Tennessee Motor Vehicle Dealer Bonds

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Who Is Required To Purchase an Auto Dealer Bond In Tennessee?

The Motor Vehicle Commission licenses:

• Manufacturer and distributors
• Franchised and used dealers
• Dismantler and recyclers
• Vehicle auction license
• Mobility dealers
• And vehicle dealer salespeople

However the only license classifications that are required to purchase a surety bond are:

• Franchise and used dealers
• Auction license holders
• Mobility dealers

Each license requires a $50,000 auto dealer bond amount. This amount is the maximum amount of financial compensation available to a customer or the Tennessee Department of Revenue.

The next section will cover this bond amount in detail.

Why is a Tennessee Motor Vehicle Dealer Bond Required?

The Tennessee Motor Vehicle Commission created the standards and laws for becoming a licensed auto dealer. These laws are not only to ensure only the most qualified businesses can get licensed but also to ensure the public is doing business with professionals.

However, even with all the costs and time required to become a licensed dealer, every year a small handful of dealers will cause their customers financial damage or attempt to commit tax fraud to make more money.

Other examples of these acts of fraud include:

• Improperly transferring a title
• Selling vehicles with no title or a false title
• Misrepresenting vehicle information like milage, manufacture year, or condition
• Lying about accident history or structural work history
• Stealing customer deposits
• Choosing not to pay the sales taxes to the California Department of Revenue

If a dealership is proven guilty of purposefully committing these or similar acts, the customer or the Department of Revenue can make a claim against their surety bond for financial compensation.

The $50,000 bond amount is the total amount of financial compensation available for any one claim and even if there were multiple claims against the motor vehicle dealer surety bond.

And just to be clear this, $50,000 is set by the Motor Vehicle Commission. It's up to you to pay as little as possible when you purchase your bond.

How Much Does a Tennessee Auto Dealer Bond Cost?

Each dealership surety bond in Tennessee is considered a credit driven bond.

This means the primary credit rating of the owner or each owner of the business will be the primary factor that determines the cost.

The cost is ultimately determined by a surety. A surety is an insurance company that underwrites auto dealer surety bonds.

Every surety is different and will assess an applicant. Along with the personal credit of the owners, other factors include:

• Industry and dealership experience
• Prior bond history if any owner has been licensed and bonded in the past

Based on these factors each surety will quote a rate unique to them. And this rate multiplied by the bond amount of $50,000 will be the price you pay for a two year bond term. (Most on the bond term in the next section.)

Here's How To Save Hundreds of Dollars When You Purchase Your Bond

Because each surety uses their own internal assessment, the rates they quote can be drastically different.

And this is what we help our clients do. We're Surety Bonds Direct, a specialized surety agency. We price shop for our clients because it's easy for us to save our clients hundreds of dollars purchasing a Tennessee vehicle dealer bond.

We work with multiple A-rated sureties to find the lowest price. And we can't explain it, but different sureties will come back with rates that are 1% to 3% different.

With a bond amount of $50,000, this can easily save you hundreds of dollars when you purchase your bond.

What Do Example Auto Dealer Surety Bond Prices Look Like?

Let's look at some example pricing for the $50,000 bond. Pay attention to how one to two percentage points affect the price you'll pay.

Example prices help but you can get your exact pricing within 24 hours when you request your price quote or call a bond specialist at 1-800-608-9950.

Go request your pricing today to find out how low of a price we can get for you.

Our price quotes are valid for 30 days. And once you have pricing, you'll be able to make the right decision for your dealership and goals.

How Long Does a Tennessee Auto Dealer Bond Last?

In Tennessee, each of the required surety bonds have a bond term of 24 months or 2 years.

This means you pay one time for a 2 year period. And as long as your dealership remains in business, you'll have to renew your bond every 2 year period.

When you purchase your bond, you'll choose an effective date. This date is your bond "activation" date and when the 2 year period starts.

This is another great reason to work with us. We manage your bond for you so you won't overlook it and let it expire.

When it's time for renewal, your bond specialist will contact you 30 to 45 days in advance to make sure the renewal premium is paid on time so your bond remains active.

Once you pay the renewal premium, you don't have to do anything else. Your bond is active and you can continue selling vehicles.

Neighboring States Dealer Bond Requirements

We have many clients that are licensed in neighboring states. For Tennessee you might also be interested in:

• North Carolina auto dealer bond
• Georgia auto dealer bond
• Kentucky auto dealer bond
• Alabama auto dealer bond

Motor Vehicle Dealer Bonds And Getting Your Tennessee Business License/Registration

The surety bond is only one of the license requirements you must meet to have your application accepted. Here's a quick overview of the license steps.

At a high level, the steps are:

• Pay all the appropriate fees including the application fee and salesperson fees
• Complete the dealer occupational application
• Purchase your auto dealer surety bond
• Meet all of the physical dealership requirements like signage, lot size, and office setup
• Provide your businesses financial statement
• Purchase the required minimum liability insurance
• Have your fingerprints and criminal background check completed
• If you don't have a service garage on site, prove you have service agreement in place
• Have your tax license issued

Additional Tennessee Motor Vehicle Dealer Bond Resources & Links

The following are specific requirements as outlined by the State of Tennessee Motor Vehicle Commission:

"The duration of the bond is two (2) years beginning in the month of the expected license issuance and expiring on the last day of the same month two (2) years later. Only the original surety bond is acceptable and is to be signed by the principal owner of the dealership or if a partnership any partner must sign and must be submitted to the Commission with the license application. If a partnership, all partner’s names must be listed. If a dba name is being used the bond has to reflect this. The name on the bond MUST be the same as the entity to be licensed and the dealer address MUST be the physical address of the dealership."

As a result of the 2-year term required for this bond, it is important to note that your premium will reflect the cost of the bond for the extended term. The bond also must become effective on the first day of the month and expire on the expiration date of your business license.