North Carolina Auto Dealer Bond

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North Carolina Auto Dealer Bond: A Comprehensive Guide

This guide provides information for insurance agents to help new and pre-owned car dealership owners on North Carolina Auto Dealer bonds.

At a Glance:

  • Lowest Cost: $250 per year or $25 per month
  • Bond Amount: $50,000 for one location, $25,000 for each additional location
  • Who Needs It: All individuals seeking to sell, advertise, lease, or arrange the sale of at least 5 motor vehicles in a 12-month consecutive period
  • 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 North Carolina: North Carolina Department of Transportation, Division of Motor Vehicles, License and Theft Bureau, is in charge of licensure and regulation of motor vehicle dealers
North Carolina Auto Dealer Bond Form
North Carolina Auto Dealer Bond Form


North Carolina General Statutes Chapter 20 Articles 12 and 15 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DMV, License and Theft Bureau. The North Carolina 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 North Carolina motor vehicle dealer surety bond, with an additional $25,000 surety bond for each subsequent place of business (more on this topic below).

What is the Purpose of the North Carolina Auto Dealer Bond?

North Carolina requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the 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 North Carolina. In short, the bond is a type of insurance that protects the public if the dealer breaks the licensing laws.

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

BondExchange makes obtaining a North Carolina 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, 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 North Carolina Auto Dealer Bond Cost?

The $50,000 North Carolina Motor Vehicle Dealer surety bond can cost anywhere between $250 and $3,500 per year or $25 to $400 per month. The $25,000 bond for a secondary location can cost anywhere from $125 to $1,750 per year or $12.50 to $175 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We offer the financing option “in-house”, so your customer doesn’t have to deal with pesky 3rd party financing with high-interest rates and lengthy paperwork! The chart below offers a quick reference for the approximate bond cost on the $50,000 bond requirement.

Credit Score* Bond Cost (1 Year) Bond Cost (1 month)
635+ $250 $25
625 – 634 $750 $75
600 – 624 $1,000 $100
550 – 599 $2,500 $250
500 – 549 $3,500 $350

*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 North Carolina Define “Motor Vehicle Dealer”?

North Carolina G.S. 20-286 (11) defines a motor vehicle dealer as anyone who:

  • Buys, sells, or exchanges five or more vehicles in a 12 month period
  • Negotiates, arranges, or solicits the sale of five or more vehicles in a 12 month period
  • Displays or permits the display of five or more vehicles in a 12 month period
  • Leases or sells five or more vehicles to retail dealers in a 12 month period

North Carolina Auto Dealer Bond

BondExhange 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 North Carolina?

The process for applying for a motor vehicle dealer license in North Carolina is pretty complex. Below are the general guidelines, but dealers should refer to the Motor Vehicle Dealer and Manufacturer Regulation Manual for details on the process.

License Period – The dealer license period is valid for one year from the date of issuance, and must be renewed prior to the expiration date for dealers to continue operations.

Step 1 – Buy/Lease an Established Salesroom (retail dealers) or Established Office (wholesalers only)

Before dealers can obtain their dealer license they must first buy or lease a permanent business location, known as an established salesroom for retailers or an established office for wholesalers. The location must meet the following requirements:

    • Established Office Requirements
      • Contain at least 96 square feet of floor space
      • Location where the dealer safely keeps books, records, and files
    • Established Salesroom Requirements
      • Contain at least 96 square feet of floor space separate from any other businesses/residences
      • Location where the dealer safely keeps books, records, and files
      • The permanent place in which all business is conducted
      • Maintain reasonable hours of operation
      • Display a sign of the business name in block letters at least three inches high in colors that contrast with the signs background
      • Follow all relevant zoning regulations

Step 2 – Schedule an Inspection

Both an established office and salesroom must pass inspection from the License and Theft Bureau to be considered an established salesroom or established office.

Step 3 – Complete the Application

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

North Carolina Department of Transportation
Division of Motor Vehicles
3129 Mail Service Center
Raleigh, NC 27699

For more information about what is required on the application, view this form. To complete the application dealers must complete the following steps:

    • 3.a Corporate Charter – Corporations are required to obtain the 1st page of their corporate charter and mail this page as part of the dealer application
    • 3.b Comprehensive Liability Insurance – Dealers are required to submit their policy number for the state-mandated comprehensive liability insurance as part of their application
    • 3.c Assumed Name – Dealers who seek to operate under any name other than what is listed on the Dealer License Application must provide evidence that they filed an assumed name with the Register of Deeds in the county in which the business is located
    • 3.d Dealer Education Course – All dealers seeking to sell used vehicles must provide proof of completion of a state-approved dealer education course. The course must be completed in the 12 months leading up to the application and takes 12 hours to complete. The course takes 6 hours to complete for dealers seeking to renew their license

Step 4 – Pay Fees

There is a $90 application fee associated with obtaining the Dealer License. Dealer license plates fees are $35 for the first 5 plates and $36 for each additional plate

Step 5 – Obtain a Local Business/Privilege License

Many North Carolina municipalities require a privilege or business license for businesses operating in their jurisdiction. Contact the city or county government where the dealership will be located to obtain the license.

How Does a Motor Vehicle Dealer Renew Their License?

The Motor Vehicle Dealer License is valid for one year and must be renewed annually. To renew their license, dealers must complete a 6-hour dealer registration course. Dealers should keep the documentation required for the initial application on hand to assist with the renewal process.

What Are the Insurance Requirements for the Dealer License?

The State of North Carolina requires all auto dealers to maintain comprehensive liability insurance on all vehicles with dealer plates to remain in compliance with licensing regulations. Dealers must also file a $50,000 motor vehicle dealer bond and an additional $25,000 surety bond for each branch location.

How Does the Dealer File Their Bond With the License and Theft Bureau?

The $50,000 surety bond, and each subsequent $25,000 bond, require signatures from both the surety company that issues the bond and the auto dealer. The bond form will require the following items:

  • Legal name of entity/individual(s) buying the bond
  • Physical address where the business will operate
  • Surety company’s name, address and signature
  • Date on which the bond will be executed

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

North Carolina Department of Transportation
Division of Motor Vehicles
3129 Mail Service Center
Raleigh, NC 27699

What Can Dealers Do to Avoid Claims Against the North Carolina Auto Dealer Bond?

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 sell any vehicle with a faulty or altered odometer
  • Only display vehicles for sale at an established salesroom
  • 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
  • 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
  • Register for and renew the dealer license annually
  • Adhere to the dealer license plate regulations approved by the state
  • Pay the license application fees

What Other Insurance Products Can Agents Offer Dealers in North Carolina?

North Carolina 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 North Carolina Auto Dealer Customers?

North Carolina unfortunately does not display motor vehicle dealer information to the public. We suggest contacting a list service company or the North Carolina 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.

North Carolina Auto Dealer Bond