An auto dealer bond is a required surety bond that motor vehicle dealers must file with the Tennessee Motor Vehicle Commission before operating. It guarantees that licensed dealerships comply with state motor vehicle sales laws and licensing regulations. A license is required for anyone selling more than five motor vehicles in a year, and a separate bond and license must be maintained for each branch location.
The bond protects vehicle buyers, lenders, and the state if a dealer violates Tennessee statutes, such as failing to properly transfer titles, misrepresenting vehicles, or breaching sales contracts. When a dealer’s actions cause financial harm, eligible parties may file a claim against the bond.
An auto dealer bond in Tennessee involves three parties:
Principal: The licensed dealer required to obtain the bond
Obligee: The Tennessee Motor Vehicle Commission
Surety: The bonding company that guarantees the dealer’s compliance
Tennessee Auto Dealer Bond at a Glance
- Purpose: Helps protect vehicle buyers and the state from financial loss caused by dealer misconduct or regulatory violations
- Who Needs It: Applicants seeking or renewing a Tennessee motor vehicle dealer license
- Regulating Authority: Tennessee Department of Commerce & Insurance, Motor Vehicle Commission (TMVC)
- Required Bond Amount: $50,000
- Bond Term: 2 years (aligned with the license cycle); the bond must remain in force for the life of the license
- Premium Range: Often starts at approximately 1% of the bond amount and may range up to 10%, depending on financial qualifications and underwriting review.
How Much Does a Tennessee Auto Dealer Bond Cost?
The cost of a Tennessee auto dealer bond is based on underwriting reviews, not just the bond amount itself. While Tennessee requires most licensed motor vehicle dealers to carry a $50,000 surety bond, dealers do not pay the full $50,000. Instead, you pay a premium equal to just a small percentage of the required bond amount.
| Bond Type | Bond Amount | Estimated Cost* |
|---|---|---|
| Motor Vehicle Dealer Bond | $50,000 | Starts at $500 |
*Estimated pricing reflects well-qualified applicants. Final premiums are determined after underwriting review.
Surety companies evaluate several factors when calculating your rate, including credit history, financial stability, available working capital, dealership experience, and prior bond performance.
Dealers with strong credit and established operations often qualify for rates near 1% of the bond amount (approximately $500). Applicants with average credit or newer businesses may fall into mid-range (3%-5%) pricing tiers, while higher-risk profiles may receive higher premium quotes.
Even if your credit isn’t ideal, bonding options are still available. Through our Bad Credit Surety Bond Program, we work with specialty markets to help Tennessee dealers secure the coverage required to obtain or renew their license.
Estimate your surety bond premium with our free surety bond cost calculator below:
Surety Bond Cost Calculator
Tell us where to send you your FREE estimate
SEND ME MY ESTIMATE!We'll never share your information with third parties
Thank you for your request!
The ballpark estimate on your premium is: $100 - $167
We've sent a copy of your estimate on your email as well.
Want an exact quote? Simply fill out our online application It's fast and 100% free!
Get a free exact quote Get another estimateHow to Get a Tennessee Auto Dealer Bond
- Complete a short online application: Provide the bond amount and contact details.
- Review your personalized quote: Аpplicants receive a free, no-obligation quote the same business day.
- Finalize and receive your bond: Once approved and payment is processed, your official Tennessee auto dealer bond is issued and ready to file with the Tennessee Motor Vehicle Commission.
In many cases, the bonding process can be completed within one business day, helping prevent delays during licensing or renewal. Bryant Surety Bonds is authorized to issue surety bonds in Tennessee (license #2269214) and partners with nationally recognized surety carriers known for efficient underwriting and dependable turnaround times.
How Do You Get a Tennessee Auto Dealer License?
Obtaining a surety bond is one step of Tennessee’s dealer licensing process. At a general level, applicants must also:
- Submit a completed dealer license application to the Tennessee Motor Vehicle Commission
- Submit the application through the Commission’s CORE online system at core.tn.gov (paper applications are no longer accepted)
- Maintain a permanent business facility — minimum 288 sq ft with a restroom, a dedicated display lot for at least 15 motor vehicles plus 3 customer parking spaces, an 8-inch permanent sign visible from the road, and street-view photos of the location submitted with the application.
- Provide a Certificate of Liability Insurance — Garage Liability or аny аuto coverage at a minimum of $300,000 per occurrence, naming the Tennessee Motor Vehicle Commission as certificate holder, in force for the life of the license.
- Register the business entity with the Tennessee Secretary of State (if applicable)
- Obtain a Tennessee sales tax registration through the Department of Revenue
- Submit ownership disclosures and required background documentation
- Pay the biennial license fee — $400 for a motor vehicle dealer selling new or used vehicles, $35 per salesperson, $800 per automobile auction, or $600 per line-make for franchise vehicle dealers, payable through CORE.
- Submit a CPA-compiled financial statement showing a minimum net worth of $10,000, dated within 12 months of application.
- Provide a Service Agreement with an operating repair garage within a reasonable distance if no mechanical repair facility is located on-site
- Hold a current city and county business license identifying the business as a motor vehicle dealer.
For more detailed step-by-step information about the licensing process, visit our Tennessee Auto Dealer License Guide.
Tennessee Auto Dealer Bond Renewal
Tennessee motor vehicle dealer licenses are issued on a two-year cycle, and the required $50,000 surety bond must remain continuously active throughout the licensing period. The bond on Form IN-1316 is issued for a 2-year term that starts on the first day of the month of issuance and expires on the same date as the dealer’s license, so most dealers simply renew the bond with the license under a continuous schedule. The surety must provide the Commission with at least 60 days’ written notice before canceling the bond.
If bond coverage expires, is canceled, or becomes insufficient, the Tennessee Motor Vehicle Commission may suspend or revoke the dealer license. To avoid compliance issues or interruptions in business operations, dealers must renew their bond well in advance of the expiration date.
FAQs
Is the Tennessee auto dealer bond the same as garage liability insurance?
No. A surety bond and garage liability insurance serve different purposes. Insurance protects your dealership from covered losses, while the auto dealer bond protects consumers and the state if you violate Tennessee motor vehicle laws.
Can the Tennessee Motor Vehicle Commission increase my bond requirement?
The standard bond amount is set by state law. However, disciplinary action, licensing changes, or compliance issues could affect your ability to maintain coverage.
How long does it take to get a Tennessee auto dealer bond?
Quickly. Most applicants are quoted on the same business day they apply, and once payment is processed, the bond is typically issued within 24 hours and ready to file with the Tennessee Motor Vehicle Commission. Higher bond amounts or more complex underwriting reviews can occasionally extend that timeline.
Does obtaining an auto dealer bond in Tennessee affect my credit score?
No. Sureties run a soft credit inquiry to issue your quote, which has no impact on your credit score and is not visible on the credit reports lenders see when you finance inventory or apply for other business credit.
Can I get a Tennessee auto dealer bond if I have bad credit or past financial issues?
Yes. Bad credit, prior bankruptcies, tax liens, or other financial setbacks do not automatically disqualify you. Through our Bad Credit Surety Bond Program, higher-risk applicants are typically quoted at 5%–10% of the bond amount rather than the standard 1%–3%, and most still secure the coverage they need to obtain or renew their Tennessee dealer license.
Do used car dealers and new car dealers both need a Tennessee auto dealer bond?
Yes. Licensed motor vehicle dealers in Tennessee, including both new and used inventory dealers, must maintain the required bond coverage.
