What Does An Auto Dealer Bond Cover?

An auto dealer surety bond is protection for the customers you'll serve at your dealership or dealerships. It's also protection for your state's agency that collects sales taxes for products sold in the state.

So your auto dealer surety bond is not protection for you, rather protection for those you've made commitments to as a licensed business.

How Does an Auto Dealer Bond Protect Customers?

The bond gives customers a set amount of financial compensation they can claim if they are purposefully harmed by a dealership.

When you get licensed, you're agreeing to follow the laws in your state for operating a dealership.

Every year, there will be a small handful of dealerships who will purposefully commit fraud to make more money.

Examples of this purposeful fraud can include:

• Improperly transferring a title for sold vehicles
• Selling vehicles with no title or fake titles
• Lying about vehicle condition, accident history, or milage
• Stealing customer deposits
• Switching out vehicles when delivering on sold vehicles

Your state wants to protect the public of fraudulent dealerships and the surety bond is the only tool they have to hold you accountable.

How Does an Auto Dealer Bond Protect The State?

If you sell retail products in any state, you're required to collect and pay to the state (typically on a quarterly basis) the sales taxes for those sales.

In most cases, retail businesses are not required to purchase a surety bond to ensure they pay sales tax.

However, because auto dealers are required to purchase a bond as part of the license, the bond also covers sales tax responsibilities.

Click here to learn more about sales tax surety bonds.

Click here to learn more about auto dealer surety bonds.