California Motor Vehicle / Auto Dealer Bond Cost

While $50,000, or even $10,000 might seem like a large amount to pay, in reality, you only need to pay a percentage of it to get bonded, which is called the bond annual premium. The surety company will look at several factors to determine your motor vehicle dealer bond cost, most importantly, your credit score. Factors such as years licensed and years of industry experience will also play a factor in your dealer bond cost.

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• If your credit score is above 650, you’ll likely have to pay between .75% and 2% of the bond amount.

• For applicants with credit scores between 600 and 649, the rates range between 2.5% and 4%.

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Who is required to be licensed?

In California, anyone engaging in the sale, lease, manufacture, dismantling, or transportation of vehicles for commercial purposes must obtain a DMV Occupational License. The OL 100 form is the first step in this process.

You are required to be licensed if you are operating as any of the following:

• New or Used Vehicle Dealer – Selling or leasing new or pre-owned vehicles to the public

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• Wholesale Dealer – Selling vehicles to other licensed dealers, not the general public.

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• Auto Broker – Arranging vehicle sales between buyers and dealers.

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• Dismantler – Dismantling or scrapping vehicles for parts or recycling.

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• Manufacturer or Distributor – Building or distributing new vehicles for retail or commercial sale.

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• Lessor/Retail Lessor – Leasing vehicles under contract terms.

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• Transporter – Moving vehicles from one location to another for business purposes.

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• Registration Service – Assisting customers with DMV registration, title transfers, or related paperwork.

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• Driving School Operator – Running a commercial driving instruction business.

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• Traffic Violator School Operator – Operating a school for court-ordered driving courses.

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If you’re conducting business in any of these categories—even online or from a home office—you must be licensed by the California DMV. Failing to do so may result in fines, legal penalties, or business shutdown.

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Bond types

• $50,000 - Auto Dealer Surety Bond -  Who needs it? New and used motor vehicle dealers. This bond protects customers from fraud or misrepresentation by the dealer.

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• $10,000 - Motorcycle or Wholesale Auto Dealer Surety Bond - Who needs it? Motorcycle-only or wholesale-only dealers. This bond protects customers from fraud or misrepresentation by the dealer.

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• $25,000 - Registration Service Bond - Who needs it? Businesses that handle DMV paperwork, registration, and title services on behalf of customers. This bond protects the public from errors, omissions, or fraudulent practices in registration services.

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What are the insurance recommendations?

It is recommended that all motor vehicle dealers in the state of California obtain liability insurance coverage. Some examples include:

• Garage Liability Policy with a minimum of $35,000 Premises and Auto Liability Coverage

• Dealer Inventory Physical Damage Coverage

• Uninsured and Underinsured Motorist Coverage

• Garage Keepers Coverage - (if you do repairs, or paint & body work)

• Property Coverage for any buildings or tools

• Medical Payments of $1,000, $2,000, or $5,000

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How to become a motor vehicle dealer in California?

Starting your own car dealership in California? Whether you're selling new or used vehicles, you'll need to follow a specific licensing process with the California DMV. Here's a step-by-step guide on how to become a licensed motor vehicle dealer in California.

✅ Step 1: Complete a DMV-Approved Dealer Education Program

If you're applying for a used car dealer license, California requires you to complete a 6-hour Pre-Licensing Education Course from a DMV-certified provider.

✅ Step 2: Pass the DMV Dealer License Exam

After completing your education course, you must pass a written exam administered by the DMV Occupational Licensing Division.

✅ Step 3: Choose Your Business Type and Name

Decide whether you’ll operate as a sole proprietor, LLC, corporation, or partnership. Register your business name (DBA) with your county or the California Secretary of State.

✅ Step 4: Secure a Business Location

You must have a physical location that meets the DMV’s requirements:

• Permanent structure with office space

• Display area for vehicles (for retail dealers)

• Zoning compliance approval

✅ Step 5: Obtain a Surety Bond (Dealer Bond)

Most dealers are required to post a $50,000 or $10,000 surety bond. This protects consumers and ensures your business follows DMV regulations.

✅ Step 6: Get Fingerprinted and Complete a Background Check

All applicants must submit Live Scan fingerprints to pass a criminal background check.

✅ Step 7: Complete and Submit Required Forms

Key forms include:

• OL 100 – Application for Original Occupational License

• OL 29 – Personal History Questionnaire

• OL 25 – Surety Bond

• OL 55 – Dealer Education Certificate

• Other supporting documents like your lease agreement, photos of the location, and zoning approval.

✅ Step 8: Schedule a DMV Inspection

Once your paperwork is approved, a DMV inspector will visit your location to ensure it meets all legal requirements.

✅ Step 9: Receive Your California Motor Vehicle Dealer License

Upon approval, you'll receive your Dealer License, enabling you to buy and sell vehicles legally in California.

🛠️ Need Help Starting Your Dealership?

We can help you with:

• Surety bonds & garage liability insurance

📞 Talk to an expert today — Get licensed faster and easier!