Motor vehicle dealers in California are required to be licensed by the Department of Motor Vehicles. However, a significant step in that licensing process is to obtain a California Motor Vehicle Dealer Bond. By posting this surety bond, the dealer guarantees that they will operate according to the guidelines of their license and laws established by the state of California.
The California Motor Vehicle Dealer Bond (also referred to as an auto dealer or car dealer bond) is a three-party agreement between the principal, the obligee, and the surety company. The principal is the person or business that has to get the bond. The obligee is the entity that requires the principal to get the bond, in this case, the California Department of Motor Vehicles. The surety company is the company that writes and backs the bond.
Aside from needing this bond to get your motor vehicle dealer license, this bond helps to protect the public from fraudulent or illegal acts committed by licensed dealers. The purpose of an auto dealer bond is to ensure the licensed vehicle dealer adheres to all applicable laws and regulations associated with their license. If a licensed dealer violates one of these laws or commits a fraudulent act that injures another party (typically a customer), the injured party (the claimant) can file a claim against the dealer’s bond. The surety company will investigate the claim and, if the claim is deemed valid, compensate the claimant for damages up to the bond amount.
Many people mistake surety bonds for a type of insurance. However, after a claim has been paid out to the claimant, the principal is financially obligated to reimburse the surety company for the entirety of the claim plus any additional fees and expenses incurred. This is what differentiates surety bonds from your typical insurance policies.
In the state of California, new and used auto dealers who buy or sell more than 25 vehicles per year (other than ATVs and motorcycles) are required to post the $50,000 California Motor Vehicle Dealer Bond.
If you sell motorcycles or ATVs, or you operate as a wholesale dealer, you will need the $10,000 surety bond. You can read more about the $10,000 bond for those types of dealers here.
The cost of a California Auto Dealer Bond will primarily depend on your credit score and years in business. Your credit will be checked using a soft inquiry, so it will not harm your score. The surety will analyze these factors and assign you a percentage, called a premium rate. Your premium rate will be a percentage of the bond amount, which in this case is $50,000. For those with excellent credit and several years in the business, premium rates can start as low as 1% of the bond amount.
We understand that not everyone has great credit, which is why at EZ Surety Bonds, we work with a variety of markets to find you the best quote available. Applying for your quote is free and easy, so we encourage you to apply for your bond anyway.
The obligee for this bond is the California Department of Motor Vehicles. You can find more detailed contact information, including local occupational licensing inspector offices, here.
At EZ Surety Bonds, we’ve made applying for surety bonds online quick and free. Simply fill out the application for your bond and one of our surety experts will contact you within 24 hours regarding your free quote. If you still have questions, please reach out to us at info@ezsuretybonds.com or 1-866-546-4605.
How do I obtain a California Motor Vehicle Dealer License?
To get your California motor vehicle dealer license, you must complete the following:
For more detailed information regarding this process, check out our California Dealers License Guide.
How much is an auto dealer bond in California?
The cost of most surety bonds is dependent upon the credit of the individual applying. Surety companies will analyze your credit using a soft credit check and quote you a percentage, called your premium rate. To calculate how much you’ll pay for your auto dealer bond in California, multiply your premium rate by the bond amount, which for new and used car dealers is $50,000. Individuals with excellent credit scores may see quotes for their bond starting around 1% of the bond amount.
I’ve purchased my California Motor Vehicle Dealer Bond, now what?
After purchasing your bond with EZ Surety Bonds, we will mail the original bond to you so you can file your bond with the obligee. Every obligee has different filing requirements for bonds, some allow an electronic copy, while others require the original bond document signed and mailed in. Always double-check the specific filing requirements for your obligee before you do anything with your bond.
You’ll know if you need a surety bond because some entity will have required you to obtain one. They must also inform you of which specific bond type you’ll need. There are thousands of bonds across the country, all of which vary by state and industry.
Visit EZSuretyBonds.com to browse hundreds of bonds by state, type, or industry.
