Indiana Auto Dealer Bond

An Indiana auto dealer bond, formally filed as the Indiana Vehicle Merchandising Certificate/Bond, is a surety bond required by the Indiana Secretary of State Auto Dealer Services Division before your dealership license can be issued.

The required bond amount is $25,000. The state requires the bond to be in favor of the Secretary of State and to secure payment of fines, penalties, costs, and fees assessed by the Secretary. Indiana also requires the bond to be filed on State Form 53966.

It is a financial guarantee that your dealership will operate in compliance with Indiana law and deal honestly with customers. If you fail to do so, a covered claimant or the state can make a claim against your bond to recover covered losses or amounts owed.

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

Every surety bond is a contract between 3 parties:

• The Obligee: Indiana Secretary of State Auto Dealer Services Division
  The state authority that requires the bond as a condition of licensing. They set the bond amount, bond form, and filing requirements.
• 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.

The cost of an Indiana auto dealer bond starts at $250. Bond premiums are typically between 1% and 3% of the bond amount — so between $250 and $750 per year for the standard $25,000 dealer bond.

It's important to understand the difference between the bond amount and what you actually pay. The $25,000 is the maximum amount required by the state — it's the coverage limit, not your cost. What you pay is the annual premium, which is a small percentage of that amount.

Your premium is quoted individually based on three factors: your personal credit score, your experience in the industry, and any prior bond claims on your record. Because each surety company weighs these factors differently, the same applicant can receive meaningfully different quotes from different underwriters.

Even applicants with poor credit can get bonded. A lower credit score means a higher premium, not a denial.

Here’s a breakdown of the bond requirement and the premium costs based on your credit score.

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 Indiana. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond with the Indiana Secretary of State

Submit your Indiana Vehicle Merchandising Certificate/Bond as part of your dealer license application through the Indiana Dealer Portal. Indiana requires the bond to be submitted on State Form 53966, and the dealer must sign the bond before submitting it.

As of October 1, 2024, Indiana requires bond and insurance updates to be completed online through the Dealer Portal. The Division no longer accepts bond or insurance updates by mail or email.

The Indiana Secretary of State Auto Dealer Services Division requires license applications to be accompanied by evidence of a $25,000 bond. The requirement applies across the dealer license types handled by the Division, including the following:

Motor vehicle dealers - New and used motor vehicle dealers need a license if they sell, offer to sell, or advertise at least 12 new or 12 used motor vehicles in a 12-month period. This includes semitrailers, trailers, off-road vehicles, snowmobiles, mini-trucks, and recreational vehicles.

Automobile auctions - An automobile auction license is required if your primary business arranges, manages, sponsors, advertises, hosts, or facilitates the auction of more than 3 motor vehicles or watercraft in a 12-month period.

Watercraft dealers - A watercraft dealer license is required if you sell, offer to sell, or advertise at least 6 watercraft or qualifying watercraft trailers in a 12-month period.

Transfer dealers - A transfer dealer license is required if you transfer ownership of at least 12 motor vehicles in a 12-month period as a result of your primary business.

Automotive salvage recyclers - Automotive salvage recycler applicants also list the Indiana Vehicle Merchandising Certificate/Bond as part of the required application documents.

Other license types, including manufacturers, distributors, and converter manufacturers, may also need to file the Indiana Vehicle Merchandising Certificate/Bond when applying through the Auto Dealer Services Division.

The bond protects the state and the public from financial loss caused by dealer misconduct, unpaid assessed amounts, or violations of Indiana dealer law. A claim or complaint can arise from issues such as:

• Failing to deliver or transfer title properly
• Misrepresenting a vehicle’s condition, title status, accident history, or mileage
• Failing to satisfy a lien or complete a vehicle transaction properly
• Taking customer funds without delivering the vehicle or completing the promised transaction
• Failing to pay fines, penalties, costs, or fees assessed by the Secretary of State

The maximum payout per bond is the bond’s penal sum: $25,000 for Indiana dealer bonds. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• A consumer, the state, or another claimant files a complaint or 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 ($25,000)
• The dealer (principal) is then required to reimburse the surety for any amounts paid out
• Claims on your record will significantly increase your bond premium at renewal

Indiana dealer licenses and dealer plates expire annually, and the expiration date depends on the first letter of the dealer’s business name. Renewals are an online-only process, and Indiana allows dealers to submit a renewal up to 90 days before the license expiration date.

When completing your renewal, make sure the expiration dates on your bond and insurance fall after your license expiration date. Indiana says your dealer license will be suspended during any lapse in bond coverage.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage.

Indiana accepts continuation certificates for existing bonds, meaning you typically will not need to file a completely new bond each year unless you change surety providers. Bond updates should be handled through the Dealer Portal.

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

Getting an Indiana auto dealer license is handled by the Indiana Secretary of State Auto Dealer Services Division. New and used dealer applications are completed online through the Dealer Portal, and the state lists the Indiana Vehicle Merchandising Certificate/Bond as one of the required documents.

For a new or used motor vehicle dealer license, Indiana lists required documents such as a background check, business entity documentation, certificate of insurance, State Form 53966 bond, license fee, photo identification, business location photos, retail merchant certificate, zoning affidavit, and dealer training completion certificate for first-time used car dealers.

You can find the full checklist on the Indiana Secretary of State’s website.

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

How long does it take to get an Indiana 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, we can 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 by the bond — $25,000 for Indiana dealer bonds. 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 — typically 1% to 3% for applicants with good credit. So a $25,000 bond can cost $250 to $750 per year.

What happens if my bond lapses?

If your bond is canceled or expires, you are no longer in compliance with Indiana dealer bond requirements. Indiana states that when a bond is canceled or expires, you must submit a new bond as soon as possible and your dealer license will be suspended during any lapse in bond coverage.

Can my bond be cancelled?

Yes, a surety bond can be cancelled — either by you or by the surety company. If the surety cancels your bond, you need to replace it quickly to keep your license active. If you need to cancel your bond voluntarily — for example, because you are closing your dealership — contact us directly so the cancellation is handled properly.

Do I need a bond for every salesperson I employ?

No. Indiana’s $25,000 dealer bond requirement is tied to the licensed dealership, not to each individual salesperson. This is different from Colorado, where individual salesperson bonds are required.

Do I need a separate bond for each dealership location?

Generally, each licensed dealership location should be handled separately. If you operate multiple locations, confirm the bond and license requirements for each location through the Indiana Secretary of State Auto Dealer Services Division, or contact us and we can help you manage bonding across locations.