California Auto Dealer Bond

Sun, sand, surf, and mountains; while the Golden State is known for its beautiful climate and sceneries, it has also become famous for being a state that requires some form of motor vehicle. In guides that help individuals move to California, "come with a car" or "get a car" is almost necessary for building a comfortable life there. Thus, California has the highest number of around 45.7 billion registered automobiles and motor vehicles overall in 2022-2023. Consequently, California is also the home to the most significant number of motor vehicle dealers. With the market for automobiles and motor vehicles still expanding, many see an opportunity to become a new or retail car dealer. However, the state has strict laws regulating the automobile industry. Specifically, under the California Code of Regulations, Title 13, Chapter 1, any person who sells more than five vehicles for profit in California must obtain the relevant auto dealer license from the California Department of Motor Vehicles, Occupational Licensing. You need a California motor vehicle surety bond based on Section 11710 of the Vehicle Code to obtain the license. SuretyNow will introduce the surety company, the bond type, the bond cost, and other necessary information related to the California auto dealer bond to get you started!


The most common bond within the California auto dealer bond is a $50,000 motor vehicle dealer bond, which starts at $300 per year. You will need a $10k wholesale dealer bond if you're a wholesaler. 

  • Who Needs It: all new car dealers, retail car dealers, public consignment auction dealers, parts recyclers, and wholesale dealers in California need a California auto dealer bond.
  • Bond Type and Amount: $50,000 bond for all retail car dealers; $10,000 for wholesale dealers and retail dealers who only sell motorcycles and all-terrain vehicles; $20,000 for used auto-only dealers. 
  • Cost: $100 for one year, depending on the applicants' credit scores. 
  • Application: The surety bond is renewed annually with the dealer license. 

Why is the bond needed?

Requiring a car dealer bond adds a layer of protection to the consumers, the governmental agencies, and the financial agencies with a high auto dealer bond cost and severe legal as well as financial consequences for violating ethical business practices. In other words, paying a fee to regulate dealers' conduct is mandatory, and the car dealer bond can help entities recover from financial losses due to potential unethical activities.

What is a surety company?

For the bonding process, the surety company is very crucial. The surety companies would be responsible for a series of actions in evaluating and issuing California auto dealer bonds.

California Auto-Dealer Bond (2).png

Risk Assessment

The surety company assesses the risk of providing a car dealer bond to a California motor vehicle dealer. This step involves evaluating the dealer's financial stability, business practices, and adherence to state regulations.

Issuance of the Bond

Once the surety company determines that the California motor vehicle dealer is a suitable candidate, it issues an auto dealer surety bond. The California Department of Motor Vehicles sets the bond amount based on different dealer types. The bond is a financial guarantee for the dealer's compliance with industry regulations.

Legal Agreement

The bond is a legal agreement between three parties:

a. The Principal: The auto dealer purchasing the bond.

b. The Obligee: The state of California that requires the bond.

c. The Surety: The company providing the bond.

Financial Backing

Suppose the auto dealer fails to comply with state regulations, engages in fraudulent activities, or violates the bond terms. In that case, the surety company is responsible for compensating up to the bond amount for the financial losses of affected parties. The affected parties may be consumers of governmental entities. In the process, the surety company would also investigate the claim associated with the auto dealer to evaluate the circumstance fully.

Reimbursement from the Dealer

After settling a claim and compensating the third party, the surety company would seek legal reimbursement from the auto dealer for the amount paid out. This legal process reinforces the financial responsibility of the dealer and encourages compliance with regulations.

Sample California Auto Dealer Bond Form
Sample California Auto Dealer Bond Form

Commonly Asked Questions: 

What Are the Different Types of California Motor Vehicle Dealer Bond? 

  • Retail Dealers (Most Common): $50,000 bond
  • Wholesale-Only Dealers: If you sell more than 25 vehicles to other licensed dealers, a $50,000 bond
  • Wholesale-Only Dealers who sell less than 25 vehicles to other licensed dealers: $10,000 bond
  • Motorcycle / All Terrain Dealers: $10,000 bond 

If My Dealership Wants to Run More Than One Type of Operations, Do I Need More Than One Bond? 

No, you only need one bond for multiple operations. You would need the bond with a more considerable sum. For example, suppose you sell motorcycles and used motor vehicle dealers to regular citizens (not licensed dealers). In that case, you need to purchase the $50,000 since it is higher coverage than the $10,000 motorcycle bond.

If My Dealership Has Multiple Locations, How Many Bonds Do I Need? 

You only need one bond for as many locations as you have. For example, a used dealership with one location needs the same $50,000 bond as a dealership with ten locations.

What Is the Purpose of the California Auto Dealer Bond? 

The bond protects California consumers from the potential fraudulent acts of unscrupulous bonded auto dealers. Some of the unethical acts include the following: 

  • Intentionally hide issues of a vehicle before a sale
  • Don't own the titles of the vehicles you are selling 
  • Forget to transfer the titles of the vehicles to the customer after the sale
  • Fail to pay all relevant taxes related to operating your dealership

If any unethical practices exist, a customer can file a claim against the bond.

What is the Bond Term?

The CA Auto Dealer Bond needs to have its bond term consistent with the CA Auto Dealer License. Since the CA Auto Dealer License is renewed annually, the bond typically is only for a one-year term and is renewed annually.

What Information Is Required on Your Bond Form?

  • Principal Name and DBA
  • Dealer Service Address
  • Surety Name
  • State of Incorporation of the Surety Name
  • Surety Service Name
  • Bond Effective Date
  • Bond Execution Location 

How to Ensure Your Bond is Accepted by the DMV

To ensure the DMV accepts your bond, you can do a few things: 

  • Only choose licensed bonding companies with lots of good Google reviews. 
  • Once you receive the bond, make sure you double-check the bond form and ensure it is consistent with the California DMV bond form (a picture is attached above)
  • Make sure all blank fields are filled out. Make sure the Attorney-In-Fact of the Surety Company signs on the appropriate field. 
  • Make sure the Surety Seal is next to the signature of the Attorney-In-Fact.
  • Make sure a Power of Attorney is attached to the bond. 

How To Get the Best Price for a Bond

A credit score is the most critical determinant of the bond price you can control. Having a good credit score can lower the price of your bond significantly. There are a few things you can do to improve your credit score.

  • Pay credit card balances.
  • Ask for a higher credit limit.
  • Become an authorized user.
  • Pay bills on time.
  • If there is a credit report error, make sure to dispute it to preserve your credit.

How Fast Can I Obtain the CA Motor Vehicle Dealer Bond?

Given that the state DMV accepts electronic versions of the bond, you can receive the bond within 30 minutes after bond purchase. We will email a fully signed bond to your email inbox. All you need to do is sign your bond and submit it to the CA DMV.

How to Submit the CA Motor Vehicle Dealer Bond?

Even though the Occupational Licensing Branch of the Licensing Operations Division of the CA DMV has its address indicated on the top left of the bond form, you should submit your bond electronically through the Occupational Licensing Login.

At What Step In the Application Process Can I Get a Bond? 

There are many steps in the CA Auto Dealer License application process. We have defined the steps below, where obtaining a dealer bond is step 13. However, to obtain an excellent rate for your dealer bond, you can also obtain it as soon as you have a business name. All we need to secure you a rate for your bond is your social security number and a valid dealership name. The sooner you lock down an affordable bond rate, the more peace of mind you have.

Will I Get a Hardcopy of the Bond? 

A hard copy of your bond is optional for your CA Auto Dealer Bond application. The bond we email you is the final bond with an electronic signature and digital seal. All you need is to print out the bond we emailed you and submit the bond we emailed you to the Occupational Licensing Branch of the Licensing Operations Division of the CA DMV.

How to Get a CA Motor Vehicle Dealer License?

California Auto-Dealer Bond (1).png

FYI, we have an in-depth guide on how to become a CA auto dealer. But here are the abbreviated steps.

Step 1: Determine the Type of Motor Vehicle Dealer License You Need 

  • Decide among New Dealer License, Used Dealer License, Wholesale-Only License and Autobroker’s Endorsement

Step 2: Complete a 6 Hour Pre-Licensing Training Course

  • A 6-hour pre-licensing training course focuses on laws and regulations of the CA Auto Industry and explains the steps it takes to become a licensed CA Auto Dealer
  • You can take the courses among many providers, including Dealer 101, Dealer Training, Redline Dealer Education

Step 3: Pass the Dealer License Test at Your Nearest DMV Licensing Office 

  • Pass a 40 multiple-choice-question exam. Scoring correctly 28 out of the 40 questions would mean a passing grade

Step 4: Determine Your Business Corporate Structure 

  • Corporation 
  • Limited Liability Corp (LLC)
  • Sole Proprietorship
  • Partnership 

Step 5: Set Up Your Business Corporate Structure and Complete the Required Documents  

Step 6: Obtain Your Federal Employer Identification Number (FEIN)

  • You can apply for a federal employer identification number on the official IRS website

Step 7: Apply for a Business Bank Account

Step 8: Obtain Seller’s Permit from the California Department of Tax & Fee Administration

Step 9: Register with the California Secretary of State or County

  • You can use online filing services like Biz File online who can handle the registration and filing process for you

Step 10: Find a Dealership Location and Display Lot 

  • There are many requirements that the dealership location and display lot need to fulfill. For details, please check out our dealer license page 

Step 11: Install a sign 

  • A sign of 2x2 with business name, address and hours of operations is required to be posted outside of your office 

Step 12: City Business License

  • If you are located in certain cities and towns, you may need to obtain a Business License

Step 13: Obtain a Dealer Surety Bond

Step 14: Submit Application Through the Online Form

  • Complete the correct auto dealer application from the California DMV website

Step 15: Complete Live Scan Fingerprinting 

Step 16: Schedule and Accommodate a Site Visit by the DMV Inspector 

  • Schedule the inspection of your dealership location

Step 17: Receive your approved application in your mail. Now time to celebrate!