A Motor Vehicle Dealer Bond (sometimes called an auto dealer bond, DMV Bond, MVD bond, or car dealer bond), is a type of surety bond that guarantees that the new or used auto dealer complies with all applicable federal, state, and local laws, tax, licensing guidelines and other conditions pertaining to managing a motor vehicle dealership.
Getting a motor vehicle dealer surety bond is a required part of the dealer licensing application process in many states. In some states, different types of dealerships, such as retail dealers, used vehicle dealers, or ATV and motorcycle dealerships, may need different types of bonds.
The surety bond protects consumers in the event the dealership (surety bond customer, or principal) engages in fraudulent practices, misrepresentation or other wrongful acts. In most states, a dealership must submit their auto dealer surety bond to the state Department of Motor Vehicles in order to obtain an auto dealer license in that state.
Some examples of a dealer's actions that may result in third party damages and a surety bond claim include:
- Delivering an invalid or fraudulent certificate of title
- Neglecting to pay motor vehicle fees
- Misrepresentation or other unethical business practices
- Failure to make sales tax payments to the state government
