Your Full Guide to Getting Your Tennessee Dealer License 2022

Published: Mar 17, 2021
tennessee dealer license

What is a Tennessee Dealer License? 

A Tennessee Motor Vehicle Dealer License is a license required by the state of Tennessee for anyone who wishes to sell 5 or more vehicles.  

There are several different license types available from the Motor Vehicle Commission (MVC) at the Tennessee Department of Commerce and Finance. The type of car dealer license, or other license, that you need depends on the type of vehicles you wish to sell. They include: 

  • Franchised motor vehicle dealer – for selling both new vehicles and used vehicles
  • Used motor vehicle dealer – for selling only used vehicles
  • Franchised motorcycle dealer – for selling both new and used motorcycles.

These licenses qualify you to provide different services. However, the application process for each is similar to the others. 

Whilst the auto dealer license application process can be lengthy, this guide will give you all the information you need to get your license as quickly and easily as possible. 

How Do I Get a Tennessee Dealer License? 

In order to get a license, you’ll need to ensure that you meet a series of criteria set by the Tennessee Motor Vehicle Commission. These are known as Tennessee Dealer License requirements.

Once you have gathered these, you are ready to submit your application. If your application and the ensuing inspection are successful, you will then be granted a license.  

What are the Tennessee Dealer License Requirements? 

There are a number of Tennessee Dealer License requirements that you must meet prior to applying for a license, and evidence of which you must supply with your application.

Obtain Your Business and Tax Registration 

The first requirement is to ensure that your business is registered as an entity with the Division of Business Services. This is also the stage at which you need to register your assumed name. 

In order to provide evidence that your business is a formal entity, you will need to provide a copy of the charter or articles of organization of the entity with your application. 

To support this evidence, you will also need to submit your:

  • Business Tax License from your county and/or city administration (if applicable)
  • Sales & Use Tax Certificate from the state Department of Revenue

Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS)

Establish a Place of Business 

In your license application, you’ll have to showcase that you have a permanent facility primarily used for the sales and servicing of motor vehicles.

Your established place of business should have the following:

  • An office of a total of 288 square feet with functioning restroom accommodation
  • A display lot accommodating a minimum of 15 motor vehicles for sale and 3 for customer parking, and to which there must be immediate and unblocked access. This lot cannot be floored with grass. 
  • Written approval from the local zoning or land-use authority for your business location 
  • Permanently installed business signage with letters a minimum of 8 inches in height including your full dealership name
  • A landline telephone, with the phone number visibly displayed on the dealership window or sign, and which is available in the local directory. 

You should include photos of all of these in your application, including photos providing a “street view” showing the building in its entirety, and all entrances and exits.

If you don’t have a mechanical repair facility on site, you’ll have to provide a Service Agreement with an operation repair garage located nearby. You must have written verification of your zoning compliance in the form of a letter of approval, written by the local zoning or land-use authority for your business location. You must also be open at least 12 hours a week, at least 8 of which must be between Monday and Friday. 

Present Financial Statements 

You’ll need to present a compiled financial statement in the name of your business. It should be prepared by a Certified Public Accountant (CPA) and should be dated within the last 12 months. 

The statement should demonstrate you meet the minimum net worth requirement of $10,000. 

In addition, the principal owner, directors, and all persons who own more than five percent (5%) of the company will need to fill out the financial background disclosure form. 

Obtain Franchised Vehicle Dealers Documents

If you’re applying for a franchise dealer license, you’ll have to obtain franchise agreements from the Manufacturers or Distributors of the product or line-make.

Get a Surety Bond and Insurance 

You’ll have to obtain a $50,000 dealer surety bond to complete your licensing process. It ensures you will comply with all Tennessee motor vehicle dealer laws in your operations. 

You can begin the online application for your Tennessee auto dealer bond online right away. You’ll then have to submit it in the official bond form. For more information on how to get a bond quote, see the section entitled “How much does it cost to get a Tennessee Dealer License?”

You’ll need to get a Certificate of Liability Insurance with a minimum of $300,000 per occurrence too. 

You may also need worker’s compensation insurance depending on your hiring arrangements. 

What are the Steps to Getting a Tennessee Dealer License? 

The first step for getting your Tennessee Dealer License is to ensure that you have met all of the dealer license requirements and that you have gathered the relevant evidence.

You should then check the Minimum Dealer Requirements Guide. 

The next step is to complete the application forms. These need to be submitted via the MVC portal. You’ll also have to complete and file salesperson license applications, including the Eligibility Verification Forms for each.

Your application must be sent with the appropriate license fees. These fees are explained in the section entitled “How much does it cost to get a Tennessee Dealer License?” 

Once your application and the necessary documents have been received and processed by the Motor Vehicle Commission, they will contact you to schedule an inspection of your dealership.

If the Field Enforcement Agent conducting the inspection is satisfied that your dealership meets the required standards, the MVC will perform a final review of your application. If this final review goes well, you will then be issued your Tennessee Motor Vehicle Dealer License.

How Long Does It Take to Get a Tennessee Dealer License? 

Once your Tennessee Motor Vehicle Dealer License has been approved, you will receive it within no more than 14 business days. 

However, the period between submitting your application and receiving your license can take between 6 to 8 weeks, assuming that there are no problems with your application. 

You need to renew your license annually, and you need to ensure that your renewed license arrives at least 10 days before the expiration date of your previous license. Therefore, it’s important that you leave yourself ample time to gather the relevant documentation, and for the waiting period after submitting your application. 

How Much Does it Cost to Get a Tennessee Dealer License? 

Licensing Fees and Registration Fees 

The license fees depend on the license type and are the following:

  • Franchised motor vehicle dealers and franchised motorcycle dealers – $400 per line make 
  • Used car dealers – $400
  • Salesperson license – $35

You can pay the fees by cash, check, money order, or certified check. 

Surety Bonds and Insurance

Surety bonds act as a form of financial protection for customers and represent a guarantee that the auto-dealers who post them will perform within regulations laid out by the state. 

Tennessee state law requires auto dealers to post an auto dealer bond with a bond amount of $50,000. However, the price that dealers must pay for that bond, known as the bond premium, is significantly lower than the overall bond cost. 

The exact price of the bond premium will vary depending on your personal finance and business credit history. However, this variation is usually within the range of 1% and 10% of the overall bond value, meaning that Tennessee auto dealers can usually expect to pay between $500 and $5,000. For applicants with average credit, the range is usually between £1,500 and $2,500

For a more precise idea of the price of your surety bond, you can apply for a  free quote now. 

You must also take out liability insurance worth at least $300,000 and include garage liability. The price of this insurance will vary depending on your provider. 

How to Verify Your Tennessee Dealer License

It is important to know how to verify your license online, to assure customers that your dealership operates according to the guidelines and regulations set by the state. As such, verification provides evidence that your dealership is a reliable and safe place to buy vehicles. 

You can verify your license with the Motor Vehicle Commission’s search.

If you have any more questions about obtaining a Tennessee dealer’s license, or you wish to learn more about surety bonds, leave us a question in the comments, send us a message using the chatbot, or give us a call on 877.514.5146

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Robin Kix

Robin Kix is currently the Renewal Department Manager. Since joining Lance Surety in 2014, she has helped thousands of businesses throughout the nation remain compliant at the federal, state and local level. She has significant experience supporting commercial bond lines, particularly in the automobile, transportation and construction industries. Robin and her team work together to create a positive customer service experience at the time of every policy renewal, whether that be finding the best pricing or offering additional assistance.