Illinois Auto Dealer Bond

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Illinois Auto Dealer Bond: A Comprehensive Guide

This guide provides information for insurance agents to help new and pre-owned car dealers on Illinois Auto Dealer bonds

At a Glance:

  • Lowest Cost:  $500 per year or $50 per month, based on the business owner’s credit
  • Bond Amount: $50,000
  • Who Needs It: All individuals and businesses that sell or deal in 5 or more motor vehicles in a calendar year
  • 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 Illinois: The Illinois Secretary of State (SOS)
Illinois auto dealer bond form
Designated Agent Bond for Illinois Vehicle Dealers Form (RT DS 47.6)


Illinois Statutes Chapter 625 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the SOS. The Illinois 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 $50,000 Designated Agent Bond for Illinois Vehicle Dealers.

What is the Purpose of the Illinois Auto Dealer Bond?

Illinois requires dealers to purchase the Designated Agent Surety Bond as part of the application process for licensure. The bond protects all purchasers, sellers, financing agencies, and government agencies from monetary loss stemming from any fraud or fraudulent representation, failure to comply with licensing law, and failure to pay required taxes and fees. In short, the bond is a type of insurance that protects the public if the dealer breaks the laws pertaining to motor vehicle dealers.

How Can an Insurance Agent Obtain an Illinois Auto Dealer Bond?

BondExchange makes obtaining an Illinois 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 Illinois Auto Dealer Bond Cost?

The $50,000 Illinois auto dealer bond costs between $500 to $2,500 for a 1-year term or $50 to $250 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.

$50,000 Illinois Auto Dealer Bond Cost

Credit Score* Bond Cost (1 year) Bond Cost (1 month)
625+ $500 $50
600 – 624 $1,250 $125
575 – 599 $1,500 $150
500 – 574 $2,500 $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 Illinois Define “Motor Vehicle Dealer”?

The Illinois Secretary of State considers any person or business entity who sells or deals in 5 or more motor vehicles a year, either directly or indirectly, to be a motor vehicle dealer.

Illinois Auto Dealer Bond

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 Dealers Apply for a Motor Vehicle Dealer License in Illinois?

The process for applying for a motor vehicle dealer license in Illinois is pretty complex, and each license type has its own specific set of requirements. Below are the general guidelines, but dealers should refer to the Illinois Dealer Handbook for details on the process.

License Period – The Illinois dealer license expires December 31 of each year regardless of the date of issuance and must be renewed before the expiration date. Dealers will receive a renewal notice in September of each year.

Step 1 – Determine the License Type

Illinois 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 Illinois Dealer License.

    • New and Used Dealer – Sells new and used motor vehicles
    • Used Only Dealer – Sells used motor vehicles only
    • Motorcycle Dealer – Sells motorcycles
    • Trailer Dealer – Sells trailers
    • Community-Based Manufactured Home Dealer – Operates 1 or more contiguous tracts of land where 5 or more manufactured homes are permanently located
    • Manufactured Home Dealer – Sells manufactured Homes
    • Salvage Dealer – Sells salvage vehicles on behalf of insurance companies
    • Buy Here Pay Here Used Dealer – Sells used motor vehicles and provides the buyer with direct financing options that are not through any third-party lenders.

Step 2 – Establish a Location

Dealers are required to establish a permanent place of business that meets the following minimum requirements:

    • Office space where all required books/records are kept and maintained
    • Telephone number registered in the business’s name and listed in the dealer’s local directory
    • Working electrical lights
    • Dealership’s name posted on the front door
    • Open a minimum of 4 consecutive hours 5 days a week and have a sign posted indicating these hours
    • Display lot with different sections for new and used motor vehicles and properly illuminated if the dealership is open after sundown
    • A permanently affixed sign that contains the name of the dealership and is visible from the nearest public road

Dealers must submit a Notice of Proper Zoning form, signed by the dealer’s local zoning official, with their application.

Step 3 – Acquire Insurance

Dealers must acquire liability insurance and submit a Certificate of Insurance with their application. The minimum required insurance limits are:

    • $100,000 per person
    • $300,000 per accident
    • $50,000 property damage

Step 4 – Purchase and File a Surety Bond

Motor vehicle dealers must purchase and file a $50,000 designated agent bond. The bond must run concurrently with the license period and expire on December 31st of each year.

Step 5 – Complete Dealer Training

All used only dealers, brokers, and wholesalers must complete 8 hours of pre-license training provided by the SOS. Dealers can email [email protected] or call (217) 785-2050 to register for a dealer training course.

Step 6 – Complete the Application

All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

Secretary of State
Vehicle Services Department
Dealer Licensing Section
501 S. Second St., Rm. 069
Springfield IL 62756

Dealers can access the application form here. The following information should be included with the application:

    • 6.a Lease – Dealers who lease their business location must submit a copy of their lease with their application
    • 6.b Franchise Agreement – New vehicle dealers must submit a copy of their franchise agreement with a manufacturer authorizing them to sell each make and model of new motor vehicles
    • 6.c Hazardous Waste Generator – Dealers with repair shops must submit proof they applied for a hazardous waste generator number with the Illinois Environmental Protection Agency
    • 6.d Background Check – Dealers must submit a receipt from a state-approved vendor indicating that a background check was performed. Dealers can contact the Illinois State Police Bureau of Identification at v(815) 740-5160 for a list of state-approved vendors.

Step 7 – Pay Fees

The following fees are associated with obtaining the Illinois dealer license:

    • $1,000 Certificate of Authority annual fee ($500 for community and non-community based manufactured home dealers)
    • $500 fee if the initial application is submitted between June 15-December 31 ($250 for community and non-community based manufactured home dealers)
    • $45 master plate fee

Step 8 – Pass Inspection

After the dealer has submitted their application and paid all required fees, a representative from the SOS will contact the dealer to set up an inspection to ensure that the dealer’s business location meets all the minimum requirements.

How Do Illinois Auto Dealers Renew Their License?

The Illinois dealer license expires December 31st of each year regardless of the date of issuance and must be renewed before the expiration date. Dealers will receive a renewal notice in September of each year and can view the renewal instructions packet for step-by-step instructions for renewing their application, as well as a guide to the number of dealer plates they are eligible for.

Dealers should mail their notarized renewal application along with a continuation certificate for their surety bond to the following address:

Secretary of State
Vehicle Services Department
Dealer Licensing Section
501 S. Second St., Rm. 069
Springfield IL 62756

What Are the Insurance Requirements for the Illinois Auto Dealer License?

The State of Illinois requires dealers to obtain liability insurance with minimum limits of 100/300/50. Dealers must also file a $50,000 designated agent bond for Illinois vehicle dealers.

How Do Illinois Auto Dealers File Their Bond?

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Secretary of State
Vehicle Services Department
Dealer Licensing Section
501 S. Second St., Rm. 069
Springfield IL 62756

The $50,000 Auto Dealer 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 the individual(s)/entity buying the bond
  • Name of the surety company
  • Year the dealer license expires
  • Date the bond is sealed
  • Witness signatures for both the principal and surety

How Can Illinois 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:

  • Disclose all required information when transferring ownership of a vehicle
  • Do not engage, or allow representatives of the business to engage, in any acts of fraud
  • Pay sellers of vehicles promptly and in full
  • Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Illinois?

Illinois requires motor vehicle dealers to obtain liability insurance. 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 Illinois Auto Dealer Customers?

Illinois, unfortunately, does not display motor vehicle dealer information to the public. We suggest contacting a list service company or the Illinois Secretary of State for a list of active motor vehicle dealers. 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.

Illinois Auto Dealer Bond