Kentucky Auto Dealer Bond

A Kentucky auto dealer bond, formally called a Motor Vehicle Dealer Bond, is a surety bond the Kentucky Motor Vehicle Commission may require before your dealership license can be issued or maintained.

Kentucky is different from many states because the bond amount is not always the same for every dealer. The Commission reviews your application and financial responsibility, then tells you whether a bond is required and what amount must be filed.

It is a financial guarantee that your dealership will operate in compliance with Kentucky law and deal honestly with customers. If you fail to do so, a harmed customer or other aggrieved party may be able to make a claim against your bond to recover losses.

Unlike insurance, which protects you, a surety bond primarily protects your customers and the state. If a valid claim is paid out, you are responsible for reimbursing the surety company.

Every surety is a contract between 3 parties:
 

• The Obligee: Kentucky Motor Vehicle Commission
  The state authority that reviews dealer applications and sets the bond requirement when one is needed.
   
• The Principal: You, the dealer
  You purchase the bond and are bound by its terms. If a valid claim is paid, you must reimburse the surety.
   
• The Surety: such as Lance Surety Bonds
  We underwrite the bond and guarantee payment to claimants up to the bond amount if you default on your obligations.

1. Submit Your Bond Application

You can apply for your bond online. Just enter some basic information about yourself and your business, and you should be able to submit your application within a matter of minutes. If you have any questions, we are more than happy to assist you.

2. Get a Quote

At Lance Surety Bonds, we want to provide you with the best premium rate possible. For most applicants with a strong credit history, a quote is ready within minutes. More complex applications may take up to 24 hours.

3. Purchase Your Bond

Once you receive your quote, you can pay the bond premium and you’re officially bonded in Kentucky. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond with the Kentucky Motor Vehicle Commission

If the Commission requires a bond, submit it as part of your Kentucky dealer license application or as otherwise instructed by the Commission.

Filing address:

Kentucky Motor Vehicle Commission
 200 Mero Street, 3rd Floor
 Frankfort, KY 40601
 Phone: (502) 573-1000

The Kentucky Motor Vehicle Commission may require a bond when it needs additional assurance of an applicant’s or licensee’s financial responsibility or compliance. The Commission sets the final amount after reviewing the application and financial information.
 

• New motor vehicle dealers - Franchise dealers selling new vehicles under a manufacturer agreement may be required to furnish a bond if the Commission determines one is needed.
• Used motor vehicle dealers - Dealers selling used vehicles to the public may be required to file a bond based on the Commission’s review.
• Wholesale and auction dealers - Wholesale dealers and motor vehicle auction dealers fall under Kentucky dealer licensing rules, and the Commission may assign a bond requirement when appropriate.
• Motorcycle, leasing, and restricted dealers - These license types may also be subject to a bond requirement depending on the application and financial review.
• Recreational camper and mobility dealers - Kentucky licensing covers these dealer types as well, and the Commission may require a bond when financial assurance is needed.
• Salespersons - Kentucky requires salespersons to be licensed, but this is separate from the dealer bond requirement. The dealer should confirm all salesperson licensing requirements with the Commission.

The bond protects consumers and other aggrieved parties from financial loss caused by dealer fraud, negligence, or violation of Kentucky motor vehicle dealer law. 

A claim can arise from issues such as:
 

• Selling a vehicle with no title, a fake title, or failing to transfer title properly
• Misrepresenting a vehicle's condition, accident history, or mileage
• Retaining customer deposits without delivering the vehicle
• Failing to record vehicle sales or pay the correct amount of sales tax
• Any other breach of Kentucky motor vehicle dealer law

The maximum payout per bond is the bond’s penal sum, which is the amount set by the Kentucky Motor Vehicle Commission. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• Consumer or claimant contacts the surety company directly to file a claim
• The surety investigates the claim to determine its validity
• If the claim is valid, the surety pays the claimant up to the bond’s penal sum
• The dealer is then required to reimburse the surety for any amounts paid out
• Claims on your record will significantly increase your bond premium at renewal

Kentucky dealer licenses expire on December 31 of the calendar year for which they are issued. If the Commission requires you to maintain a bond, the bond must stay active for your license to remain compliant.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage. Your renewal cost may change if your credit, financial condition, bond amount, or claims history changes.

Kentucky dealer bonds are commonly issued on a continuous basis, meaning the bond remains active as long as the annual premium is paid. You typically won’t need to file a new bond every year unless the Commission requires it or you change surety providers.

At renewal, the surety company will review your credit. Maintaining a strong credit profile can help keep your premium costs low.

Getting a Kentucky auto dealer license is a detailed process. The Kentucky Motor Vehicle Commission reviews dealer applications, financial information, business location details, salesperson information, and other required forms before issuing a license.

The dealer license application asks for details such as your business name, ownership, established place of business, financial statement, lot information, photographs, personal data forms, salesperson forms, and required fees. The Commission may require a bond after reviewing your financial statement.

For more information on how to get the license, check our guide: Kentucky auto dealer license.

How long does it take to get a Kentucky dealer bond?

For most applicants, bonds are issued the same day, often within minutes of completing the application. Your bond is delivered digitally by email. If the Commission requires an original or paper copy, we can mail it to you.

Is a Kentucky auto dealer bond always required?

No. Kentucky is different from many states because the Motor Vehicle Commission may decide whether a bond is required after reviewing your financial responsibility and application. If a bond is required, the Commission will tell you the required amount.

What is the difference between the bond amount and the bond premium?

The bond amount, also called the penal sum, is the maximum protection available to claimants. This is not what you pay. The bond premium is the annual cost you pay to purchase the bond, usually a percentage of the required bond amount.

What happens if my bond lapses?

If your required bond lapses, you may no longer be in compliance with Kentucky dealer licensing requirements. The Kentucky Motor Vehicle Commission can require you to reinstate the bond before your license remains valid or before a renewal is approved.

Can my bond be cancelled?

Yes, a surety bond can be cancelled by you or by the surety company. If the surety cancels the bond, notice is typically sent to the Kentucky Motor Vehicle Commission. Once the bond is cancelled, your dealer license may be affected if the bond is required for your license.

Do Kentucky salespeople need separate bonds?

Kentucky requires motor vehicle salespersons to be licensed, but the salesperson license requirement is separate from the dealer bond requirement. Dealers should confirm current salesperson licensing rules with the Kentucky Motor Vehicle Commission.

Do I need a separate bond for each dealership location?

Kentucky licenses are tied to dealership locations. If you operate more than one licensed location and the Commission requires a bond, confirm with the Commission whether each license location needs its own bond or whether a single bond can satisfy the requirement.