Who licenses used car dealers in Massachusetts?

Used motor vehicle dealers (Class 2) are licensed by the city or town where the business is located under Massachusetts General Laws Chapter 140, Section 58. After obtaining a local dealer license, you apply to the Registry of Motor Vehicles (RMV) for dealer plates.

What bond is required for a Massachusetts used car dealer?

Massachusetts used car dealers holding a Class 2 license are generally required to post a $25,000 motor vehicle dealer surety bond as proof of financial responsibility.

What are the basic facility requirements for a Massachusetts used car dealer?

Typical requirements include a permanent business office, a display area for vehicles, and a sign indicating the nature of the business. Many cities and towns publish their own specific Class 2 dealer rules and application checklists.

Massachusetts Used Motor Vehicle Dealer (Class 2) License Requirements – 2025 Overview

In Massachusetts, used car dealers are licensed locally by their city or town as Class 2 – Used Motor Vehicle Dealers under M.G.L. c.140 §58. Once licensed, you can apply to the Registry of Motor Vehicles (RMV) for dealer registration and plates.

Important: This is a general overview, not legal advice. Each municipality sets its own application process and site standards in addition to state law. Always confirm requirements with your local licensing authority and the RMV.

1. Who regulates dealers in Massachusetts?

Massachusetts uses a two–step structure for dealer licensing:

Local licensing authority – the city or town issues a Class 2 license for used motor vehicle dealers under M.G.L. c.140 §58.
Registry of Motor Vehicles (RMV) – once you hold a valid local dealer license, you apply to RMV for dealer registration and plates.

The Commonwealth provides general dealer information, but many details are handled in local bylaws and application checklists.

2. Dealer license types (focus on Class 2 used dealers)

For most independent used–car operations, the relevant category is:

Class 2 – Used Motor Vehicle Dealer – buys, sells, or exchanges used vehicles at retail.

Some municipalities also issue Class 1 (new car) and Class 3 (junk/salvage) licenses, each with different requirements. Check with your city or town clerk or licensing board to confirm which license class you need.

3. Business location, office, and sign requirements

To qualify for a Class 2 license, you must have an established place of business suited for selling vehicles. While the exact standards vary by municipality, typical expectations include:

A permanent business office on–site, with desk, chairs, and a record book or electronic system for tracking vehicle inventory and sales.
A display lot or spaces sufficient to hold the number of vehicles your license permits.
A business sign clearly indicating the dealership name and type of business, visible from the public way.
Zoning compliance and any required local inspections (fire, building, or planning board sign–off).

Many towns publish a “Class II License – Second–Hand Vehicles” page outlining their local requirements. For example, the Town of Douglas lists specific office, display, and record–keeping expectations on its Class II license information page .

4. Entity, bond, and other prerequisites

4.1 Business entity and tax registration

Form your business entity and, if required, file a business certificate with the city or town clerk.
Obtain a Federal Employer Identification Number (FEIN) and register with the Massachusetts Department of Revenue.

4.2 $25,000 surety bond

Massachusetts law requires used car dealers to demonstrate financial responsibility. Class 2 license holders are typically required to post a $25,000 motor vehicle dealer bond as part of their license.

The bond is executed by a surety company authorized in Massachusetts and must be continuous for the life of the license.
The bond protects customers and the state if the dealer violates licensing laws or fails to transfer titles properly.

4.3 Local and state prerequisites

Proof of zoning or planning board approval where required by the city/town.
Proof of liability insurance and, later, proof of garage or dealer plate insurance for RMV.
Background checks or CORI (Criminal Offender Record Information) checks where required by the municipality.

5. Massachusetts Class 2 dealer application process

Because licensing is local, the exact forms and steps differ. A typical process looks like this:

Contact your city or town clerk or licensing board and request the Class 2 dealer license application packet.
Confirm zoning, sign, and facility requirements and secure a compliant location.
Form your entity, obtain tax IDs, and arrange your $25,000 surety bond.
Gather supporting documents (site plan, photos, insurance, CORI forms, tax certificates, etc.).
Submit the Class 2 license application and appear at a public hearing if required.
Once the local license is granted, apply to the RMV for dealer registration and plates, providing a copy of the local license and any additional RMV forms.

6. After approval: ongoing Massachusetts compliance

Renew your Class 2 license annually (or as required by your municipality) and maintain your $25,000 bond.
Renew your RMV dealer plates and related insurance.
Maintain accurate records of all vehicles bought and sold, including a bound or electronic record book.
Comply with Massachusetts used–vehicle warranty, inspection, and advertising laws.