What is a California auto dealer bond?
Before becoming a motor vehicle dealer in California, you must post a surety bond as part of the state licensing process.
- New and used auto dealers must post a $50,000 bond.
- Motorcycle, lessor-retailer, all-terrain vehicle, and wholesale vehicle dealers must post a $10,000 bond.
- These bond requirements apply to parties selling more than five vehicles annually in California.
- Wholesale dealers selling more than 25 vehicles annually will need a $50,000 bond.
The California Department of Motor Vehicles Occupational Licensing requires you to keep your bond (and license) active for as long as you wish to operate your business. Your bond ensures that you follow California Code Section 11711.
Get Your Auto Dealer Bond:
How much do California auto dealer bonds cost?
Auto dealer bond premiums can vary based on applicants’ credit scores: the higher your credit score, the lower your annual premium. If you have excellent credit, expect to pay as little as 1% or less of the $50,000 motor vehicle bond amount. Other factors that may impact the cost of your bond include your industry experience and business and personal financials.
ZipBonds charges a flat rate of $100 for the $10,000 wholesale motor vehicle dealer bonds. These bonds don’t require credit checks and can be issued immediately.
How do California auto dealer surety bonds work?
An auto dealer surety bond is a three-party agreement between an obligee, a principal, and a surety.
- Obligee: California Department of Motor Vehicles
- Principal: Motor vehicle dealer
- Surety: Financial institution that issues and backs the bond
If your auto dealership engages in fraudulent activities or breaks state laws, the party that loses money can file a claim against you. If the claim is valid, your surety will cover the costs to settle the claim upfront. You must later repay your surety in full (up to the bond amount of either $50,000 or $10,000).
How to Get an Auto Dealer License in California
To obtain your auto dealer license in California, follow the New Dealer Application Checklist. Here’s an overview of the application requirements:
- Pay all required fees.
- Fill out all applicable forms.
- Obtain any additional documents required.
- After you’re licensed, you must participate in the Business Partner Automation program (if you are a new dealer).
- Obtain a National Motor Vehicle Titling Information System report for used vehicles.
- Keep a copy of everything for your records.
You can apply for, modify, or renew your license online.
Frequently Asked Questions
You may still be able to get bonded by paying a higher premium. Expect to pay upwards of 5-10% if you have a low credit score.
There are two types of auto dealer bonds in California:
- Surety bond of dealer ($50,000 bond)
- Surety bond of motorcycle dealer, motorcycle lessor-retailer, all-terrain vehicle dealer, or wholesale-only dealer selling fewer than 25 vehicles per year ($10,000 bond)
Once you’ve purchased your motor vehicle dealer bond from a surety provider like ZipBonds, remember to renew it before its expiration date each year. If you’re buying your bond from us, we’ll send out a reminder each year when the expiration date is approaching. That way, you’ll have plenty of time to renew your bond and maintain your business license.
How to Get Your California Auto Dealer Bond
ZipBonds offers the fastest and most secure option for getting auto dealer bonds. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent directly. Many of our bonds can be processed and issued immediately online.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.