California Motor Vehicle Dealer Bonds

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Who Is Required To Purchase an Auto Dealer Bond In California?

Getting licensed as an auto dealer means getting an occupational license. Here are the major dealership occupational licenses required in California. All of these are required to purchase a surety bond.

• New and used car dealers
• All terrain vehicle dealers
• Motorcycle dealers
• Commercial vehicle dealers
• Trailer dealers including semi, fifth wheel, and camp trailers
• Bus dealers
• Trailer coaches and park trailers
• Snowmobiles

Among a few other categories of vehicle dealers.

Some examples of dealers that do not require an occupational license include:

• Golf carts
• Special construction equipment
• Motorized scooters, mopeds, and electronic bicycles
• Manufactured homes
• Dune buggies

If you're required to obtain an occupational license, you have an auto dealer surety bond requirement.

Vehicle Wholesaler Bond Exemption

Wholesale dealers, dealers who sell vehicles to other dealerships to supply their inventory, can file for bond exemption of the $50,000 amount to a $10,000 amount if they sell less than 25 vehicles per year.

And they must be wholesale only dealers.

These bond amounts are discussed more below.

Every California Dealership Location Is Independent

Each dealership location must obtain its own occupational license. This means each location must be independently bonded.

This requirement also extends to each license classification.

For example, if you're a used dealer and you want to become a new motorcycle dealer as well, you will have to purchase a surety bond for each license.

 

Why is a California Dealer Bond Required?

The California Department of Motor Vehicles is not only responsible for licensing dealers, but for protecting the public from fraudulent businesses attempting to take advantage of them. This is why the licensing process exists.

The licensing process is a series of standards each dealer must satisfy to legally sell vehicles in the state.

And despite this licensing process, every year there will be dealerships who will purposefully harm their customers to increase profits.

Examples of these purposeful acts of fraud include:

• Improperly transferring a title
• Selling vehicles with no title or a false title
• Misrepresenting vehicle information like milage, manufacture year, or condition
• Lying about accident history or structural work history
• Stealing customer deposits
• Choosing not to pay the sales taxes to the California Department of Revenue

The surety bond is the primary tool used by the Department of Motor Vehicles and the Department of Revenue to hold dealers accountable to the promises they made when obtaining their license.

The bond amount is the total amount of financial coverage available to customers if they are purposefully and financially harmed by a dealership. It also extends to the California Department of Revenue for any failure to pay sales taxes.

How Much Does a California Auto Dealer Bond Cost?

The California auto dealer bond requires the following amount (or coverage):

License Classification	Bond Amount
New and used dealer	$50,000
Wholesale dealer selling over 25 vehicles per year	$50,000
Lessor - Retailer	$50,000
Remanufacturer	$10,000
Wholesale dealer selling less than 25 vehicles per year	$10,000

All California dealer bonds are credit driven. This means a custom rate must be quoted from a surety.

A surety is a special type of insurance company that chooses to underwrite dealer bonds.

Every surety is different and will assess each applicant using their own set of guidelines. The primary factors each surety considers includes:

• The personal credit of the owner or owners
• Industry and dealership experience
• Prior bond history if any owner has been licensed and bonded in the past

From these factors and their assessment, the surety will quote a rate and this rate multiplied by the bond amount is the price you pay for your bond.

How To Save Hundreds of Dollars When You Purchase Your Bond

The rates quoted by each surety can vary by many percentage points and as you'll see, this can mean hundreds of dollars difference in the price.

This is why it's a great idea to work with a specialized surety agency like Surety Bonds Direct.

We work with multiple A-rated sureties and price shop for you to find the lowest rate and price we can. Plus by using an A-rated surety we can guarantee your bond will be accepted by the Department of Used Motor Vehicles or your money back.

Let's look at some example pricing for the $50,000 bond. Pay attention to how one to two percentage points affect the price you'll pay.

Example prices help but you can get your exact pricing within 24 hours when you request your price quote or call a bond specialist at 1-800-608-9950.

There's no cost to have a bond specialist collect rates and find you the lowest pricing. And there's no obligation to purchase either.

Our price quotes are valid for 30 days. And once you have pricing, you'll be able to make the right decision for your dealership and goals.

How Long Does a California Auto Dealer Bond Last?

All California auto dealer bonds have a term of 12 months from the effective date.

The effective date (activation date) is a date you choose when you purchase your bond. It's when you want the bond to become active. It's typically the date you plan to submit your application.

When you work with Surety Bonds Direct, we handle filling out the auto dealer bond form for you. All you need to ensure is you provide the exact same name as you used on the application.

Renewing your bond is easy.

Your bond specialist will contact you 30 to 45 days in advance to make sure the renewal premium is paid on time so your bond remains active.

Once you pay the renewal premium, you don't have to do anything else. Your bond is active and you can continue selling vehicles.

Dealer Bonds And Getting Your California Business License/Registration

Read our blog post that will take you through the steps to get your California used dealer license and other licenses. They all have the same process with slight variations in the paperwork required.

At a high level, the steps are:

• Pay all the appropriate fees including the application fee, branch fee, dealer plate fees and more
• Complete the dealer occupational application
• Purchase your auto dealer surety bond
• Sign the authorization to release of financial information
• Complete the personal history questionnaire
• Meet all the requirements for your dealership and schedule your inspection
• Have your fingerprints and criminal background check completed
• Outline your business structure

 

Additional California Dealer Bond Resources & Links

Once received from Surety Bonds Direct, auto dealers are to submit the original signed and sealed bond form to their local Occupational Licensing Inspections Office. The California Department of Motor Vehicles can be reached at (800) 777-0133.

California Department of Motor Vehicles License Application Requirements