What is a California auto dealer bond?
The California auto dealer bond is an important pre-licensing requirement, which you may encounter under several different names: a dmv bond, a car dealer bond, or a motor vehicle dealer bond.
Regardless of the name, the important thing to remember is that this type of surety bond is not insurance to your business. Quite the opposite, it is an added layer of protection to car shoppers in California. Without the bond, you cannot apply for a dealer license.
Here is an overview of the requirement:
Surety Bond Name: California Motor Vehicle Dealer Bond
Surety Bond Amount: $50,000 (retail dealers)
$10,000 (motorcycle, all-terrain and wholesale-only dealers)
Obligee: California Department of Motor Vehicles
Licensing Operations Division
Occupational Licensing Branch
P.O. Box 932342
Sacramento, CA 94232-3420
Expiration Date: Yearly renewal
You can begin your online application by clicking on the banner, or you can learn more about California dealer bonds in the Questions section below.
Questions about Auto Dealer Bonds in California
How much does a California auto dealer bond cost?
The cost of getting bonded depends on several factors.
First, you need to know whether you need to post the $10,000 or $50,000 bond amount, depending on the license you are applying for. These two sums refer to the maximum penal sum of the bond. In other words, if you have to compensate a claimant, you will not be required to pay more than $10,000 or $50,000.
Dealer bonds are renewed annually, and for this, bonding companies charge a premium. The premium is only between 1% and 3% of the bond amount for applicants with good credit. Credit score is the single most important determinant of your premium, because surety underwriters use it to measure the risk they undertake by signing the bond.
|Surety Bond Cost Based on Credit Score|
|Bond Type||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|California Motor Vehicle Dealer Bond (Retail)||$50,000||$375-$750||$500-$1,500||$1,250-$2,500||$2,500-$5,000|
|California Motorcycle, All-terrain or Wholesale-Only Dealer Bond||$10,000||$100-$150||$100-$300||$250-$500||$500-$1,000|
Sometimes other factors can be considered too, such as your financial strength, the availability of liquid assets, or even your industry experience. You can find full information on the factors sureties consider important on our What Does a Surety Bond Cost? Page.
Can I get a California dealer bond with bad credit?
Surety bond companies consider bad credit applicants to be a higher risk, and may sometimes be unwilling to underwrite bonds for them. With this issue in mind, we have developed our bad credit surety bonds program, which enables us to successfully help 99% of applicants get bonded.
Regardless of your credit score or history, we can help you stay compliant. The only two exceptions are applicants with open bankruptcies or late child support payments.
Bad credit applicants can expect premiums in the range of 5% to 10% of the total bond amount.
How can I apply for a California auto dealer bond?
We have made it easy for you to apply and get your bond without the hassle. Our online application is fast and secure. Once you submit it, we will call you to confirm we’ve received it. You’ll get a bond quote and, once you’ve paid for the bond, we will need 1 to 2 business days to finalize your application.
How can I renew my California dealer bond?
Dealer bonds in California need to be renewed annually to remain valid. To renew your bond, you have to pay your bond renewal quote by the due date. Each year your bond policy should be reviewed by an underwriter, so the cost may vary year to year depending on your financial strength and personal credit. Of course, improving your credit or financial situation will typically mean a lower renewal quote too.
At Lance Surety Bonds we help our customers stay compliant by sending multiple renewal reminders ahead of the deadlines. That way you can focus on what matters to you: your business.
How can I apply for a California dealer license?
Your dealer license application form along with instruction on how to apply and what requirements you need to satisfy can be found on the California DMV’s website.
Here are some of the main steps you need to remember:
- Submit all required application forms for your license type
- Pay all applicable fees
- Submit a copy of your Fictitious Name Statement
- Submit proof of completed dealer training course
- Pass the DMV’s test
- Submit photographs of your business location
Different license types call for different requirements, so be sure to check them in their entirety prior to submitting your application.
What happens if someone files a claim?
If a disgruntled customer files a claim against you, you have two choices: to offer a settlement or fight the claim in court. A settlement is always the advised option, but it is not always possible.
In case a claim reaches court after all and the court considers it valid, you will have to financially compensate the claimants for a sum that cannot exceed $50,000.
You can consult your surety bond company in cases where you are facing a claim. If they think you are not in the wrong, they can help you with legal advice. To make sure you can effectively defend your case, keep documents of all your communication with the claimant.