Tennessee Auto Dealer Bond

Learn more about Tennessee auto dealer bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.

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What Are They?

Part of the process of obtaining or renewing a motor vehicle dealership license in Tennessee is purchasing a surety bond that guarantees you will do business in compliance with state law. This bond is known as an auto dealer bond or motor vehicle dealer bond. The bond is your pledge to operate lawfully and ethically, which provides a measure of protection for the state and consumers.

• Bond Penalty Amount: $50,000
• Bond Term: 2 year
• Bond Expiration Date: Varies. The bond must be issued for two consecutive years and begin in the month of expected license issuance, and expire 2 years late on the last day of the same month.

Who Needs Them?

Anyone who sells more than five vehicles within a year in the state of Tennessee must be licensed as a dealer. To become licensed, you must purchase a Tennessee dealer bond. Both used vehicle dealers and franchise vehicle dealers must be properly licensed and bonded. Note, however, that there is no wholesaler license in Tennessee.

A dealership license is good for two years, and a valid bond must be in place in order to renew a license.

How Do They Work?

The three parties in the bond contract are:

• The Tennessee Motor Vehicle Commission (the obligee)
• The owner of the dealership (the principal)
• The company underwriting and issuing the bond (the surety)

The terms and conditions of the bond set forth the rights and responsibilities of all three parties. A dealer who violates any of these terms and conditions—for example, by failing to comply with state regulations governing the sale of motor vehicles—risks having a claim filed against the bond. When a claim is filed, the surety will investigate it to make sure it is valid, and if it is, they will pay the claimant on the dealer’s behalf.

That doesn’t mean that the dealer is off the hook. Every surety bond includes a clause that indemnifies the surety and legally obligates the dealer to reimburse the surety for the amount paid to the claimant.

What Do They Cost?

The Tennessee Motor Vehicle Commission has established the required amount of any motor vehicle dealer bond as $50,000. But the premium cost paid by the dealer is only a small percentage of that amount.

You can expect to pay anywhere between 1% to 5% of the bond penalty amount if you maintain good credit. For individuals with lower credit ratings, we can still offer the most competitive premiums with financing sometimes being an option. We are currently offering TN auto dealer bonds as low as $350 per 2 years as required by the State of Tennessee.

After Purchasing Your Bond

After you receive your dealer bond from Absolute Surety, you will need to sign it and file it along with the attached power of attorney with:

Tennessee Motor Vehicle Commission

500 James Robertson Parkway

Davy Crockett Tower, 5th Floor

Nashville, TN 37243

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Let us help you get the auto bond you’ll need to obtain the license for your Tennessee auto dealership.

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