealer license

 

Thinking about a car dealership startup in Kentucky? If you want to launch this business endeavor, you have to obtain a Kentucky dealer license. It is required for anyone who sells more than 5 vehicles in the state within a year.

The licensing process entails meeting a list of requirements set by the state Motor Vehicle Commission. Among the major ones is obtaining a Kentucky auto dealer bond, which ensures your legal compliance.

In the guide below, you can find out the exact steps that you need to take to start your dealership with ease. 

1. Find out the right auto dealer license type 

The licensing authority is the Kentucky Motor Vehicle Commission. You can obtain a few different license types from it. They are described below, together with the types of vehicles that you can sell under each one: 

  • New Motor Vehicle Dealer – new vehicles under a franchise agreement
  • Used Motor Vehicle Dealer – used vehicles including wholesale
  • Motor Vehicle Leasing Dealer – you can offer leasing for vehicle purchases
  • Wholesale Motor Vehicle Dealer – selling wholesale 
  • Motor Vehicle Auction Dealer – you can conduct vehicle auctions
  • Motorcycle Dealer – motorcycles 
  • Restricted Dealer/Mobility Dealer – specialized vehicles
  • Restricted/Automotive Recycling Dealer – you can dismantle vehicles to harvest parts for resale or reuse
  • Recreational Camper Dealer – pull behinds, pop-ups, drivable RVs

2. Get to know the Kentucky dealer license requirements

kentucky dealer license

You need to fulfill a list of criteria set by the Commission in order to qualify for the Kentucky auto dealer license type that you wish to obtain. The common requirements include:

  • Proof of an established place of business with a display lot/customer parking area of at least 2,000 square feet 
  • Permanent business sign (except for wholesale dealers)
  • Salesperson licenses for each salesperson and owner (except for restricted/automotive recycling dealers) 
  • Financial statement
  • Franchise agreement (only for new vehicle dealers)
  • $100,000 minimum net worth (only for restricted/automotive recycling dealers) 
  • Garage liability coverage in the minimum amounts of $250,000 per person, $500,000 per occurrence and $250,000 for property damage, except for restricted dealers, who need $1 million garage liability insurance

3. Prepare your paperwork

To start your licensing process, you have to get an application form online. If you want to receive a paper version, you have to mail to the Commission a $7 check or money order payable to the Kentucky State Treasurer.

Then you need to complete the application fully and attach all documents which showcase that you meet the Kentucky dealer license list of requirements outlined in the previous section.

In addition to them, all applicants need to obtain a proper business name when registering a company. It has to contain words that indicate your exact activities. You can use the words ‘wholesale’ and ‘leasing’ only if you are licensed as such a dealer. 

Note: Restricted/automotive recycling dealers also have to provide a statement by the zoning officials certifying that their business location is legally fit. They also need a permit to operate a salvage/recycling yard from the Kentucky Department of Highways.

4. Obtain the necessary Kentucky auto dealer bond 

In order to obtain your Kentucky dealer license, you will typically be required to get a surety bond in an appropriate amount set by the Commission. For most license types, the Kentucky auto dealer bond amount is between $25,000 and $100,000. The exact amount is set by the licensing authority depending on the strength of your financial statement and other factors. Auction dealers may need to post a higher amount. 

To get bonded, you have to pay a fraction of the required amount, which is called the bond premium. The rates for dealer applicants with stable finances are between 0.75% and 5%. Thus, if your credit score and business finances are in good shape, you can expect to pay between $375 and $2,500 for a $50,000 bond.  

5. Apply with your full document set

Whenever you have prepared all your paperwork, you have to mail your KY dealer license application to the address of Commission:

Motor Vehicle Commission

105 Sea Hero Road, Suite 1

Frankfort, Kentucky 40601

It holds license meetings on the second Friday of each month. You have to send your documents early on, so that they arrive at least 10 working days before the scheduled meeting. 

The relevant fees that you have to cover are as follows:

  • $40 application fee
  • $20 salesperson license fee
  • $20 salesperson criminal background check fee
  • $100 licensing fee

6. Renew your KY car dealer license annually

You need to renew your license every year if you want to continue operating as a dealer in Kentucky. The renewal process starts on October 1st and runs until December 31st. It is conducted in the same way for all types of dealers. License holders have to use the online renewal webpage for submission

Do you have any further questions about the Kentucky dealer licensing and bonding process? You can contact our bonding experts for further information at 877.514.5146.

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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.

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