Tennessee Auto Dealer Bond

A Tennessee auto dealer bond, formally called a Motor Vehicle Dealer Bond (state form IN-1316), is a corporate surety bond required by the Tennessee Motor Vehicle Commission before your dealership license can be issued.

The state requires a $50,000 corporate surety bond for motor vehicle and recreational vehicle dealer applicants. The requirement is set by Tenn. Code Ann. § 55-17-111(g) for motor vehicle dealers and § 55-17-405(g) for recreational vehicle dealers. The bond must match the exact legal business name and address on your license application, include a Power of Attorney letter, and be issued for two consecutive years.

It is a financial guarantee that your dealership will handle customer title, registration, fee, and tax obligations properly. If a valid claim is paid out, you are responsible for reimbursing the surety company.

Unlike insurance, which protects you, a surety bond primarily protects customers and the state.

Every surety bond is a contract between 3 parties:

• The Obligee: Tennessee Motor Vehicle Commission The state authority that requires the bond as a condition of licensing. They set the bond amount and terms. Under the bond form, an obligee also includes any person who suffers a loss covered by the bond.
• 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 Tennessee. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond With the Tennessee Motor Vehicle Commission 

Submit the original signed Dealer Bond Form as part of your dealer license application. The bond must match the exact legal business name and address on your license application and include the surety’s Power of Attorney.

Filing address:

Tennessee Motor Vehicle Commission
 500 James Robertson Parkway
 Nashville, TN 37243-0565

The Tennessee Motor Vehicle Commission requires a bond before issuing a motor vehicle or recreational vehicle dealer license. Anyone who sells, or offers to sell, more than five motor vehicles in one year in Tennessee is required to be licensed as a Motor Vehicle Dealer. This includes cars, RVs, and motorcycles, new or used.

• Motor vehicle dealers - New and used vehicle dealers, including franchise dealers. A $50,000 bond is required.
• Recreational vehicle dealers - RV dealers are bonded under a parallel requirement in Tenn. Code Ann. § 55-17-405(g), also for $50,000. 
• Motorcycle dealers - Dealers selling motorcycles are covered under the Tennessee motor vehicle dealer licensing process.
• Motor vehicle auctions - Licensed motor vehicle auctions must provide a separate $50,000 surety bond on the form provided by the Commission. Motor vehicle auctions licensed by the Commission operate on a wholesale basis between licensed dealers. Public automobile auctions are licensed through the Tennessee Auctioneers Commission instead.
• Dealerships with sales staff - A Tennessee dealership must employ at least one licensed motor vehicle salesperson. Salespeople apply through their own CORE account, and there is no separate bond requirement for a salesperson license.

Each separate place of business requires its own license, and each licensed location or branch requires its own $50,000 bond matching that location's name and address.

The bond protects consumers and the state from financial loss caused by specific dealer failures. Under Tenn. Code Ann. § 55-17-111(g)(2) and the state bond form, the bond covers losses caused when the dealer fails to:

• Pay a retail customer’s prepaid title, registration, or other related fees or taxes
• Deliver a valid vehicle title certificate free and clear of prior owner interests and liens, except for a lien created by or expressly assumed in writing by the buyer
• Any other breach of the Tennessee Motor Vehicle Dealer Law

The maximum aggregate payout to all claimants is the bond's penal sum of $50,000. After any payout, you, as the principal, are liable to reimburse the surety. No suit may be brought to enforce liability on the bond more than two years after the event that gave rise to the claim.

How the Claims Process Works?

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

Tennessee motor vehicle/recreational dealer licenses must be renewed before the expiration date listed on the license. The renewal application, required documents, and fee must be submitted before the license expires.

For renewal, Tennessee requires a two-year bond that begins and ends on the license expiration date. For example, if your license expires at the end of October 2026, the renewed bond should run from 10/31/2026 to 10/31/2028.

Lance Surety will contact you before your renewal date to help prevent a lapse in coverage. If a renewal is late, Tennessee may assess a late fee, and sales activity during an unrenewed period can lead to fines and penalties.

At renewal, the surety company may review your credit and claims history. Keeping a clean claims record and strong credit profile can help keep your premium costs low.

Getting a Tennessee auto dealer license is a detailed process. The Tennessee Motor Vehicle Commission outlines the licensing requirements for motor vehicle and recreational vehicle dealers on its official dealer licensing page.

Common requirements include:

• An established place of business with a permanent facility, restroom, display lot, and customer parking
• A $50,000 corporate surety bond that matches the business name and address
• Zoning approval, business tax license, and Sales & Use Tax Certificate
• A compiled financial statement showing at least $10,000 in net worth
• Garage liability insurance with at least $300,000 per occurrence
• A service agreement if there is no mechanical repair facility on site
• Entity documents, franchise documents if applicable, signage photos, and any required conviction records
• At least one licensed motor vehicle salesperson associated with the dealership

For more information on how to get the license, check our guide: Tennessee dealer license guide

How long does it take to get a Tennessee 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, and a paper copy can be mailed if needed. Tennessee requires the original signed bond form with the license application, so make sure you have the correct filing copy before submitting your dealer paperwork.

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

The bond amount is the maximum protection available to claimants. In Tennessee, the required motor vehicle dealer bond amount is $50,000. This is not what you pay. The bond premium is the cost you pay to purchase the bond, usually a percentage of the bond amount.

What happens if my bond lapses?

If your bond lapses, your dealership is no longer meeting Tennessee's licensing requirements. Once the Commission receives notice of cancellation, you must either cease business operations until you provide proof of minimum coverage, or provide evidence of coverage from another provider. Renewal documents must be submitted before the license expiration date, and sales activity during an unlicensed period may be subject to fines and penalties.

Can my bond be cancelled?

Yes, a Tennessee dealer bond can be cancelled by the surety. The bond form requires the surety to send written notice by certified mail to both the principal and the Executive Director of the Tennessee Motor Vehicle Commission at least 60 days before the termination takes effect. Cancellation does not release the surety from liability for acts or omissions that occurred before the effective termination date.

Do I need a bond for every salesperson I employ?

No. Tennessee salespeople need their own salesperson license, but there is no bond requirement attached to it. The dealer bond is tied to the dealership license, and a dealership must have at least one licensed motor vehicle salesperson employed at the business.

Do I need a separate bond for each dealership location?

Yes. A separate license is required for each separate place of business, and each licensed location or branch needs its own $50,000 bond matching that location's licensed business name and address.