New Jersey Auto Dealer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help new and pre-owned car dealership owners on New Jersey Auto Dealer bonds
At a Glance:
- Lowest Cost: $100 per year or $10 per month, based on the business owner’s credit
- Bond Amount: $10,000
- Who Needs It: All individuals or business entities who sell or deal in motor vehicles
- Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
- Who Regulates Dealers in New Jersey: The New Jersey Motor Vehicle Commission (MVC)
Background
New Jersey Revised Statutes 39:10-19 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the MVC. The New Jersey legislature enacted the license and regulations to ensure that dealers engage in ethical business practices and remit required taxes and fees. In order to provide financial security for the enforcement of the license law, dealers must purchase and maintain a $10,000 motor vehicle dealer surety bond to be eligible for licensure.
What is the Purpose of the New Jersey Auto Dealer Bond?
New Jersey requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the Motor Vehicle Dealer License. The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations and that the dealer will pay all required taxes and fees to the State of New Jersey. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.
How Can an Insurance Agent Obtain a New Jersey Auto Dealer Bond?
BondExchange makes obtaining a New Jersey Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensure that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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How Much Does the New Jersey Auto Dealer Bond Cost?
The $10,000 New Jersey Motor Vehicle Dealer surety bond can cost anywhere between $100 to $500 per year or $10 to $50 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost on the $10,000 bond requirement.
$10,000 New Jersey Auto Dealer Bond Cost
| Credit Score* | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 629+ | $100 | $10 |
| 619 – 628 | $130 | $13 |
| 600 – 618 | $200 | $20 |
| 550 – 599 | $400 | $40 |
| 500 – 549 | $500 | $50 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does New Jersey Define “Motor Vehicle Dealer”?
N.J.A.C 13:21-15.1 defines a motor vehicle dealer as “any natural person or entity that is engaged in the business of buying, selling, or dealing in motor vehicles.”
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do Auto Dealers Apply for a License in New Jersey?
Dealers in New Jersey must navigate several steps to secure their motor vehicle dealer license. Below are the general guidelines, but dealers should refer to the MVC’s dealer page as well as the licensing statutes for details on the process.
License Period – The New Jersey Dealer License expires March 31 of each year regardless of the date of issuance and must be renewed before the expiration date
Step 1 – Determine the License Type
New Jersey requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of the New Jersey Dealer License:
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- New Dealer – Sells new and used motor vehicles
- Used Dealer – Sells used motor vehicles only
- Leasing Dealer – Leases motor vehicles
Step 2 – Establish a Location
Before dealers can obtain their dealer certificate they must first buy or lease a permanent business location. The location must meet the following requirements:
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- Office space that is at least 8 x 9 square feet and contains a desk, chair, and a safe
- Landline telephone that is registered in the business’s name
- Display lot large enough to display at least 2 motor vehicles (not required for leasing dealers)
- A permanently affixed sign that displays the business name and is visible from the nearest roadway (not required for leasing dealers)
- In compliance with all applicable zoning regulations
Step 3 – Purchase Insurance
New Jersey dealers must obtain liability insurance on all vehicles with dealer plates and submit proof of insurance with their application. Below are the minimum required limits:
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- $100,000 per person
- $200,000 per accident
- $25,000 for property damage
Step 4 – Purchase a Surety Bond
Dealers must purchase and maintain a $10,000 motor vehicle dealer surety bond.
Step 5 – Complete the Application
All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:
Business Licensing Services Bureau
P.O. Box 170
Trenton, NJ 08666-0170
The following items should be included with the application:
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- 5.a Formation Papers – Dealers must submit a copy of their business formation letters filed with the New Jersey Division of Taxation. Dealers can register their business here. Dealers whose business is located outside the State of New Jersey must submit a Certificate of Authority obtained from the New Jersey Department of Treasury.
- 5.b Driver’s License – All individuals listed on the application must submit a copy of their New Jersey Driver’s License
- 5.c Sales Tax – Dealers must submit a Sales Tax Certificate of Authority with their application. Dealers can obtain a sales tax number here.
- 5.d FEIN – Dealers must submit their Federal Employer Identification Number to the New Jersey MVC. Dealers can obtain a FEIN here.
- 5.e Deed/Lease – Dealers must submit a copy of either the deed or lease of their business location with their application
- 5.f Phone Bill – Dealers are required to submit a copy a telephone bill for the phone registered in the business’s name
- 5.g Dealer Plates – Dealers can request dealer plates on their application. Dealer plates all come in sets of five.
- 5.h Child Support – Dealers will need to complete a Child Support Form and submit it with their application (form comes with the application packet)
- 5.i Certification/Signature – Dealers will need to complete a Certification/Signature form and submit it with their application (form comes with the application packet)
- 5.j Fingerprints – All dealers are required to obtain a criminal background prior to receiving their license. Dealers will need to submit the Fingerprint Request Form and submit it with their application.
- 5.k Hours of Operation – Dealers will need to disclose their business hours of operation on their application
- 5.L Proper Walls – Dealers must complete the Dealer Certification of Licensed Location Type and Proper Walls form and submit it with their application
- 5.m Municipal Approval – Dealers will need to obtain approval from their local municipality and submit a Municipal Approval Form with their application
Step 6 – Pay Fees
Applicants must pay a $257.50 license and registration fee when submitting their dealer application. This fee includes one set of dealer plates (5 dealer plates in a set).
Step 7 – Pass Inspection
A representative from the MVC will need to inspect and approve the dealer’s business location. The inspector will administer a written examination testing the dealer’s knowledge of all dealer laws and regulations during the site inspection.
How Do New Jersey Auto Dealers Renew Their License?
The New Jersey Dealer License expires March 31st of each year regardless of the date of issuance and must be renewed before the expiration date. Dealers should receive a renewal packet around 60 days before the expiration date. Dealers should mail their renewal application, including all required documents and fees, to the following address:
Business Licensing Services Bureau
P.O. Box 170
Trenton, NJ 08666-0170
What Are the Insurance Requirements for the New Jersey Auto Dealer License?
The State of New Jersey requires dealers to maintain liability insurance on all vehicles with dealer plates with limits of 100/250/25. Dealers must file a $10,000 motor vehicle dealer bond.
How Do New Jersey Auto Dealers File Their Bond?
Dealers should mail the completed bond form, including the power of attorney, to the following address:
Business Licensing Services Bureau
P.O. Box 170
Trenton, NJ 08666-0170
The $10,000 surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name
- Date bond will go into effect
- Witness signature for the principal
- Date the bond will expire
- Bond Amount
- Date the bond is signed and sealed
How Can New Jersey Auto Dealers Avoid Bond Claims?
To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state, including some of the most important issues below that, tend to cause claims:
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
- Pay sellers of vehicles promptly and in full
- Transfer all vehicle titles when sold
- Pay taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
- Do not engage in any illegal selling practices
- Adhere to all dealer plate regulations
- Maintain all records/ledgers at the business location
What Other Insurance Products Can Agents Offer Dealers in New Jersey?
New Jersey requires dealers to obtain comprehensive liability insurance on all vehicles with dealer plates. Most reputable dealers that provide towing or service station services should also obtain garage keeper’s liability. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for New Jersey Auto Dealer Customers?
New Jersey unfortunately does not display motor vehicle dealer information to the public. We suggest contacting a list service company or the New Jersey Secretary of State for a list of active motor vehicle dealers. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.
What Other States Require Auto Dealer Bonds?
All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.