A Complete Guide to Getting Your Tennessee Dealer License
Opening a car dealership in Tennessee requires that you obtain a license from the Tennessee Motor Vehicle Commission, part of the Tennessee Department of Commerce and Insurance.
Apart from the Tennessee dealer license, applicants must comply with a variety of other requirements in order to get licensed, such as to establish a place of business and obtain a $50,000 Tennessee auto dealer bond.
Read on below for a detailed account of all you need to do in order to become licensed as an auto dealer in Tennessee.
Tennessee Dealer Types
There are four possible licenses in Tennessee for dealers:
- Used motor vehicle dealer
- Franchised motor vehicle dealer
- Franchised motorcycle dealer
- Franchised recreational vehicles
These types of licenses require that applicants submit a completed Motor Vehicle Dealer Application to the Tennessee Motor Vehicle Commission and attach to it all the documents and items listed in the next section.
Breakdown of Tennessee Dealer License Requirements
Along with completing the dealer application, applicants are also required to meet or exceed the following minimal application requirements for a Tennessee dealer license.
- Establish a place of business with a facility, a minimum of 288 square feet total, offering functioning restrooms. The facility must also have a display lot which should be able to hold 15 vehicles that are for sale and 3 lots for customer parking.
The place of business must feature a sign which is permanently installed and is clearly visible from the road. The sign should state the full name of the dealership, minimum 8 inches in height, along with its designation as a business entity – whether corporation, LLC, LP or else.
Finally, you should also take photos of the sign, lots, facilities, working hours and days, as well as of the facility as a whole, preferably in digital format.
- Submit a completed floor plan form / agreement.
- Prepare a copy of your business’s charter or article of organization to submit along with your application.
- Obtain a zoning compliance from your local zoning authority.
- Prepare a compiled financial statement, indicating a minimum net worth of $10,000 along with a compilation letter from a CPA.
- Obtain a business tax license and, if applicable, a city county license.
- Provide a copy of your Sales & Use Tax Certificate.
- Provide a certificate of liability insurance with a minimum of $300,000 per occurrence.
- Submit a service agreement with an operation repair garage if your facility does not have such a garage.
- Complete and submit a financial background disclosure form.
- Franchised dealers specifically must include a letter of acknowledgment from the manufacturer(s) or distributor(s), specifically stating that the dealer has been awarded an agreement.
- Submit a salesperson application and Eligibility Verification Form for every salesperson.
- Pay the necessary licensing fee of $400, along with a $35 salesperson licensing fee.
- Obtain and submit the original of your $50,000 Tennessee auto dealer bond, with a validity of 2 years.
Once you have submitted your application along with all of the additional documents and items described above, an inspection will be scheduled for your dealership. After the inspection is conducted, and if no problems are established, a final review of your application will be performed. If approved, your Tennessee dealer license will be issued and you will receive your license no later than 14 business days after the approval of your application.
Tennessee Auto Dealer Bond Details
Without an auto dealer bond you cannot open a dealership. This is because auto dealer bonds serve to guarantee that your business complies with state rules and statutes and that your salespeople conduct business in an honest manner.
Put differently, bonds work as protection for the public and the state. If a car dealer violates state rules and regulations a claim can be filed against their Tennessee auto dealer bond. The surety then steps in to compensate the claimant up to the full $50,000 amount of the bond, depending on the severity of the claim.
It costs much less to get your bond, though. Typically, only a small percentage of the total amount of the bond is paid – somewhere between 1%-3%, at standard market rates. Your credit score is one of the factors that determine how high your premium will be. If you’d like to know how exactly your credit score and other factors influence bond cost, have a look at our surety bond cost page.
You can always request a free quote on your own bond, by filling in and submitting our surety bond application form. If you prefer talking to someone personally, call our surety experts at 877.514.5146 or send us an email at email@example.com.
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