Auto Dealer Bond

Auto Dealer Bond

Surety Bonds for Vehicle Dealers

Auto dealers in most states must file a surety bond with the state’s Department of Motor Vehicles (DMV) before they can receive their auto dealer license. Unfortunately, purchasing an auto dealer bond can be one of the most confusing parts of getting a dealer license. That’s why we developed the following comprehensive guide to auto dealer bonding.

Surety bonds are designed to protect customers and the state from auto dealers that commit fraud. A surety bond will help ensure that your dealership will follow the car dealership legislation and regulations in your state.

On this page you’ll find a general overview of dealership surety bonds. For specific information about what type of surety bond you’ll need and what documents you’ll need to submit to satisfy the surety bond requirement of your dealership licensing process, please contact the appropriate motor vehicle agency in your state.

General Surety Bond Requirements

As with other surety bond types, auto dealer bonds provide financial guarantees that help regulate the industry. Auto dealer bonds protect customers, sellers, financial enterprises, and/or government agencies. If a dealer commits fraud or conducts business in other unethical ways, the bond helps these entities recover from any resulting financial loss.

Additionally, having a surety bond gives your dealership credibility to both your customers and the appropriate agencies in your state.

Depending on where you work and what kind of dealership you plan to operate, you might need to file one of many different auto dealer bond types. Some common ones include:

  • DMV bonds.
  • RV bonds.
  • Motorcycle dealer bonds.
  • Used car dealer bonds.
  • Wholesale car dealer bonds.

No matter the specific name of the bond, they work in the same basic way. If a bonded motor vehicle dealer breaks the bond’s terms, the wronged party (i.e. a customer, bank, or government agency) can make a claim against the bond to get compensation.

Vehicle Dealership Surety Bonds in Every State

The state agency that is in charge of licensing auto dealers should tell you if you need a bond before you begin the application process. If you haven’t been told that you need a bond, it’s a good idea to contact the agency and make sure you don’t need one. You might also take the time to learn more about the dealer licensing process in your state.

Generally, obtaining and filing a surety bond is a normal part of the dealer licensing process in every state.

Cost of a Surety Bond for Your Dealership

The exact price you’ll pay for a surety bond will vary for a few reasons, such as:

  • The required surety bond amount.
  • Your application and financial credentials.
  • If you choose to finance your bond premium.
  • Your credit score.

Generally, if your financial credentials qualify you for the standard market, your premium could be calculated as just 1% of the bond amount, which would only be $500 for a standard $50,000 bond. Conversely, dealers with poor credit could pay a premium that’s a higher percentage of the bond amount. The best way to determine your exact surety bond cost is get a free price quote from a surety provider.


California auto dealer bonds work as three-party agreements like other surety bonds. In this case, the three parties include:

  1. Principal: The dealer who purchases the bond in order to get a license, thus guaranteeing the quality of his future performance.
  2. Obligee: The Department of Motor Vehicles, which requires the dealer to purchase a bond to ensure appropriate professional behavior.
  3. Surety: The agency (like who issues the bond to the principal, thus offering a financial guarantee of the dealer’s performance.

California Vehicle Code Section 1171 C forbids the dealer from committing fraud or making any fraudulent representations that could result in financial loss for a purchaser, seller, financing agency, or governmental agency. If a bonded motor vehicle dealer damages consumers or a government agency, the harmed party has a right to take action against the bond in an amount that can’t exceed the face value of the bond. If a court finds a dealer, remanufacturer, or surety liable for certain actions protected by the bond, the professional’s license will automatically be suspended. The license can only be reinstated if the bond is reinstated, or if a new bond is purchased.

California Auto Dealer Bond Regulations

Securing an auto dealer bond is essential for anybody looking to get a California auto dealer license. Any individual applying for an auto dealer or remanufacturer’s license in California has to purchase the bond before being issued a license. Once executed, a California auto dealer bond will remain in effect throughout the duration of the license. Likewise the bond will need to be renewed along with the license.

California Vehicle Code Section 1171 outlines three major bond types for California auto dealers:

  1. Surety Bond of Dealer (OL 25): $50,000
  2. Surety Bond of Vehicle Remanufacturer (OL 25A): $50,000
  3. Surety Bond of Motorcycle Dealer, Motorcycle Lessor-Retailer, All Terrain Vehicle Dealer, or Wholesale-Only Dealer [less than 25 vehicles per year] (OL 25B): $10,000

California Auto Dealer Bond Costs

New California auto dealers with good credit should expect to pay about a 2% premium, which would be around $1,000 for the $50,000 bond. offers experienced auto dealers reduced rates as low as $575 on the same bond. Applicants looking to purchase form OL 25B for $10,000 usually only need to pay 1% of the bond amount—or $100—to purchase their bond. Dealers with bad credit should be prepared to pay fees that could cost anywhere between 10 and 20% of the bond amount, which could mean a $5,000 to $10,000 premium for the $50,000 bond. works to get every applicant a competitive rate for a California auto dealer bond.


Who is Required to Secure this Bond

Under California Vehicle Code 11710 (CVC 11710) all applicants for a dealer or remanufacturer license are required to procure and file a bond with the Department of Motor Vehicles. The bond must be executed by an admitted surety, as approved to by the Attorney General. The dealer bond must be in the amount of $50,000, unless the dealer deals exclusively in motorcycles or all-terrain vehicles and wholesale dealers who sell fewer than 25 cars per year (CVC 11710.1). In this case, a $10,000 bond will be required by the State of California Department of Motor Vehicles.

Bond Requirement Specifics

The bond is required by the State of California Department of Motor Vehicles for all licensed dealers and remanufacturers to ensure that the applicant will not practice any fraud or make any fraudulent representation which will cause a monetary loss to a purchaser, seller, financing agency or governmental agency (CVC 11710). The liability of the bond must remain at full value at all times. If the bond amount is decreased or if there is an outstanding court judgment again the dealer, remanufacturer or surety, the license will be automatically suspended. In order to reinstate the license, the licensee must file an additional bond or restore the bond to the original amount, or terminate the outstanding judgment or which the dealer, remanufacturer or sureties are liable (CVC 11710).

Who is protected Under this Bond

Purchaser, sellers, financing agencies or governmental agencies in the State of California are entitled to make a claim against the dealer’s surety bond should they act in violation of the California Vehicle Code. Upon validation of the claim, the beneficiary is entitled to monetary damages which the surety bond would cover. The bond guarantees that individuals granted a license or permit to operate a business or to exercise a privilege will meet the obligations under that license or permit.

Underwriting Process

Each applicant must first complete and submit the application for a Motor Vehicle Dealer, which contains all of the pertinent information regarding the business and business owners. Upon receipt of the application, our agency will be able to provide a response as to rate and approval for the Motor Vehicle Dealer bond within one business day. Once the application is approved, the bond will be executed and released to the applicant upon receipt of payment.

What you Need to do Once you have your Bond

Once the Motor Vehicle Dealer bond has been approved and released to the applicant’s care, it must be filed with the Department of Motor Vehicles along with the licensing paperwork. The Department of Motor Vehicles will maintain the bond, which must remain effective at all times to prevent any suspension of the Motor Vehicle Dealer license , also we offer Arizona Motor vehicle bond

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California Motor Vehicle Dealer Bond
California Motor Vehicle Performance Bond
California Motor Vehicle Wholesale-Only Dealer (Less Than 25 Vehicles) Bond
California Motor Vehicle Commercial Requestor Account Bond
California Motor Vehicle Remanufacturer Bond
California Motor Vehicle Verifier Bond
California Motorcycle Dealer Bond
California Motorcycle Lessor – Retailer Bond
California Motorcycle Wholesale Dealer Bond
California All Terrain vehicle Dealer Bond
California DMV Business Partner Automation Bond – $10,000
California DMV Business Partner Automation Bond – $50,000
California Vehicle Registration Service Bond – $5,000
California Vehicle Registration Service Bond – $25,000