Everything You Need to Know About Auto Dealer Bonds [Infographic]

Everything You Need to Know About Auto Dealer Bonds

You need a license to become a car dealer, and you need an auto dealer bond before you can get a license. A bond is basically a way to hold you financially accountable if you break state laws. Fortunately, getting through the auto dealer bond process doesn’t have to be difficult as long as you know what to do:


Everything You Need to Know About Auto Dealer Bonds

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  1. Learn the Requirements – Bond requirements differ in every state. Find out what agency regulates auto dealers in your state, then contact that agency to explore what kind of bond(s) you need and in what amount.
  2. Pick a Surety – Surety companies issue auto dealer bonds. Find one that can issue you a bond quickly, easily, and affordably. Ideally, you find a long-term partner from the start.
  3. Complete the Application – The bond application asks for information about your personal finances and your business finances. You may need to provide other documents as well to help underwriters understand your credit risk.
  4. Pay the Premium – The premium price is a small percentage of the auto dealer bond’s total value. Upon payment, the bond becomes active for 12 months.
  5. Provide Proof – Agencies that license car dealers require proof of having an active surety bond before issuing a license. The surety company will give you an official document to pass along, which will be the surety bond itself.
  6. Stay Renewed – Your auto dealer license lapses when your bond expires, making it illegal to sell vehicles. Renew the bond before that happens by filling out a renewal application and paying a premium for the next 12 months.


Stay in Good Standing – Surety companies can refuse to renew a bond or even revoke a bond if they choose not to continue working with a specific car dealer. Usually, they only take this drastic action when someone has multiple claims against their bond or lingering unpaid debts. Since it’s so important to have an active auto dealer bond at all times, stay in good standing with the surety that backs up the bond.