Auto Dealer Bonds

For any MVD (Motor Vehicle Dealer) to operate legally in the United States, an auto dealer bond required is a prerequisite of becoming licensed. Also known as car dealer bonds or motor vehicle dealer bonds, each state individually sets out the specific requirements for bonds, and auto dealers must ensure continued coverage or risk losing their auto dealer license.

The purpose of the bond is to provide a financial guarantee that the dealership is operating in compliance with legal and ethical standards, protecting customers from malpractice and fraud.

It does this by extending credit to the dealership whereby the principal, the dealer, is required to pay out on any claims.

Each type of dealership requires a different type of bond with a different bond amount. For example, motorcycle dealers and wholesale dealers will need different bond types than used motor vehicle dealers. Additionally, the types of dealers that need a bond, and the types of bonds required, will vary from state to state—so whether you are in California or Florida, it is important to speak with an expert and learn exactly what your dealership needs.

Auto dealer surety bonds constitute a three-party guarantee between the principal (the dealer), the oblige (the DMV), and the surety (the bond provider).
This guarantee acts as a form of credit that compensates the customer in case of any claim against fraud or unethical practices by your dealership.

The bond itself must be issued by a licensed surety company and most commonly requires an annual payment (bond premium) which ensures continued cover as long as it is paid each year. In essence, when a surety company extends this type of credit, this assures the obligee that all rules and regulations within the specific state will be followed. If they are not, then the surety company steps in to protect the third party (customers of the dealer).

If a claim is made, the surety covers the costs up to the amount of the bond. However, it is important to remember that the dealer will need to reimburse these costs to the surety at a later, agreed upon date. This is why avoiding claims remains important to continued operation.

Auto dealer bonds cover a broad range of fraudulent, negligent, or unethical practices. These vary in line with the regulations of each state, and the DMV is responsible for outlining many of the requirements. Some of the most common include (but are not limited to):

• Improper title transference
• Misleading customers as to vehicle condition
• Odometer tampering
• Not honoring verbal or written warranties
• Using deceptive financing methods
• Failure to pay state sales tax or other applicable fees
• Failure to properly report sales
• Failure to adhere to licensing conditions

Firstly, apply for a free quote today on our website. After your application is approved, your bond agent will let you know how much your bond premium will cost and give you a formal agreement with a bonding company. Once you pay your premium and sign the contract, you will receive your bond.

Lance Surety writes more Auto Dealer Bonds than any other type of bond, so our staff is experienced with each state’s specific requirements. Due to strong relationships with many top bonding companies, we offer exclusive programs to dealers throughout the nation at prices that cannot be matched.

Quoting and issuing bonds directly out of our office helps make Lance Surety the fastest way for a dealer to get bonded. Our low prices combined with our outstanding customer service will ensure you a hassle-free bonding experience!

To learn more about the process and to get a surety bond quote, view our page on How to Get Bonded or contact us today to discuss your requirements.

Surety Bond Costs are based almost solely on the credit profile of the business owners. In most cases, applicants pay a premium, which is a percentage of the bond amount. Dealers with excellent personal credit typically pay between 1 to 3% of the bond amount. However, customers with poor credit scores are usually required to pay more. Bad credit programs range between 5 to 15% of the bond amount.

Since the bond amount in each state varies, the amount of your premium will depend on where you are based and where you operate. It is important to remember that each state has their own motor vehicle dealer bond and dealer licensing requirements. If you own dealerships in multiple states, you'll be required to be both licensed and bonded in each state with which you are operating in. Be sure to check with the obligee in each state to ensure you are operating in compliance with their respective auto dealer regulations or contact our agency with any questions.

Motor vehicle dealership license and bond requirements are established by the obligee, which is usually a state's Department of Motor Vehicles (DMV). The first thing a new applicant should do is contact their state's DMV to gather information about the state's current licensing requirements. Most states provide detailed checklists on their websites designed to simplify the process.

To learn more about dealer bonds in each state, select a state from the interactive US Map below. Our auto dealer bonds by state guide allows users to view MVD bonding requirements for all 50 states and provides other useful information such as bond amounts and obligee information.

If you become bonded with Lance Surety, you will be notified about your bond renewal up to 3 months prior to the bond's expiration date. We will provide you with the renewal invoice, which includes your renewal premium along with the payment due date.

Our staff contacts all customers via US Mail, fax, email and follow up phone calls to make sure you are aware of the pending due date for payment. As long as you pay your renewal premium by the due date, your bond will be renewed by the surety for another term.