Jet Journal

Auto Dealer Bonds: Everything You Need to Know

Estimated Read Time: 4 minutes
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10-27-2022

Looking to become a motor vehicle dealer? Maybe you’re already a dealer searching for more information. In all 50 states, a surety bond is required to be a licensed car dealer. This article covers what a surety bond is, how much it costs, and how to get an Auto Dealer Bond. 

The Purpose of Auto Dealer Bonds

Auto dealer bonds are a security tool used by state regulatory agencies to guarantee compensation to a person or entity when a licensed vehicle dealer fails to comply with the regulations, whether intentionally or negligently. 

Manipulating an odometer or failing to deliver a vehicle’s title are just two reasons a customer could seek reimbursement via the surety bond. Obligees (regulatory agencies) also have jurisdiction to file a bond claim.

Bonds hold the licensee financially accountable, and are essentially a “line of credit”. The surety company will provide compensation in the event of a claim, but rather than affording protection to the licensee, the bond provides protection to the public—more details on claims below.

Who Needs a Motor Vehicle Dealer Bond?

There are a few different dealer classifications required to hold a surety bond. Here are a few common ones:

  • Franchise (new) vehicle dealer
  • Used vehicle dealer 
  • Wholesale vehicle dealer 
  • Motorcycle dealer

There are niche dealer types that may need bonds, such as snowmobile dealers, trailer dealers, and even vehicle auctions. 

Auto Dealer Bond Cost

The cost is dependent on three main factors: (1) the bond limit, (2) the personal credit of the dealer, and (3) years of experience. You can rest assured that the bond cost is only ever a small percentage of the bond limit, regardless of credit

If you are interested in learning about state-specific requirements and costs, check out our Auto Dealer Bonds page and select the state you are doing business in.

Jet’s direct distribution model removes the middleman, allowing us to provide our customers with the best bond prices with no added fees. You have the option to choose convenient monthly payments or discounted annual or multi-year rates.

Claim Process for Auto Dealer Bonds

Once a claim is filed on the motor vehicle dealer bond, the surety company (Jet) is notified. The surety company completes its own investigation by reviewing the details and documents to confirm the claim’s validity. 

If proved just, a payout is made to the claimant (person or entity pursuing the claim) up to the bond limit. That’s not the end though—the principal must reimburse the surety company for the full claim amount; this is because surety bonds are unlike insurance, and claims are only paid out for intentional and fixable issues the auto dealer fails and/or refuses to address.

For more information on claims, read our Auto Dealer Bond Claims Guide.

Ready to Apply?

Once you’ve paid for the bond, it will need to be filed. Sometimes, Jet can do this for you, depending on the obligee’s requirements. Most auto dealer bonds are renewed on an annual basis. Keep track of your bond renewal date to ensure no lapse in coverage. Jet will also send you an email when it is time for renewal.

Motor Vehicle Dealer Bond State Information

Bond InformationLegislation/Regulations
AlabamaCode Of Alabama - Title 40 Chapter 12 Licenses
AlaskaAlaska Statutes - Title 8, Chapter 66
ArizonaArizona Revised Statutes - Title 28 Transportation
ArkansasNew Vehicle Dealers: Arkansas Motor Vehicle Commission Rules
Used Vehicle Dealers: Arkansas State Police Used Dealer Laws
CaliforniaCalifornia Legislative Information - Division 5 Vehicle Code
ConnecticutConnecticut General Statutes, Chapter 246
DelawareTitle 30, Chapter 30 of the Delaware Code
Delaware Title 21, Chapter 63
District of ColumbiaDistrict of Columbia Department of Licensing and Consumer Protection Laws
FloridaFlorida Statutes - Chapter 320 Motor Vehicle Licenses
GeorgiaGeorgia Code - Title 47, Chapter 47
IllinoisIllinois Secretary of State Regulations
IndianaIndiana Secretary of State Regulations
IowaIowa Code, Chapter 321 - MOTOR VEHICLES AND LAW OF THE ROAD
Iowa Code, Chapter 322 - VEHICLE MANUFACTURERS, DISTRIBUTORS, WHOLESALERS, & DEALERS
Iowa Code, Chapter 322C - RECREATIONAL VEHICLE DEALERS, MANUFACTURERS, & DISTRIBUTORS
KansasKansas Statutes - Chapter 8, Article 24
KentuckyKentucky Revised Statutes - Chapter 190
LouisianaLouisiana Revised Statutes - Title 32
MarylandCode of Maryland Regulations - Title 11, Subtitle 12
MassachusettsMassachusetts General Laws - Title XX, Chapter 140, Section 58
MichiganMichigan Vehicle Code - Act 300 of 1949
MississippiNew Vehicle Dealers: Mississippi Motor Vehicle Commission Regulations
Used Vehicle Dealers: Mississippi Department of Revenue Regulations
MissouriRevisor of Missouri - Chapter 301
MontanaMontana Code Annotated - Title 61, Chapter 4
NebraskaNebraska Revised Statute - 60-1401
NevadaNevada Statutes - Chapter 482
New JerseyNew Jersey Code - Title 13, Chapter 21
New MexicoNew Mexico Statutes - Title 66
North CarolinaNorth Carolina Statutes - Article 12 Motor Vehicle Dealers and Manufacturers Licensing Law
North DakotaNorth Dakota Century Code - Title 39
NevadaNevada Revised Statutes - Chapter 482 Motor Vehicle and Trailers
OhioOhio Administrative Code - Chapter 4501 Motor Vehicle Dealers and Salespersons
OklahomaOklahoma Statues - Title 47, Chapter 62A
OregonOregon Revised Statutes - Chapter 822 Regulation of Vehicle Related Businesses
PennsylvaniaDealer/Manufacturer - 75 Pa.C.S. 1335
Full/Issuing Agent, Card Agent, Messenger Service - 75 Pa.C.S. 7503.1
Salvor - 75 Pa.C.S. 7302
South CarolinaSouth Carolina Code - Title 56
South DakotaSouth Dakota Code - Title 32
TennesseeTennessee Code - Title 55, Chapter 17
TexasTexas Transportation Code - Title 7 Vehicles and Traffic
UtahUtah Code - Chapter 3, Title 41
VirginiaCode of Virginia - Chapter 15, Title 46.2
WashingtonWashington State Legislature - Title 46, Chapter 46.70
West VirginiaMotor Vehicle Dealers, Distributors, Wholesalers - West Virginia Code, Article 6A, Chapter 17A
Automobile Auctions - West Virginia Code, Article 6C, Chapter 17A
WyomingWyoming Statutes - Title 31, Chapter 16

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