Getting an auto dealer bond is one of the requirements for applying for a car dealer license.
You also have to go through a criminal background check, pay your licensing fees, establish a place of business, and you need to get insurance. Getting insurance is different from getting an auto dealer bond.

Liability insurance provides protection for your business and the cars on your lot. A car dealer bond provides protection for the state and your customers. It’s the government’s way of making sure you’re complying with state regulations. It also takes care of your customers, in case you use any fraudulent business methods.

Auto dealer bonds, like all surety bonds, are underwritten by surety bond companies and obtained through bond agencies such as Lance Surety Bonds. Bonding companies typically don’t work directly with the public. That’s why you need to find a good bonding agency that partners with many different bonding companies. This will maximize your chances of obtaining a bond as well as receiving the lowest possible premium.

When you apply at a surety bond agency, you will receive a quote showing the premium you have to pay. The amount of the premium is mostly based on the business owner’s personal credit score. The higher it is, the lower the premium.

If you have bad credit, not all is lost – you can still open a car dealership. Bad credit, and other credit issues such as tax liens, civil judgments or past bankruptcies, put you in a “high-risk” category. This may increase your auto dealer bond premiums from 5 to 15 percent. But providing your agent with strong financial or business statements, cash verification or strong liquid assets can again lower your premium.

Just like your car dealer license, an auto dealer bond is only valid within the state it was issued. If you want to open a dealership in another state, you’ll have to apply for a new bond and license.

When you obtain an auto dealer bond you will have to renew it in regular intervals. That depends on your state’s requirements. Most states want you to renew your license every year, which means you’ll need renew your auto dealer bond every year, too.

Additional resources:
1. If you want to know how bond prices are determined, go to
2. To find out more about finding the lowest surety bond rates, visit
3. To receive a FREE surety bond quote, go to
4. For state-specific licensing guides, dealer bond renewal tips and the latest auto dealer legal requirements, follow
5. If you have questions about used car dealer bonds, check out:

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