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How Do Motor Vehicle Dealer Bonds Work?

How Do Motor Vehicle Dealer Bonds Work?

Surety Bond Requirements for Dealers

Motor vehicle dealers and related businesses are subject to surety bonding requirements in nearly every state. These bonds are also known as auto dealer bonds, car dealer bonds, and MVD bonds. The bond amount (or required coverage) varies by state and dealer type but typically ranges from $10,000 to $100,000.

Depending on the state, motor vehicle dealer bonds may be required of new and used car dealers, motorcycle dealers, auto parts dealers, all-terrain vehicle dealers, power-sport vehicle dealers, boat dealers and wholesalers. The bonds typically ensure that the dealer complies with applicable state regulations and engages in lawful business practices.

Motor Vehicle Dealer Bond Term (Duration)

Most motor vehicle bonds are purchased for an annual term but some bonds may be available with longer terms (2 or 3 years). Others have a fixed expiration date that is set by the department of motor vehicles or other governing authority. For example, all Florida motor vehicle bonds expire on April 30, regardless of when the bond was purchased during the year.

If you purchase a bond with a set expiration date, the annual bond premium you pay will be reduced to only reflect the portion of the year that the bond will be active.