New York Auto Dealer Bond

A New York auto dealer bond, formally called a Dealer Bond Under New York State Vehicle and Traffic Law Section 415(6-b), is a surety bond required by the New York State Department of Motor Vehicles before certain dealership registrations can be issued.

It is a financial guarantee that your dealership will follow New York dealer laws and handle customer transactions honestly. If your business violates the bond conditions, a harmed customer or the state may recover losses up to the bond amount.

Unlike insurance, which protects you, a surety bond primarily protects your customers 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: New York State Department of Motor Vehicles - 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 New York. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File your bond with the Auto Industry Division 

Submit your completed Dealer Bond Under New York State Vehicle and Traffic Law Section 415(6-b) (VS-3) with your Original Facility Application (VS-1). The bond must be the complete original, sealed and signed, and must include the surety company's seal, the correct business name and address, required signatures, and power of attorney papers made out to your business name and address. Make sure the business name and mailing address on the bond exactly match your application.

Filing address:

Bureau of Consumer and Facility Services
 Application Unit
 New York State DMV
 P.O. Box 2700
 Albany, NY 12220-0700

The New York State Department of Motor Vehicles requires the following dealer types to file a surety bond before receiving or maintaining registration.

• New motor vehicle dealers and qualified dealers - Franchised retail dealers selling cars, SUVs, light trucks and similar vehicles must file a $50,000 bond. The same $50,000 amount applies to qualified dealers, who are entitled to sell new motor vehicles of any make.
• Powersports dealers - ATVs, dirt bikes, snowmobiles and other power sports vehicles fall under the same requirement a $50,000 bond applies.
• Retail or wholesale dealers selling 50 or fewer vehicles - Retail or wholesale dealers other than new motor vehicle dealers that sold 50 or fewer vehicles during the previous calendar year must file a $20,000 bond. First-time applicants also file a $20,000 bond, since they have no prior-year sales figure.
• Retail or wholesale dealers selling more than 50 vehicles - Retail or wholesale dealers other than new motor vehicle dealers that sold more than 50 vehicles during the previous calendar year must file a $100,000 bond.
• Exempt dealer categories - Dealers that sell only trailers, motorcycles, vehicles over 10,000 pounds, ATVs, boats, or snowmobiles are exempt from the bond requirement. Snowmobile dealers apply using a separate form, the Application for a Snowmobile Dealer Registration (RV-253).

The bond protects consumers and the state from financial loss caused by covered dealer violations. The VS-3 bond form sets out five specific conditions, and a claim must be based on one of them:

• Failing to pay valid bank drafts, including checks, drawn for the purchase of motor vehicles
• Failing to transfer good title to a motor vehicle sold by the dealership
• Failing to maintain and keep safe customer deposits until good title is transferred
• Failing to pay fines imposed by the Commissioner of Motor Vehicles under the Vehicle and Traffic Law
• Overcharging a customer for vehicle registration or title fees payable to the Commissioner of Motor Vehicles

The bond covers only these five conditions. It also does not provide coverage for transactions involving the sale of any motor vehicle for which a bond is not required under Section 415(6-b).

The maximum payout per bond is the bond's penal sum: $20,000, $50,000, or $100,000 depending on the dealer's required bond amount. That limit applies to all claims combined, regardless of how many claims are made or how many years the bond stayed in force. After any payout, you, as the principal, are liable to reimburse the surety.

How the Claims Process Works?

1. A judgment is obtained against the dealership. Under the VS-3 bond, recovery may be made by a person, including the State, who obtains a judgment against the dealer for an act or omission on which the bond is conditioned. The act or omission must have occurred during the term of the bond.
2. The claimant presents the claim to the surety company.
3. The surety investigates the claim to determine its validity.
4. If the claim is valid, the surety pays the claimant up to the bond amount: $20,000, $50,000, or $100,000 depending on the required bond.
5. The dealer is then required to reimburse the surety for any amounts paid out.
6. Claims on your record can significantly increase your bond premium at renewal.

New York business registrations and inspection station licenses are valid for 2 years. You can renew when your facility certificate expires within 60 days, or if it expired within the last 6 months.

What does renew on a schedule is your dealer registration. New York business registrations are valid for 2 years, and the DMV will send you a Facility Renewal Application (VS-2) as your expiration date approaches. You can renew if your facility certificate expires within 60 days, or if it expired within the last 6 months. Your bond must remain active for as long as your dealership registration requires it.

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

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

Getting a New York auto dealer registration is a detailed process. The New York State Department of Motor Vehicles requires applicants to submit the Original Facility Application (VS-1), the completed VS-3 dealer bond, property-use documentation, sales tax information including a copy of your Sales Tax Certificate of Authority, proof of workers' compensation coverage when applicable, identification documents for everyone listed on the application, required fees, and business registration documents.

After the application is reviewed in Albany, a regional DMV office will contact you to schedule an on-site investigation. The automotive facilities inspector checks items such as your dealer starter kit, permanent sign, display lot, dedicated mailbox, locked storage, utilities, business phone and separation from other businesses at the location.

You can find the full checklist on the New York DMV website.

For more information on how to get the license check our guide: New York auto dealer license 

How long does it take to get a New York dealer bond?

For most applicants, bonds are issued the same day, often within minutes of completing the application. Your bond can be delivered digitally by email, and we can mail a hard copy if required. New York DMV requires the completed VS-3 dealer bond with the surety company’s seal, matching business name and address, required signatures, and power of attorney papers.

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

The bond amount is the maximum protection available to claimants. In New York, the required amount is usually $20,000, $50,000, or $100,000 depending on dealer type and vehicle sales volume. The bond premium is what you pay to purchase the bond. It is usually a percentage of the bond amount and depends heavily on credit, business experience, and bond history.

What happens if my bond lapses?

If your bond lapses or is cancelled while your dealer registration still requires a bond, you are no longer in compliance with New York DMV requirements. The bond form requires 60 days written notice of cancellation to the New York State Commissioner of Motor Vehicles, but you should not rely on that notice period as a substitute for active coverage

Can my bond be cancelled?

Yes. A surety bond can be cancelled by the surety company. In New York, the surety must provide 60 days written notice of cancellation to the New York State Commissioner of Motor Vehicles before the cancellation takes effect. If you are closing your dealership or changing surety providers, contact us so the process is handled properly.

Do I need a bond for every salesperson I employ?

No. New York's motor vehicle dealer bond requirement applies to the dealer registration, not to each individual salesperson. Your required bond amount is based on your dealer category and, for retail or wholesale dealers other than new motor vehicle dealers, the number of vehicles sold in the previous calendar year.

Do I need a separate bond for each dealership location?

Generally, yes. New York DMV requires that the business name and address on your bond exactly match the ones on your facility application, and DMV regulations require a dealer to make all sales at its registered place of business. A dealer may run a maximum of two away-from-premises sales per calendar year at an additional location, and only with written authorization from the regional director of the Division of Vehicle Safety Services. Beyond that, a second sales location generally means a second Original Facility Application (VS-1) with its own bond matching that location's address. Contact the New York DMV before filing to confirm what your specific situation requires.