Most of the time, a surety bond’s purpose is to protect a consumer against damages due to fraud, defaulting on a contract, or other negative and wrongful behaviors on the part of a business providing a service or product. In some cases, a business opts to get a surety bond to prove that they are committed to ethical behavior; however, most of the time a bond is required by a government agency in order for a business to get a license to provide those services or products.
One example of an industry that is required by law to have surety bonds in place in order for a business to obtain a license is the motor vehicle dealership industry.
A motor vehicle dealer bond, sometimes also called a DMV bond, used car dealer bond, or auto dealer bond, guarantees that the motor vehicle dealer complies with all federal laws, state laws, local laws, and tax and judgment guidelines that relate to motor vehicles.
The bond also ensures that if the dealer or any of its employees commits fraud or other actions that are wrongful to the consumer, the consumer is protected from any consequence arising from those actions.
In addition to the protection that a consumer receives from a motor vehicle dealer bond, they also find peace of mind knowing that a dealership has a surety bond in place. That surety bond means that a third party bonding company has reviewed that dealership’s financial information and endorsed them as a financially stable company. And in the event that something does take a negative turn during the transaction between consumer & dealership, the bonding company can step in to make the situation better for the consumer.
Typically, dealers obtain their motor vehicle dealer bond by applying with a surety bond company. As part of the application process, the dealer provides financial documentation and agrees to submit to a credit check, so that the bond company can be sure that they are financially stable, can pay for bond premiums and cost, and are a reasonable dealership to provide a surety bond to.
A poor credit score on the record of the dealer will make getting a surety bond more difficult with many companies; however, at BFBOND.com many of our motor vehicle dealer bonds have special programs available to applicants with poor credit scores.
We’ve helped hundreds of dealerships across the nation get their surety bond quickly and without hassle, and we’d love to help you with your surety bond requirements. Call us at 800-925-1008 or apply online today.
Motor Vehicle Dealer Bond FAQ
How much does an auto dealer bond cost? A percentage of the bond amount — rates vary by bond size, state, bond form, and the applicant. Unlike most agencies, we review only the owners’ personal credit (our volume gives sureties “safety in numbers”), where others also demand business financials, bank balances, and years in business. Apply online for an instant, no-obligation quote.
Can I get a dealer bond with bad credit? Yes. We have access to high-risk markets — many exclusive to us — that approve challenged credit, though pricing runs higher than standard markets. Agencies elsewhere will often broker the bond back through us anyway, adding cost and time.
How long does the application take? Minutes. Auto dealer bonds are approved instantly online.
Does my bond protect my dealership? No — a common misconception. MVD bonds protect the public from dealer fraud; a claim paid on your bond must be repaid by you. To protect the dealership itself, you need insurance.
Will my bond cost the same as another dealer’s? Not necessarily. Rates reflect each dealership’s estimated risk and ability to repay claims — yours could be lower or higher.
Do I need a bond to sell mobile homes? Most likely. Many states require dealer bonds for RVs, manufactured homes, and modular homes — check your state in the list below.
Do I need separate bonds for new and used vehicles? Usually no — one dealer bond generally covers both, but requirements vary by state.
Retail vs. wholesale: a retail dealer bond lets you sell to the public and to dealers/wholesalers; a wholesale bond covers dealer-to-dealer sales only.
State Requirements For Motor Vehicle Dealerships
Please note that this information is not legal advice or counsel, and consulting with your attorney as to the specific legal requirements in your state is recommended.
License & Permit
