Overview
A motor vehicle dealer bond, commonly called an auto dealer bond, is the surety bond a state's motor vehicle department requires as a condition of a dealer license. It guarantees that the dealer will follow state motor vehicle law and deal honestly, including paying sales taxes and title fees, delivering clean title, and not misrepresenting a vehicle. A buyer, lender, or the department harmed by a violation can claim against the bond.
State regulators set the required amount, commonly in the tens of thousands of dollars, and it can vary by dealer type. Because the bond guarantees honest dealing rather than insuring the dealer, underwriting centers on the owners' credit.
It is a surety bond that protects buyers, lenders, and the state, not the dealer. The dealer reimburses the surety for any paid claim under the indemnity agreement.
Who needs this bond
New and used car dealers, motorcycle and RV dealers, wholesalers, and other licensed motor vehicle dealers in states that condition the dealer license on a posted bond (most do).
Typical amount and term
Bond amount is set by each state's motor vehicle department, commonly 10,000 to 100,000 dollars. Premium runs 1 to 3 percent of the bond amount for well-qualified dealers. Term is usually one to two years.
What this bond costs
Your premium is a small percentage of the bond amount, set by underwriting. The biggest drivers:
- The state-set bond amount
- The owners' personal credit
- The dealer type and the state's requirements
- Any prior claims history
| Scenario | Bond amount | Estimated premium |
|---|---|---|
| Established dealer, strong credit | $25,000 bond | around 1 to 2 percent per year |
| Newer dealer, average credit | $50,000 bond | around 2 to 5 percent per year |
| Higher state amount | $100,000 bond | rate depends on credit and financials |
Figures are illustrative premium ranges, not quotes or statutory amounts. Your rate depends on the bond amount your obligee requires and your underwriting profile.
What you will need
- State of license and dealer license or application number
- Owner credit authorization
- Business name and dealership address
How to apply
- Send your state and the bond amount your motor vehicle department requires
- Receive an instant or one-day quote
- Sign and pay, then file the bond with the motor vehicle department
How a surety bond differs from insurance
An auto dealer bond is a surety guarantee that protects your buyers, lenders, and the state, not your dealership. Garage liability and other insurance protect the dealership's own losses. The bond backstops honest dealing; insurance transfers the dealership's own risk. A paid claim is reimbursed to the surety by the dealer.
Frequently asked questions
Who needs a motor vehicle dealer bond?
Most licensed motor vehicle dealers, including new and used car, motorcycle, and RV dealers and wholesalers, in states that condition the dealer license on a posted bond.
How much does the bond cost?
Premium is a percentage of the bond amount, low single digits for well-qualified dealers and higher for newer or credit-challenged applicants. The figures here are illustrative.
How is the bond amount set?
By each state's motor vehicle department, and it can vary by dealer type, so the required amount differs from state to state.
What happens on a claim?
The surety investigates, pays valid claims up to the bond amount, and then seeks reimbursement from the dealer under the indemnity agreement.
More additional bonds
Reviewed by the Cornerstone Surety bond team. Last reviewed 2026-06-17.