California Auto Dealer Bonds, and More

What you need to know about California Auto Dealer Bonds, and More

California Auto Dealer Bonds, and More

How much does an auto dealer bond cost in California?

Auto dealer surety bonds (also called motor vehicle dealer bonds) are mandated by the California Department of Motor Vehicles (DMV) as part of the licensing requirements for dealerships to conduct business in the state. The DMV sets the total bond amount based on the type of dealership license and the dealer’s annual number of vehicle sales:

  • $50,000 bond for new car dealers selling more than 25 vehicles per year
  • $10,000 bond for wholesale-only dealers selling less than 25 vehicles per year
  • $10,000 bond for ATV dealers, motorcycle dealers, and motorcycle lessor-retailers 

The surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium. Premium rates for California auto dealer bonds typically cost between 1% and 3% of the total bond amount.

During the application process, the surety company evaluates your personal credit, financial statements, industry experience, and licensing history. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a California auto dealer bond. EZSurety still offers competitive rates to individuals with low credit scores or other financial issues.

Below are the lowest premiums EZ Surety has issued for auto dealer surety bonds in the State of California.

  • EZ Surety has issued new car dealer bonds for premiums as low as $500.
  • EZ Surety has issued wholesale-only dealer bonds for premiums as low as $100.

Why are auto dealer bonds important in California?

California auto dealer bonds provide protection for customers, creditors, and the state government. When a California motor vehicle dealer posts a surety bond, they provide a guarantee to the California DMV that they will conduct business in compliance with the conditions listed in section 11711 of the Vehicle Code.

If the auto dealer fails to comply with the Vehicle Code, the surety company will pay out financial losses to damaged parties up to the full bond amount. The auto dealer is liable to reimburse the surety for any damages paid under the bond.

How to get your auto dealer license in California

To obtain your auto dealer license in California, you must complete and submit your dealer application and pay the associated fees to the California DMV. There are different applications for selling new or used vehicles.

New car dealers must complete the application packet (Form OL 248N), which contains the following forms.

  • Application for Original Occupational License, Part C (OL 12)
  • Original Application for Occupational License (OL 21A)
  • Surety Bond of Dealer (OL 25) OR Surety Bond of Motorcycle, ATV, or Wholesale-Only Dealer (OL 25B)
  • Authorization to Release Financial Information (OL 53)
  • Certificate of Proposed Franchise (OL 124)
  • Application for Occupational License Personal History Questionnaire (OL 29B)
  • Appointment of Director as Agent for Service of Process (ADM 9050)

New dealer applicants must pay the following fees:

  • $175 application fee (non-refundable)
  • $70 per branch location
  • $100 Autobroker endorsement
  • $300 New Motor Vehicle Board Fee
  • $90 per dealer plate (auto), $92 per dealer plate (motorcycle)
  • $1 Family Support Program fee

Used car dealers must complete the application packet (Form OL 248U) which contains the same forms and fees with the following exceptions:

  • $87 per dealer plate (auto), $89 per dealer plate (motorcycle)
  • $16 examination fee

Along with the application forms, auto dealers will need to provide the following documents to receive their auto dealer license:

  • Letter of Authorization (new trailer dealers only)
  • Evidence of successful completion of the Vehicle Dealer Written Examination (used dealers only)
  • Original Dealer Education Certificate of Completion (used dealers only)
  • Signed copy of your rental or lease agreement (used dealers only)
  • Copy of Business License, Certificate of Occupancy License, or Tax Certificate (used dealers only)
  • Statement of Information for LLCs or Corporations
  • Fictitious Name Statement
  • Copy of State Board of Equalization Resale Permit
  • Photographs of business location