Illinois Auto Dealer Bond

An Illinois auto dealer bond, formally called a Designated Agent Bond for Illinois Vehicle Dealers, is a surety bond required by the Illinois Secretary of State Dealer/Remitter Licensing Section before certain dealer licenses can be issued or renewed.

It is a financial guarantee that your dealership will comply with Illinois law, properly handle title and registration work, and deal honestly with customers. If you fail to do so, a harmed party can make a claim against your bond to recover covered losses.

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

Every surety bond is a contract between 3 parties:
 

• The Obligee: Illinois Secretary of State, Dealer/Remitter Licensing Section
  The state authority that requires the bond as a condition of licensing. They set the bond amount and terms.
   
• 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 Illinois. You’ll receive an email copy of the bond, and you can request a paper original if your filing requires one.

4. File Your Bond With the Proper Illinois Authority 

Submit your bond as part of your dealer license application to the Illinois Secretary of State Vehicle Services Department. If you are newly licensed and still within the first 60 months of business operations, the renewal instructions call for the original Designated Agent Bond, not a copy.

Filing address:

Illinois Secretary of State

Vehicle Services Department

Dealer/Remitter Licensing Section

501 S. Second St., Room 069

Springfield, IL 62756

The Illinois Secretary of State requires vehicle dealers to be licensed, and the $50,000 Designated Agent Bond applies during the first 60 consecutive months of business operations when the dealer has not been released from the bonding requirement.
 

• New and used vehicle dealers - Illinois dealer licensing applies to businesses that sell or deal in 5 or more vehicles during a year. A $50,000 bond is required when the dealer is subject to the designated agent bond requirement.
• Buy Here, Pay Here used vehicle dealers - These dealers are licensed separately under Illinois law and must submit the required bond paperwork when the bond requirement applies.
• Motorcycle, trailer, and specialty vehicle dealers - Illinois licensing can apply beyond standard cars and trucks, so dealers should confirm the correct license type with the Secretary of State.
• Newly licensed dealers - Dealers generally must maintain the bond for their first 60 consecutive months of business operations unless the state continues the requirement due to title, registration, fee, or tax deficiencies.
• Additional dealership locations - Each licensed location or additional place of business must be handled properly in the licensing process. Contact us if you operate multiple locations and need help managing bond paperwork.

The bond protects consumers and the state from financial loss caused by dealer violations. A claim can be filed for issues such as:
 

• Failing to properly collect or remit title, registration, fee, or tax obligations
• Selling a vehicle without proper title documents or failing to transfer title correctly
• Misrepresenting a vehicle's condition, accident history, or mileage
• Retaining customer deposits without delivering the vehicle
• Any other breach of Illinois vehicle dealer laws or licensing rules

The maximum payout per bond is the bond's penal sum: $50,000 for the standard Illinois auto dealer bond. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• Consumer, state agency, 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 ($50,000)
• The dealer (principal) is then required to reimburse the surety for any amounts paid out
• Claims on your record can significantly increase your bond premium at renewal

Illinois dealer licenses expire on December 31 each year, and the bond must be renewed alongside the license while the bonding requirement still applies.

Vehicle dealers must be bonded for the first 60 consecutive months of business operations, provided they have not been delinquent or deficient in transmitting title and registration fees or taxes. If the state still requires your bond, you must keep it active to remain compliant.

Lance Surety will contact you before your renewal date to help prevent any lapse in coverage. At renewal, the surety company may review your credit and financial profile. Maintaining strong credit can help keep your premium costs lower.

If a surety company cancels the bond, the Illinois bond form requires advance notice to the Secretary of State. You should replace coverage before the cancellation becomes effective.

Getting an Illinois auto dealer license is handled through the Illinois Secretary of State's Vehicle Services Department. The department reviews dealer applications and supporting documents before a license is issued.

To apply, you should be ready to provide:

• The dealer license application
• A $50,000 Designated Agent Bond for Illinois Vehicle Dealers, if required
• Franchise agreement, if applying as a franchise dealer
• Business lease or proof of location
• Notice of Proper Zoning
• Criminal background check materials
• Business entity formation documents
• Proof of Illinois EPA compliance, if applicable
• Proof of insurance
• Applicable fees

Used vehicle dealer and Buy Here, Pay Here used vehicle dealer applicants must also complete the required prelicensing education before submitting an application.

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

How long does it take to get a Illinois 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 you can request a paper original if your filing requires it.

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 claimants. For the standard Illinois dealer bond, that amount is $50,000. This is not what you pay. The bond premium is the annual cost you pay to purchase the bond, usually a percentage of the bond amount.

What happens if my bond lapses?

If your bond lapses while the bond requirement still applies, your dealership may no longer meet Illinois dealer licensing requirements. You should renew before expiration to avoid issues with your license renewal or continued operations.

Can my bond be cancelled?

Yes, a surety bond can be cancelled by you or by the surety company. If the surety cancels your bond, advance notice must be sent to the Illinois Secretary of State. Once the bond is cancelled, you need replacement coverage if the bond requirement still applies.

Do I need a bond for every salesperson I employ?

No separate salesperson bond is listed for the Illinois auto dealer bond requirement. Illinois focuses on the dealer license and the Designated Agent Bond for Illinois Vehicle Dealers when the bond requirement applies.

Do I need a separate bond for each dealership location?

Each licensed location or additional place of business must be handled correctly in the licensing process. If you operate multiple Illinois dealership locations, contact us so we can help confirm the correct bond paperwork for each license.