New Motor Vehicle Dealer Surety Bonds

What is a new vehicle dealer bond?

Many states offer a single type of motor vehicle dealer license. However, some states, including Arkansas, Louisiana, Maryland, and Mississippi, make a distinction between new and used car dealers. In these states, dealerships selling new vehicles must post a new motor vehicle dealer surety bond.

Depending on what part of the country your business is in, you might refer to this type of policy as a “new car dealer bond" or “franchise dealership bond." 

If you are unsure how your state handles vehicle dealer licensing and bonding, NNA Surety Bonds can help you navigate the process.

How much does this surety bond cost?

The cost of a new auto dealer bond can vary based upon three factors:  

  • The bond amount required by your state
  • The finances of your business 
  • Your personal credit rating

States do not all require the same bond amounts. For example, new car dealers in Mississippi must post a $25,000 surety bond. Meanwhile, dealerships in Maryland that sell over 2,500 cars per year must post a $300,000 bond.

Regardless of the bond amount required by your state, you will only have to pay a small percentage of the policy as an annual fee—this is known as the bond’s premium.  

Because premium rates are dependent upon the finances of your business and credit rating, your cost can vary from 1% to 15% of the bond amount. 

Cost of New Motor Vehicle Dealer Bonds
State Bond Amount Cost*
(Annual Premium)
Arizona $20,000–$100,000 $200–$1,000
Arkansas $50,000 $250–$500
California $50,000 $800–$1,500
Connecticut $5,000 $100
Delaware $25,000 $250
District of Colombia $25,000 $250
Florida $25,000 $375
Iowa $75,000 $263
Kansas $30,000 $300
Louisiana $20,000 $200
Maine $25,000 $250
Maryland $15,000–$300,000 $150–$2,250
Michigan $10,000 $100
Minnesota $5,000 $100
Mississippi $25,000 $115
Missouri $30,000 $300
Montana $5,000–$50,000 $100–$400
Nebraska $50,000 $250
New Hampshire $25,000 $187
New Mexico $12,500–$50,000 $125–$500
New York $100,000 $1,000
North Carolina $25,000–$50,000 $125–$500
North Dakota $25,000 $250
Oregon $50,000 $400–$500
Pennsylvania $20,000 $120
South Carolina $15,000 $150
South Dakota $5,000–$25,000 $100–$250
Tennessee $50,000 $875 (two years)
Utah $10,000–$75,000 $120–$1,500
Vermont Varies Varies
Virginia $50,000 $750
Washington $30,000 $300
West Virginia $25,000 $250

* Cost can vary depending on the bond amount required and your credit rating

Maryland Car Dealer Bonding Requirements

While most states require a fixed bond amount determined by the type of dealership you operate, Maryland bases its bond amounts on the dealership’s sales volume. 

Surety Bond Costs for MD New Vehicle Dealers
Number of Vehicles Sold Bond Amount
1 to 500 $50,000
501 to 1,000 $75,000
1,001 to 2,500 $100,00
Over 2,500 $300,000

You can access more information about Maryland vehicle dealer licensing and bond requirements by visiting the state’s MVA website

Our surety bond specialists are also happy to assist you. Give us a call!

Why do new auto dealers need a surety bond?

Laws and regulations are often complex and can be difficult to understand by average consumers. States require surety bonds for car dealerships to help protect consumers who may not be aware. Should you or someone at your dealership break a law, violate a regulation, or otherwise harm a customer, that individual may file a claim against your bond. If the claim is upheld in court, the bond will be used to reimburse the claimant for their loss. You will then be required to pay back this amount to the surety company.

A judgment against your bond can make renewing or obtaining new bonds difficult, which can then affect the status of your dealer license. In this way, surety bonds promote best business practices and help mitigate unethical behavior.

Get Your Bond Quote today!

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Questions? Call NNA Surety Bonds at 855-215-2160
Monday to Friday, 6 a.m. to 5 p.m. (PT)

Providing Bonds and Insurance Since 1957