Licensing Requirements

In Massachusetts, automotive dealer regulations are mandated by state law but issued by local communities. What this is means is that everyone follows the same rules passed by the Massachusetts State Legislature, but to actually obtain a license, you need to apply to your local municipal offices.

Massachusetts Rules for Dealer Licensing

There are three levels of dealer licensing in Massachusetts:

• Class I: This is for a dealer selling new vehicles. To obtain a Class I license, you need to meet the following qualifications:

• Be an agent of a new vewhicle manufacturer or have a contract with a manufacturer to sell new vehicles.

• Sell used vehicles as an incidental or secondary part of the business.

• Have repair facilities on site that allow repairs to vehicles under warranty.

• Class II: This is for used auto dealers. To obtain a Class II license, you need to post a $25,000 bond that will cover you in case judgment is brought against you for a variety of resons, including failure to deliver a title, selling stolen vehicles, failure to disclose actual mileage or any attempts to cheat or misrepresent proper facts about the vehicle to its buyer.

• Class III: This is for junk auto dealers and allows the buying selling of cars and trucks for parts and salvage.

To open a dealership, you must also have a separate business office on the premises, maintain a record book for used cars approved by the Registry of Motor Vehicles, and post a sign displaying the type of business.

Applying for an Auto Dealer License

As part of the application process, dealer applicants must provide all of the following:

• Zoning Application Form.

• Articles of Organization.

• Franchise Agreement(s) (If applying for a Class I dealer license).

• Purchase and Sale Agreement.

• Lease Agreement (if applicable).

• Worker's Compensation Insurance Affidavit.

• Surety Bond in the amount of $25,000 (if applying for a Class II License).

• Affidavit (if applying for a Class II wholesale license).

• Letter from seller: if the license or property is being purchased from a current dealer and license holder, the seller needs to submit a letter stating he or she has been satisfied with the sale and agrees to release the license to the buyer.

Cost of a Dealer License

Municipalities can set the price for auto dealer licensing, as long as it does not exceed $200 per year. For more information, visit the Massachusetts state government's official Web site.