Auto Dealer Bond Guide

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What Is an Auto Dealer Bond?

An auto dealer bond works as an extra level of protection for car buyers across the U.S. It’s a safe financial mechanism that guarantees you will follow the law in your work as a car dealer.  

The bond is required by the authorities that license auto dealers in your particular location.  

Who Needs an Auto Dealer Bond?

All types of dealers may need an auto dealer surety bond, depending on the licensing requirements of state or local authorities. 

This means you are likely to need a bond if you fit into any of the following categories of dealers:

  • New car dealers
  • Used car dealers
  • Retail car dealers
  • Wholesale car dealers
  • Car auction dealers
  • Motorcycle dealers
  • RV dealers

How Much Does an Auto Dealer Bond Cost? 

The cost of your car dealer surety bond is determined by how strong your personal and business finances are. Your personal credit score has the biggest impact on the price. 

Your surety bond cost is a percentage of the bond amount you’re required to obtain by the licensing authorities. Applicants with credit scores of 650 and above can expect a bond premium between 1% and 3% of the bond amount.

The table below lists some of the most common dealer bonds that we sell. For each bond, you can check out the bond amount and the respective starting bond price:

Auto Dealer Bond Cost Table
State and Dealer Type Bond Amount Starting Price
California retail vehicle  $50,000 $500
California motorcycle, all-terrain and wholesale  $10,000 $100
Utah new or used motor vehicle or large trailer $75,000 $750
Utah motorcycle or small trailer $10,000 $100
North Carolina new or used dealer and auto recycler  $50,000 $500
Arizona recycler $20,000 $200
Arizona broker, wholesale auto auction dealer, and wholesale motor vehicle dealer $25,000 $250
Arizona new and used dealer and public consignment auction dealer $100,000 $1,000
Florida auto dealer bond $25,000 $250
Texas auto dealer bond $25,000 $250

What Does an Auto Dealer Bond Cover?

The bond provides protection to your customers in a range of situations. 

The most common cases when the bond coverage can be activated include:

  • Breach of warranties
  • Fraudulent financing schemes
  • Title transference issues
  • Misleading information about sold vehicles
  • Interference with odometer readings  
  • Non-payment of sales tax or fees and inaccurate reporting 
  • Other potential breaches of dealer licensing requirements

In such situations, a harmed client or other parties can file a claim against the auto dealer bond to demand fair compensation. 

How to Get Your Auto Dealer Bond? 

Here’s how to obtain your dealer bond in a few easy steps:

What Happens If You Have Bad Credit?

Bad credit can be a serious hamper to getting bonded. The reason is that your credit score is one of the main factors in the bond cost formation. 

At our family-run surety agency, we know that it’s difficult to run a dealership when you’re facing financial issues. That’s why we offer dealers the ability to obtain the necessary bond even if they’re struggling with bad credit by opting to set-up convenient payment plans.  

What Do You Need to Keep in Mind When Getting an Auto Dealer License?

The licensing process for dealers across the country varies because it’s set by different licensing authorities on the state or local level. 

You’ll typically have to provide a set of documents, including:

  • Business entity registration documents
  • Training or examination proof
  • Tax and/or IRS registration 
  • Insurance policy (requirements are set at the individual state level)

FAQs about Auto Dealer Bonds

Which auto dealers need a bond?
A bond is required of any dealer that is involved in the sale of motor vehicles such as new, used, wholesale, RV, motorcycle, auction, and other types of vehicles. In most states, dealers are even required to obtain a surety bond as a prerequisite for licensure.
How can I get a quote for my bond?
Just apply online today with YCDB for a free quote. You will receive it in less than 8 business hours.
What is a dealer bond rider?
You’ll need a dealer bond rider if you have to fix a mistake or change on your motor vehicle dealer bond, for example, if you want to change the name or address when your bond was issued. You can also request a bond rider if you change your business location.
How to avoid claims on your auto dealer bond?
It is very important for you as a dealer to ​​be aware of the circumstances that can bring a claim against your dealership. The safest way to avoid auto dealer bond claims is to maintain pristine paperwork, be transparent with your customers, and always stick to your legal obligations, which are set in the bond language.
Can I use my dealer bond for multiple states?
You’ll need a separate car dealer bond for each state you want to operate in. Each state has different requirements for licensing and bonding, so you will have to oblige with the respective state regulations and get a separate bond for every state.
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