Florida Auto Dealer Bond: A Comprehensive Guide
October 7th, 2020
This guide provides information for insurance agents to help new and pre-owned car dealership owners on Florida Auto Dealer bonds
At a Glance:
- Average Cost: $188 – $2,250 per year, based on the business owner’s credit
- Bond Amount:
- $25,000 for used dealers, expires annually on April 30
- $25,000 for franchise dealers, expires annually on December 31
- Who Needs It: All dealers who seek to buy, sell, manufacture, repair, or exchange motor vehicles either directly or indirectly
- 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 Florida: The Florida Highway Safety and Motor Vehicles (FLHSMV), Bureau of Dealer Services
Florida Statutes 320.27 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the FLHSMV. The Florida 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 $25,000 motor vehicle dealer surety bond to be eligible for licensure.
What is the Purpose of the Florida Auto Dealer Bond?
Florida 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 Florida. 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 Florida Auto Dealer Bond?
BondExchange makes obtaining a Florida 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? Enroll 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 ensures 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 Florida Auto Dealer Bond Cost?
The $25,000 Florida Motor Vehicle Dealer surety bond can cost anywhere between $188 to $2,250 per year. 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 $25,000 bond requirement.
$25,000 Florida Auto Dealer Bond Cost
|Credit Score*||Bond Cost (1 year)|
|680 – 698||$220|
|650 – 679||$250|
|630 – 649||$500|
|625 – 629||$750|
|575 – 624||$1,000|
|550 – 574||$1,875|
|500 – 549||$2,250|
*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 Florida Define “Motor Vehicle Dealer”?
Florida Statutes 320.27 defines a motor vehicle dealer as “any person engaged in the business of buying, selling, or dealing in motor vehicles or offering or displaying motor vehicles for sale at wholesale or retail, or who may service and repair” 3 or more motor vehicles in a 12 month consecutive period.
How Do Dealers Apply for a Motor Vehicle Dealer License in Florida?
Dealers in Florida must navigate several steps to secure their motor vehicle dealer license. Below are the general guidelines, but dealers should refer to the FLHSMV dealer page for details on the process.
License Period – The Florida dealer license period is valid for either one or two years depending on the dealer’s preference and must be renewed prior to the expiration date for dealers to continue operations. Dealers simply need to check either the one or two year period on their application. Franchise dealer licenses expire on December 31st, while used dealer licenses expire on April 30th.
Step 1 – Determine the License Type
Florida 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 Florida Dealer License.
- Franchised Dealer – Sells new or used motor vehicles
- Service Facility – Location for the sole purpose of servicing motor vehicles. No vehicle sales allowed on premise
- Independent Dealer – Sells used motor vehicles only
- Wholesale Dealer – Deals in motor vehicles wholesale only
- Auction Dealer – Auctions motor vehicles wholesale
- Salvage Dealer – Deals in salvaged/wrecked motor vehicles
- Mobile Home Dealer – Sells mobile homes
- Mobile Home Broker – Acts as an intermediary between the buyer and seller for used mobile homes
- RV Dealer – Sells new or used recreational vehicles
- Used RV Dealer – Sells used recreational vehicles only
Step 2 – Establish a Location
Dealers are required to establish a permanent place of business that meets the following minimum requirements:
- Be in an enclosed building with at least 100 square feet of interior office space, 7 foot ceilings, and separate from other businesses
- Have a display lot large enough to showcase all vehicles offered for sale that is separate from customer and employee parking and is accessible from a public street
- Be open during regular business hours and have the hours of operation posted in a clearly visible location
- Store all required records and documents
- Have a business phone number
Step 3 – Erect a Sign
Dealers must place a permanent sign on their business location that displays the business name and is visible from at least 50 yards away from the nearest public street.
Step 4 – Pass Inspection
Dealers must pass inspection by a Division of Motorist Services Compliance Examiner ensuring their business location meets the minimum requirements outlined in Step 2. Dealers can contact their local examiner here.
Step 5 – Complete the Dealer Training Course
All applicants must complete a dealer education course prior to submitting their application. Dealers can find and contact approved dealer training schools here.
Step 6 – Obtain Insurance
Dealers are required to submit a copy of their garage liability insurance signed by the insurance agent for the state mandated comprehensive liability insurance as part of their application. The insurance amounts differ for each dealer type, and applicants should consult page 10 on the Application Form to determine their required limits.
***Salvage and Mobile Home Dealers are exempt from the garage liability insurance requirements***
Step 7 – Purchase a Surety Bond
Dealers must purchase and maintain a $25,000 motor vehicle dealer surety bond.
Step 8 – Complete the Application
All new dealer regulatory certificate applications and dealer regulatory certificate renewal applications should be mailed to the dealer’s local FLHSMV regional office which can be found here.
- 8.a Business Type – Dealers operating as a corporation must submit their Articles of Incorporation, registration with the Florida Secretary of State and the minutes of the meeting when the corporate officers were elected. Partnerships must provide their Partnership Agreement, and LLCs might provide both their Article of Organization and Operating Agreement.
- 8.b Fingerprints and Background Check – Dealers must submit proof of electronic fingerprints for all principles on the application. Dealers can find registered live scan service providers here.
- 8.c FEIN – Dealers must submit their Federal Employer Identification Number to the FLHSMV. Dealers can obtain an FEIN here. Sole Proprietors with no employees and Partnerships must only submit proof of identification such as their drivers license or passport.
- 8.d Sales Tax – Dealers must have a sales tax number from the Florida Department of Revenue which can be obtained here.
Step 9 – Pay Fees
The following fees must are associated with obtaining the dealer license:
- $300 application fee for independent, wholesale, auction, salvage or franchise dealers
- $340 application fee for all mobile home and RV dealers
- $50 fee for additional license locations
How Does a Florida Motor Vehicle Dealer Renew Their License?
The dealer license is valid for either one or two years depending on the dealer’s preference. All dealer renewal applications should be mailed to the dealer’s local FLHSMV regional office which can be found here. The following fees are associated with renewing the dealer license:
- $75 renewal fee for independent, wholesale, auction, salvage or franchise dealers
- $140 renewal fee for all mobile home and RV dealers
- $50 fee for additional license locations
***Fees listed are for one year license periods. For two year license periods, double the fee amount***
What Are the Insurance Requirements for the Florida Dealer License?
The State of Florida requires dealers to maintain garage liability insurance on all vehicles with dealer plates with limits dependent upon the license type. Dealers must file a $25,000 motor vehicle dealer bond. Readers can check out our in depth article on the insurance requirements for used Florida dealers here.
How Do Florida Auto Dealers File Their Bond?
The $25,000 surety bond all requires signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:
- Legal name and location of entity/individual(s) buying the bond
- Bond amount
- Surety company’s name, address, phone number and signature
- Surety agent’s name, address, phone number and signature
- Date on which the bond will be executed and date it will expire
- Date the bond is signed
Dealers should mail the completed bond form, including the power of attorney, to their local FLHSMV regional office which can be found here.
How Can Florida Auto Dealers Avoid Bond Claims?
To avoid claims on the Florida 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
- Do not engage in any illegal selling practices
- Pay the license application fees
What Other Insurance Products Can Agents Offer Dealers in Florida?
Florida 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 keepers 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 Florida Auto Dealer Customers?
Florida conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed on the FLHSMV site here. Contact BondExchange for additional marketing resources. 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.