Delaware Auto Dealer Bond

A Delaware auto dealer bond, often called a Motor Vehicle Dealer Bond, is a surety bond connected to Delaware dealer licensing and finance requirements. The Delaware Division of Motor Vehicles licenses dealers operating in the state, while the Department of Finance/Division of Revenue and the Office of the State Bank Commissioner handle the bond rules that apply to certain dealer and sales-finance situations.

Under 30 Del. C. § 3005, a motor vehicle dealer that self-finances a vehicle sale to a retail buyer without charging interest must file a $25,000 surety bond with the Department of Finance, unless the dealer is already required to file a bond with the Banking Commissioner under Title 5. Sales finance licensees under 5 Del. C. § 2914 also file a $25,000 corporate surety bond or approved letter of credit.

The bond is a financial guarantee that your dealership or finance business will follow Delaware law and deal honestly with consumers. If a valid consumer claim is made, the bond can provide compensation up to the bond amount.

Unlike insurance, which protects you, a surety bond primarily protects consumers 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: Delaware Department of Finance / Division of Revenue
  The state authority that requires the bond as a condition of licensing or compliance. In some sales-finance cases, the obligee is the Office of the State Bank Commissioner.
   
• 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 Delaware. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond With the Proper Delaware Authority 

File your bond with the Delaware Department of Finance/Division of Revenue if your bond is required under 30 Del. C. § 3005. If you are licensed as a motor vehicle sales finance company, file the required bond or approved letter of credit with the Office of the State Bank Commissioner.

Filing address for Division of Revenue bond-related documents:

Delaware Division of Revenue

Carvel State Office Building

820 North French Street, 8th Floor

Wilmington, DE 19801

Delaware’s dealer licensing and bond rules are split between the DMV, the Department of Finance/Division of Revenue, and the Office of the State Bank Commissioner. The DMV is responsible for licensing dealers, and the Delaware Dealer Manual says no person or business may buy, sell, or deal in new or used vehicles in Delaware without a dealer license issued by the Department.
 

• Motor vehicle dealers that self-finance without charging interest - Under 30 Del. C. § 3005, these dealers must file a $25,000 surety bond with the Department of Finance unless they are already required to bond with the Banking Commissioner.
• Motor vehicle sales finance companies - Title 5 licensees must file a $25,000 corporate surety bond with the State Bank Commissioner, unless an approved irrevocable letter of credit is accepted instead.
• New and used vehicle dealers - Delaware DMV licenses dealers that buy, sell, or deal in new or used vehicles, and the dealer must also maintain a yearly dealer business license from the Department of Finance/Division of Revenue.
• Wholesale dealers - Delaware recognizes wholesale dealers, but they may sell only to another dealer or licensed auto auction and may not sell or exchange vehicles with retail buyers.
• Other dealer classifications - Delaware dealer classifications include new vehicle, used vehicle, trailer, mobile home, motorcycle, recreational vehicle, wholesaler, new truck, new equipment, and auction dealers.
• Dealers with multiple locations or finance activities - Bond and licensing requirements can vary based on location, business structure, and whether the business finances sales, so confirm your filing requirement with the Delaware DMV or Division of Revenue before submitting your application.

The bond protects consumers from financial loss, certain wrongful acts, omissions, defaults, fraud, or misrepresentations by a licensed retail seller or sales finance licensee. A claim can be filed for any of the following violations:
 

• Misrepresenting a vehicle’s title, history, condition, mileage, or branded-title status
• Failing to follow Delaware title, registration, or odometer disclosure rules
• Failing to submit required title documents after delivery
• Any wrongful act, omission, default, fraud, or misrepresentation covered by the Delaware bond statute

The maximum payout per bond is the bond's penal sum, which is $25,000 for the Delaware motor vehicle dealer and sales-finance bonds discussed here. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• A consumer claim may be submitted with a final court judgment, written settlement agreement, admission, binding arbitration decision, or another binding order from an approved dispute-resolution process
• The Delaware authority overseeing the bond may require documentation from the claimant before approving the claim
• The surety company must not pay certain claims until it receives notice from the relevant Delaware authority
• If the claim is valid, the surety pays up to the bond amount, subject to the statutory claim process
• The dealer or licensee must reimburse the surety for any amount paid, and claims on your record can increase your premium at renewal

Delaware dealer licensing is ongoing, and your bond must remain active for the full license period if your business is required to carry one.

Under Delaware law, the bond term must either be continuous or match the license period, and the bond cannot expire before the license expires. If the surety cancels an existing bond, written notice must be filed at least 30 days before the cancellation takes effect.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage. Maintaining a strong credit profile can help keep your premium costs low.

If your business changes surety companies or amends the bond, Delaware law requires an original copy of the new or amended bond to be provided to the proper state authority.

Getting a Delaware auto dealer license is a detailed process. The Delaware Division of Motor Vehicles Dealer Services page directs applicants to review the Dealership Manual and contact [email protected] for dealership applications or licensing questions.

The Delaware Dealer Manual outlines license requirements, including department approval, an application, residency requirements for certain dealership owners, fingerprinting, a yearly dealer business license from the Division of Revenue, and an established place of business.

Common Delaware dealer license requirements include:

• A completed Delaware dealer application
• A criminal history background check and fingerprinting when required
• A Delaware driver’s license and 90-day Delaware residency for dealership owners, unless exempt as a franchised or new vehicle dealer
• A yearly dealer business license from the Department of Finance/Division of Revenue
• An established business location that satisfies zoning requirements
• Sales and office space, plus display space for at least five vehicles
• A business telephone listed in the business name
• Adequate liability insurance
• A sign on the premises measuring at least 24 x 36 inches with the approved dealership name
• A computer and laser printer for print-on-demand temporary tags when required

You can find the dealer application and certification details on the Delaware DMV Dealer Forms page.

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

How long does it take to get a Delaware 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 you need a paper original for filing, we'll mail it to you.

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

The bond amount, also called the penal sum, is the maximum protection offered to consumers. In Delaware, the motor vehicle dealer and sales-finance bond amount discussed here is $25,000. This is not what you pay. The bond premium is the annual cost you pay to purchase the bond, which is a percentage of the bond amount.

Do all Delaware dealerships need a bond?

Not every Delaware dealer situation is the same. Delaware law specifically requires a $25,000 bond for motor vehicle dealers that self-finance retail sales without charging interest, unless they are already required to bond with the Banking Commissioner. Sales finance licensees under Title 5 also need a $25,000 bond or approved letter of credit. Confirm your exact requirement with the Delaware DMV, Division of Revenue, or State Bank Commissioner before filing.

What happens if my bond lapses?

If your business is required to maintain a bond and it lapses, you may no longer be in compliance with Delaware licensing or finance requirements. A lapse can delay your license application, renewal, or ability to continue covered activity. Renew early so your bond stays active through the full license period.

Can my bond be cancelled?

Yes. A surety bond can be cancelled by the surety company, but Delaware law requires written notice before cancellation takes effect. If the bond is cancelled and your business is required to carry it, you must replace it or risk noncompliance.

Do I need a separate bond for each dealership location?

Delaware dealer licensing requirements can vary by location and business activity. If your business has multiple locations or separate finance operations, confirm with the Delaware DMV or Division of Revenue whether each location or license needs separate bond documentation.