Rhode Island Auto Dealer Bond

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Rhode Island Auto Dealer Bond: A Comprehensive Guide

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

At a Glance:

  • Lowest Cost: $200 per year or $20 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 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 Rhode Island: The Rhode Island Department of Revenue, Division of Motor Vehicles (DMV)
Rhode Island auto dealer bond form
Rhode Island Motor Vehicle Dealer Bond Form


Rhode Island Statutes 31-5 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DMV. The Rhode Island 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 motor vehicle dealer surety bond to be eligible for licensure.

What is the Purpose of the Rhode Island Auto Dealer Bond?

Rhode Island 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 Rhode Island. 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 Rhode Island Auto Dealer Bond?

BondExchange makes obtaining a Rhode Island 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.

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How Much Does the Rhode Island Auto Dealer Bond Cost?

The $50,000 Rhode Island Motor Vehicle Dealer surety bond can cost anywhere between $200 to $4,500 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 $50,000 bond requirement.

$50,000 Rhode Island Auto Dealer Bond Cost

Credit Score* Bond Cost (1 year) Bond Cost (1 month)
749+ $200 $20
699 – 748 $250 $25
660 – 698 $350 $35
649 – 659 $500 $50
629 – 648 $600 $60
619 – 628 $1,000 $100
600 – 618 $1,500 $150
580 – 599 $2,000 $200
570 – 579 $3,500 $350
550 – 569 $4,000 $400
500 – 549 $4,500 $450

*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 Rhode Island Define “Motor Vehicle Dealer”?

To paraphrase Rhode Island Statutes 31-5, a Rhode Island vehicle dealer is any person or business who sells, repairs, distributes, or manufactures 4 or more motor vehicles in a 12 month consecutive period either directly or indirectly.

Rhode Island 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 Rhode Island?

Dealers in Rhode Island must navigate several steps to secure their motor vehicle dealer license. Below are the general guidelines, but dealers should refer to the DMV’s Licensing and Registration Packet for details on the process.

License Period – The Rhode Island dealer license is valid for three years from the date of issuance and must be renewed before the expiration date. However, a renewal application must be submitted yearly by December 31 (More on this topic later in the article).

Step 1 – Determine the License Type

Rhode Island 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 Rhode Island Dealer Licenses.

    • New and Used Dealer – Sells both new and used motor vehicles
    • New Dealer – Sells only new motor vehicles
    • Used Dealer – Sells only used vehicles

Step 2 – Establish a Location

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

    • Be an enclosed building at least 2,400 square feet (1,200 for motorcycle only dealers)
    • Dealers with a body shop must have an enclosed building of at least 4,800 square feet
    • Have a display lot that is at least 2,400 square feet
    • Must be used exclusively for the sale, display, or repair of motor vehicles
    • Have a working business telephone

Step 3 – Erect a Sign

All dealers must have either a permanent sign or window lettering containing the name of the business as listed on the dealer license. The sign/lettering must be 24 square feet (23 in some counties, dealers can check the requirements with their local zoning official).

Step 4 – Obtain Zoning Approval

Dealers must obtain written approval from their local zoning official that their business location is in compliance with all zoning regulations.

Step 5 – Purchase a Surety Bond

Dealers must purchase and maintain a $50,000 motor vehicle dealer bond. The bond must be issued by a surety company authorized to do business in Rhode Island and must expire on December 31st of each year.

Step 6 – Obtain a Line of Credit

All dealers must submit a financial statement prepared by a certified public accountant and receive an approved line of credit for $50,000 in the dealership’s name.

Step 7 – Complete a Background Check

Dealers are required to submit a Bureau of Criminal Identification (BCI) background check as part of their dealer application. Dealers can obtain a BCI background check here.

Step 8 – Complete the Application

All new dealer regulatory license applications should be mailed to:

Division of Motor Vehicles
Dealers’ License and Regulation Office
600 New London Avenue
Cranston, RI 02920-3024

The Dealer Application can be found here.

    • 8.a Lease/Ownership – Dealers must submit a signed copy of their lease for a minimum one year term or proof of ownership of their business location
    • 8.b Pictures – Dealers must submit a total of 4 pictures of the outside of their business location covering all angles. Dealers must also submit a picture of their
    • 8.c Business Type – Corporations must submit their articles of incorporation, minutes of the meeting where corporate officers were elected, and a letter of good standing with the Rhode Island Secretary of State. LLCs must submit their operating agreement
    • 8.d Franchise Agreement – New vehicle dealers must submit submit a letter of intent from a licensed manufacturer/distributor authorizing them to sell each type of new motor vehicle

***The remaining steps must be completed within 30 of being granted a dealer license.***

Step 9 – Acquire Dealer Plates

After the dealer has been approved for licensure they can request dealer plates from the Licensing Aide by calling (401) 462-5732. Dealers are issued three initial dealer plates, and can request more plates depending on their sales volume. Dealers can request 3 additional plates for every 100 sales a year.

Step 10 – Obtain a Sales Tax Permit

Dealers are required to obtain a sales tax permit. To obtain a sales tax permit, dealers can call the Rhode Island Division of Taxation at (401) 574-8869.

Step 11 – Pay Fees

Dealers must mail a $302.50 check, made payable to “Dealers’ License & Regulation Office”, and a blank Bill of Sale form to:

Division of Motor Vehicles
Dealers’ License and Regulation Office
600 New London Avenue
Cranston, RI 02920-3024

Step 12 – Purchase Insurance

Dealers must obtain dealer plate insurance coverage on all motor vehicles with dealer plates. The dealer will be informed of the required amounts after their license is issued. The Certificate of Insurance can be mailed to the following address:

Financial Responsibility Office
600 New London Ave
Cranston, RI 02920

Step 13 – Meet with Licensing Aide

After all the required fees and documents have been submitted. A licensing aide will contact the dealer to finalize the dealer license.

How Does a Rhode Island Motor Vehicle Dealer Renew Their License?

The Rhode Island dealer license is technically valid for three years, but dealers are still required to submit a renewal packet and pay a $302.50 fee every year before December 31. Dealers will be mailed a renewal packet two months before the expiration date. Dealers should complete the renewal packet and mail all required forms and fees to the address listed on the application. The $50,000 auto dealer bond must also be renewed each year and the original bond should be included with the renewal packet.

What Are the Insurance Requirements for the Rhode Island Auto Dealer License?

The State of Rhode Island requires dealers to maintain dealer plate insurance on all vehicles with dealer plates with limits determined after the dealer license has been approved. Dealers must also file a $50,000 motor vehicle dealer bond.

How Do Rhode Island Auto Dealers File Their Bond?

The $50,000 surety bond 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
  • Date on which the bond will be executed
  • Date the bond will expire (must be December 31st)

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

Division of Motor Vehicles
Dealers’ License and Regulation Office
600 New London Avenue
Cranston, RI 02920-3024

How Can Rhode Island 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
  • Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Rhode Island?

Rhode Island requires dealers to obtain dealer plate 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 Rhode Island Auto Dealer Customers?

Rhode Island conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed on the DMV 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.

Rhode Island Auto Dealer Bond