Florida Motor Vehicle Dealer Bond

A Florida motor vehicle dealer bond is a type of surety bond required by the Florida Department of Highway Safety and Motor Vehicles for anyone selling motor vehicles in Florida. This bond creates a three party agreement between you (the dealer), your customers, and a surety company.

The bond protects Florida consumers in wholesale and retail transactions from financial loss if you violate the conditions of written contracts, fail to comply with Florida Statutes Chapters 319 and 320, or engage in fraudulent practices. If someone suffers a monetary loss due to your actions as a dealer, they can file a claim against your bond for compensation.

Florida requires all motor vehicle dealers to obtain a $25,000 surety bond, regardless of dealer type. You pay only a small percentage of this amount as your annual premium, typically ranging from 1% to 10% depending on your credit profile.

Applicants with excellent credit scores (700 or above) receive the best rates, typically between 1% and 3% of the bond amount. Those with good credit (650 to 699) can expect rates between 3% and 5%. Even if your credit score is below 599, you can still get bonded, though your rate will be between 5% and 10% of the bond amount.

With excellent credit (750 or higher), many dealers pay as little as $188 annually for their Florida motor vehicle dealer bond.

Getting your Florida motor vehicle dealer bond is a straightforward process that takes just a few steps:

Step 1: Complete Your Application

Start by filling out a bond application with a licensed surety company. You will need to provide basic information about your dealership, including your business structure, ownership details, and financial information. The surety company will also run a credit check as part of the underwriting process.

Step 2: Receive Your Quote

Once the surety company reviews your application, they will provide you with a quote for your bond premium. This quote will be based on your credit score, business experience, and financial strength. Most applicants receive their quote within one business day, and many receive instant quotes.

Step 3: Purchase Your Bond

After you accept the quote and pay your premium, the surety company will issue your bond. You will receive the original bond document on Form HSMV 86020, which you must then file with the Florida Department of Highway Safety and Motor Vehicles.

Step 4: File Your Bond with Florida

Mail your completed bond form to your local Florida Highway Safety and Motor Vehicles regional office. You can find your regional office location on the FLHSMV website. The bond must be filed as part of your dealer license application to meet the bonding requirement.

Florida law requires anyone engaged in buying, selling, or dealing in motor vehicles to obtain a dealer license and file a surety bond. Specifically, you need a Florida motor vehicle dealer bond if you are:

• Independent Dealer (VI): Selling used vehicles directly to consumers
• Franchised Dealer (VF): Selling new vehicles under a manufacturer franchise agreement
• Wholesale Dealer (VW): Selling vehicles exclusively to other licensed dealers
• Auction Dealer (VA): Operating a motor vehicle auction

Three Vehicle Threshold

Florida law presumes you are engaged in the dealer business if you buy, sell, or deal in three or more motor vehicles within a 12 month period. Even if you only sell a few vehicles, you must obtain a dealer license and bond.

Uniform Bond Amount

Unlike some states that vary bond amounts by dealer type, Florida requires the same $25,000 bond for all dealer classifications. Whether you sell new cars, used cars, or operate an auction, your bond amount is $25,000.

Prelicensing Training

All first-time dealer license applicants must complete a prelicensing training course through an FLHSMV-approved school within six months before submitting their application. This training requirement is in addition to the bond requirement and covers Florida dealer laws, regulations, and best practices.

When someone believes they have suffered a financial loss due to your actions as a dealer, they can file a claim against your bond. The claim process works as follows:

Investigation Phase

After receiving a claim, the surety company conducts a thorough investigation to determine if the claim is valid. They review all documentation, interview involved parties, and verify that the alleged violation falls within the bond's coverage. Valid claims involve violations of written contracts, failure to comply with Chapters 319 or 320 of Florida Statutes, or fraudulent conduct.

Payment Phase

If the claim is validated, the surety company will pay the claimant up to the full amount of your bond ($25,000 maximum). The aggregate liability for all claims in one year cannot exceed the bond amount, even if multiple people file claims.

Reimbursement Phase

Here is an important aspect of surety bonds: you are ultimately responsible for any claims paid. The surety company pays the claimant on your behalf, but you must reimburse the surety company for the full amount of the claim, plus any investigation costs and legal fees.

Continuing Coverage

Florida motor vehicle dealer bonds are continuous, meaning they remain in effect from year to year. However, the surety company can terminate coverage by providing 30 days written notice to the Florida Department of Highway Safety and Motor Vehicles. If you do not have a replacement bond in place when the termination becomes effective, your dealer license will be suspended.

Florida motor vehicle dealer licenses expire annually on different dates depending on your dealer type:

• Independent Dealers (VI): Expire April 30
• Franchised Dealers (VF): Expire December 31
• Wholesale Dealers (VW): Expire April 30
• Auction Dealers (VA): Expire April 30

Your bond must be renewed before your license expiration date. Your surety company will contact you before your renewal is due to begin the process. Because bond premiums can change based on your credit and financial situation, your renewal rate may be different from your initial rate.

If your credit score has improved or your business has grown stronger financially, you may qualify for a lower renewal rate. Conversely, if your credit has declined or you have had claims against your bond, your renewal rate may increase.

To avoid any gap in coverage that could result in license suspension, start your renewal process at least 30 days before your current bond or license expires. Most surety companies can process renewals quickly, often within a few days.

Beyond the surety bond, you'll need:

• Established place of business in Florida that meets local zoning requirements. Independent dealers need adequate vehicle display space, an enclosed office, and proper signage.
• Garage liability insurance with minimum coverage of $25,000 combined single limit (bodily injury and property damage) plus $10,000 personal injury protection (PIP). Coverage must be continuous.
• Prelicensing training through an FLHSMV-approved school within six months of applying. Franchise dealers with two years of continuous good standing are exempt.

Submit your application to the Florida Department of Highway Safety and Motor Vehicles with:

• Completed license application form
• $25,000 motor vehicle dealer bond (Form HSMV 86020)
• Certificate of garage liability insurance
• Proof of established place of business and zoning approval
• Prelicensing training certificate
• Franchise agreement (franchised dealers only)
• $300 initial application fee

The FLHSMV may conduct a location inspection before approving your license.

What is the difference between independent and franchise dealer licenses in Florida?

Independent dealers (VI) sell used vehicles and have different license expiration dates (April 30) than franchise dealers (VF), who sell new vehicles under manufacturer agreements and expire December 31. However, both require the same $25,000 bond amount and must meet similar operational requirements.

Can I use an irrevocable letter of credit instead of a surety bond?

Yes. Florida allows dealers to file an irrevocable letter of credit from a Florida authorized bank instead of a surety bond. The letter of credit must be for $25,000 and meet the same requirements as a surety bond. However, most dealers find surety bonds more practical and cost effective.

What happens if I sell vehicles at multiple locations?

Florida requires a separate license for each location where you conduct business. Each location must meet facility requirements, and you must pay additional location fees. However, a single $25,000 bond can cover your main location and additional locations, provided the bond lists all locations.

What if someone disputes a transaction but I believe I did nothing wrong?

If someone files a claim against your bond, the surety company will investigate thoroughly before paying. You will have the opportunity to present your side of the story and provide documentation showing you complied with all requirements. Not all complaints result in valid claims. Only violations of Florida law or failure to honor written contracts result in payouts.