If you want to work as an auto dealer in New York, you must obtain a license to operate your dealership. New York requires anyone who sells more than five vehicles per year to obtain a license and to meet multiple requirements, including a bond requirement. Most New York motor vehicle dealers must get car dealer bonds before they can operate their businesses or secure licenses from the state's motor vehicle dealer board. Which license type you might need will depend on the activities you intend to perform as an auto dealer. However, being bonded is a common requirement for obtaining most types of licenses. Surety bonds are not permanent, meaning you will also have to renew your bond before it expires to maintain your dealer license.
To keep your auto dealer license in good standing, you will need to maintain your auto dealer bond and ensure you renew it before its expiration date. Your New York motor vehicle dealer application will not be approved by the New York Division of Motor Vehicles unless you meet your bond requirements and pay a license fee. If you violate the law or commit misconduct, you could lose your license, your bond, and your dealership. Here is what New York auto dealers need to know about auto dealer bonds in New York.
What Is a New York Auto Dealer Bond?
A New York motor vehicle dealer bond is a legal agreement between the following contractual parties:
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Principal - The auto dealer that must be bonded as a condition of licensing
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Obligee - The New York Department of Motor Vehicles (DMV) requires motor vehicle dealer bonds and enforces the state's regulatory requirements for car dealerships and individual auto dealers
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Surety - The surety company that issues a bond as a guarantee the principal will follow the law and engage in ethical business practices
Some would-be car dealers believe that motor vehicle dealer bonds are insurance. A motor vehicle dealer surety bond is a form of credit offered by bond companies and does not protect you against lawsuits and liability. Instead, car dealer bonds protect the public and the obligee against any legal or ethical violations you might commit during the course of business. If you violate the terms of your surety bond, the state or a harmed consumer can file a claim against your bond.
When your bond application is approved by the surety company, you will have to sign an indemnity agreement with the surety. This agreement legally obligates you to reimburse the bond company for any claims that are filed against your auto dealer surety bond. While the surety will pay valid claims, you must pay the surety company for the amounts it paid on your behalf or face a lawsuit and enforcement by the court. Breaking the law and violating your auto dealer bond can result in the loss of your license and the closure of your dealership.
How Much Does a New York Auto Dealer Bond Cost?
The auto dealer bond cost in New York depends on the type of car dealer license you need, your credit score, and the underwriting factors that the surety company will consider when determining the level of risk it would face by issuing a bond to you. If you intend to sell fewer than 50 used vehicles per year as a car dealer, you will have to purchase a dealer surety bond in the bond amount of $20,000. If you plan to sell more than 50 used cars in a year, your bond requirement is a $100,000 auto dealer bond. Finally, if you plan to sell new vehicles, your required bond amount is $50,000 under NY Veh. & Traf. L. 415.
While these bond amounts might seem high, your bond cost will be a percentage of the maximum amount. You won't have to pay the entire bond amount to secure your surety bond. Your percentage will range from 1.5% to 3% if you have excellent credit and up to 4% of the required bond amount if your personal credit score is slightly lower. To get an idea of the pricing based on the range of credit scores where your score falls, refer to the table below:
| Type of Auto Dealer Bond | Bond Amount | Above 700 | Between 650-699 | Between 600-649 | Below 599 |
|---|---|---|---|---|---|
| Used car dealers who sell up to 50 vehicles annually | $20,000 | $200-$400 | $300-$600 | $400-$800 | $600-$1,400 |
| Used car dealers who sell more than 50 vehicles annually | $100,000 | $1,000-$2,000 | $1,500-$3,000 | $2,000-$4,000 | $3,000-$7,000 |
| Franchises, dealers of larger vehicles (SUVs, light trucks, etc) | $50,000 | $500-$1,000 | $750-$1,500 | $1,000-$2,000 | $1,500-$3,500 |
You should also refer to our surety bond cost guide for additional information about surety bond costs and how they are calculated.
How Can I Get a New York Auto Dealer Bond?
Before you submit your license application for a motor vehicle dealer license and pay your application fee, you will need to get a New York motor vehicle dealer bond. To do so, you can submit a bond application to a surety company. The bond company might also require you to submit some of the following additional documents to help with its evaluation of your application:
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Asset and debt schedules
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Bank account statements
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Resumes for each co-owner
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Personal and business tax returns
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Bank reference
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References from others who have done business with you in the past
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Legal entity structure
The bond company will submit your application materials to its underwriters, and they will review them while checking for several relevant factors. Among the other factors reviewed by the underwriters, your credit score is among the most important. Once the company decides to approve your application, it will give you a free quote for the premium you will need to pay for the license bond.
If you accept the bond quote, you will then need to sign an indemnity agreement with the surety company and agree to pay for any valid bond claims that might be filed. You will then pay the bond premium, and the surety will give you a bond form and send a copy to the state. After you have met all of the other licensing requirements and paid your license fee, the state of New York will issue you an auto dealer license. To begin the process of getting a surety bond as a step towards getting your dealer license, please complete our online application.
Can I Get a New York Auto Dealer Bond With Bad Credit?
Your business and personal credit are among the most important factors used to determine your bond premium and whether your bond will be approved. However, even if you have bad credit, you can still get a bond through our Bad Credit Program. After you receive your auto dealer bond, take steps to improve your credit and maintain a good relationship with your surety company to secure better rates in the future.
Who Should Get a New York Auto Dealer License?
Under New York law, anyone who sells five or more vehicles in 12 months must get an auto dealer license. There are three primary types of motor vehicle dealer licenses in New York, including the following:
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Retail motor new vehicle dealer license to sell new vehicles
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Retail motor other vehicle dealer license to sell used vehicles, buy or sell wholesale vehicles, trucks, trailers, motorcycles, and recreational vehicles
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Wholesale dealer license to sell wholesale vehicles to other dealers but not to the general public
The bond you will need will depend on your license type and the number of vehicles you sell per year.
Once you have gotten your auto dealer bond and your New York car dealer license, you should ensure that you always follow the law and avoid engaging in unethical business practices. Not only is this good for your dealership's reputation, but it can also help to build a strong relationship with your surety and avoid claims against your bond.
Get Your New York Auto Dealer Bond Today
Your New York motor vehicle dealer bond is only a few clicks away. Apply online through our website by filling in the simple bond application. Approvals on auto dealer bonds are relatively fast, so you can expect your free bond quote in a very short amount of time.
Would you like to know more before applying? Call us at 866.450.3412 to speak to one of our surety bond experts! They know everything about the surety bond requirements in New York state, and can help you get bonded. We’ll be happy to help!
