Rhode Island Auto Dealer Bond

A Rhode Island auto dealer bond, formally called a Motor Vehicle Dealer Bond, is a surety bond required by the Rhode Island Division of Motor Vehicles Dealers' License and Regulations Office before your dealership license can be issued or renewed.

It is a financial guarantee that your dealership will operate in compliance with Rhode Island law and deal honestly with customers. If you fail to do so, a harmed customer can make a claim against your bond to recover their losses.

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 bond is a contract between 3 parties:

• The Obligee: Rhode Island Division of Motor Vehicles, Dealers' License and Regulations Office
  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 are officially bonded in Rhode Island. You will receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond With the Proper Rhode Island Authority 

Submit your original bond and power of attorney as part of your dealer license application or renewal package to the Rhode Island Division of Motor Vehicles Dealers' License and Regulations Office.

Filing address:

Rhode Island Division of Motor Vehicles

Dealers' License and Regulations Office

600 New London Avenue

Cranston, RI 02920-3024

The Rhode Island DMV dealer rules require all of the following to post a surety bond before receiving or maintaining a dealer license.
 

• Motor vehicle dealers - New and used vehicle dealers, including franchise dealers, must carry a $50,000 Rhode Island motor vehicle dealer bond.
• Moped and motorcycle dealers - Dealers licensed to sell mopeds, motorcycles, or motor scooters must also carry a $50,000 bond.
• Annex locations - A dealership annex may need a $50,000 bond under the annex location or a rider amending the main bond to include the annex address.
• Branch or additional locations - A separate license is generally required for each branch or annex location unless the DMV grants an exception.
• Renewing dealers - Rhode Island dealer licenses are valid for a three-year period, but dealers must meet annual requirements, including filing the $50,000 bond and power of attorney, to remain in good standing.

The bond protects consumers and other parties from financial loss caused by dealer fraud, negligence, or violations of Rhode Island dealer laws and regulations. A claim can be filed for any of the following violations:
 

• Selling a vehicle with no title, a fake title, or failing to transfer title properly
• Misrepresenting a vehicle's condition, accident history, inspection status, or mileage
• Retaining customer deposits without delivering the vehicle
• Failing to provide required bills of sale, warranties, or buyer notices
• Any other breach of Rhode Island motor vehicle dealer law or DMV dealer regulations

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

How the Claims Process Works?

• Consumer 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 will significantly increase your bond premium at renewal

Rhode Island dealer licenses are valid for a three-year period, but the Rhode Island DMV renewal instructions state that several requirements must be met each year to maintain your dealer license in good standing and renew dealer plates.

Your $50,000 surety bond and power of attorney must be filed annually. The Rhode Island dealer bond remains in effect until December 31 of that year, so you must renew the bond before it expires to avoid a lapse in compliance.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage. The DMV renewal packet may also include an annual submission deadline to allow the office enough time to process the documents before December 31.

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

Getting a Rhode Island auto dealer license is a detailed process. The Rhode Island DMV requires dealership name and location approval, a completed application, zoning support, photographs, financial documentation, criminal background checks, tax permits, insurance filings, a $50,000 line of credit, and your $50,000 surety bond. You can find the official application packet on the Rhode Island DMV website.

Once the DMV receives the required documents, your application is investigated and scheduled for a hearing before the Dealer's Hearing Board. If the license is granted, the remaining documents must be submitted within 30 days to finalize the application and issue the dealer license.

For more information on how to get the licence check our guide: Rhode Island dealer license.

How long does it take to get a Rhode Island 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 Rhode Island requires an original bond for filing, we can mail the paper original 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 - $50,000 for Rhode Island dealer licenses. 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 1-3% for applicants with good credit. So a $50,000 bond costs $500-$1,500 per year.

What happens if my bond lapses?

If your bond lapses, you are no longer in compliance with Rhode Island DMV dealer requirements and may not be able to legally operate or renew dealer plates. The DMV can take action against a dealership that does not maintain the bond required for licensing. Renewal delays can also interrupt your ability to keep your dealer license in good standing.

Can my bond be cancelled?

Yes, a surety bond can be cancelled - either by you or by the surety company. The Rhode Island bond form allows the surety to terminate its obligation by giving 60 days written notice to the principal and the Dealers' License and Regulations Office. Once your bond is cancelled or expires, your dealer license can fall out of compliance. If you need to cancel your bond voluntarily, contact us directly to handle it properly and avoid penalties.

Do I need a bond for every salesperson I employ?

No. Rhode Island requires dealer employee lists and authorization forms, but the $50,000 dealer bond is attached to the licensed dealership rather than to each individual salesperson. You should still update the Dealers' License and Regulations Office when your employee list changes.

Do I need a separate bond for each dealership location?

Generally yes. Rhode Island requires a separate license for each annex or branch location unless the DMV grants an exception. For an annex, the DMV application calls for either a $50,000 surety bond under the annex location or a rider on the main bond that adds the annex address.