South Dakota Auto Dealer Bond

A South Dakota auto dealer bond, formally called a motor vehicle dealer bond, is a surety bond required by the South Dakota Department of Revenue before a dealer license can be issued.

It is a financial guarantee that protects your customers against specific losses. Under South Dakota law, the bond runs in favor of any customer who suffers a loss caused by failure of title, fraudulent misrepresentation, or a breach of warranty as to freedom from liens. If a customer suffers one of those losses, they can make a claim against your bond to recover.

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: South Dakota Department of Revenue, Motor Vehicle Division - 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 South Dakota. You will receive an email copy of the bond, and you can request a paper copy if the state or county treasurer requires the original bond with your license packet.

4. File your bond with the Auto Industry Division 

Submit your original surety bond as part of your dealer license application. South Dakota instructions say the completed application is submitted to the county treasurer in the county where the business is located, along with the license fee, original surety bond, zoning confirmation, and liability insurance when required. The county treasurer forwards the application and fees to the Motor Vehicle Division in Pierre.

Filing address:

Dealer Licensing Office
 South Dakota Department of Revenue
 445 East Capitol Avenue
 Pierre, SD 57501
 Phone: (605) 882-5192

The South Dakota Department of Revenue requires dealer applicants to provide a surety bond before a license can be issued. The required amount depends on the license type.

• Vehicle dealers and used vehicle dealers - New vehicle dealers and used vehicle dealers must carry a $25,000 bond.
• Mobile/manufactured home dealers - Mobile and manufactured home dealers must carry a $25,000 bond.
• Trailer dealers - Trailer dealers must carry a $10,000 bond for trailers weighing more than 3,000 pounds.
• Motorcycle and off-road vehicle dealers - Dealers selling motorcycles and off-road vehicles must carry a $5,000 bond.
• Boat dealers - Boat dealers must carry a $20,000 bond.
• Emergency vehicle dealers - Emergency vehicle dealers must carry a $10,000 bond.
• Dealer car auction agencies - Dealer car auction agencies must carry a $50,000 bond.

If you hold more than one dealer license, South Dakota allows a single bond to cover all of them, as long as the bond amount is large enough to satisfy the requirement under each license.

The bond protects customers from specific financial losses caused by dealer misconduct. Under South Dakota law, the bond runs in favor of any customer who suffers a loss occasioned by:

• Failure of title - including failing to provide or transfer a proper title
• Fraudulent misrepresentation - misrepresenting a vehicle, boat, trailer, or other covered unit
• Breach of warranty as to freedom from liens - selling a unit encumbered by an undisclosed lien

This is narrower than a general compliance guarantee. The bond is not a blanket promise to follow every provision of South Dakota dealer law, and it does not cover ordinary business disputes outside those three categories.

The maximum payout per bond is the bond's penal sum, such as $25,000 for the standard vehicle dealer or used vehicle dealer license. After any payout, you, as the principal, are liable to reimburse the surety.

How the Claims Process Works?

1. The consumer or claimant contacts the surety company to file a claim.
2. The surety investigates the claim to determine its validity.
3. If the claim is valid, the surety pays the claimant up to the bond's penal sum.
4. The dealer is then required to reimburse the surety for any amounts paid out.
5. If a claim is paid or a bond is canceled, the surety must notify the South Dakota Department of Revenue in writing. A surety that cancels must also state the reason for cancellation.
6. When a claim is made to the department based on a final judgment of a South Dakota court of record, the dealer must execute an additional bond in the amount necessary to restore the security to its original level.

South Dakota dealer licenses are reviewed and renewed annually. The Motor Vehicle Division sends a renewal notice ahead of your expiration date — electronically for dealers registered on the online dealer system — and renewals are filed and paid through the state's Dealer Services portal. Failing to renew before your license expires means being charged the higher initial license fee rather than the renewal fee.

Your surety bond must remain active for the license period. South Dakota law requires either a new bond or a proper continuation certificate delivered to the department at the beginning of each license period.

Lance Surety will contact you before your bond renewal date to help prevent any lapse in coverage. If the premium is not paid, the bond can be canceled, which can put your dealer license at risk.

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

A note on license terms: The Department of Revenue's dealer licensing page describes the paper dealer license as being issued for a five-year period, with an annual renewal notice and billing sent roughly three months before expiration. The Department's own Dealer Manual (revised May 2025) states the initial license is valid for 12 months and must be renewed annually online, with electronic notice 90 days before expiration. Either way, renewal and payment are annual obligations, and your bond must stay in force continuously. Confirm your own renewal month with your Dealer Agent.

Getting a South Dakota dealer license is handled by the South Dakota Department of Revenue. Before a license is issued, the dealer license application must be submitted to the Motor Vehicle Division through the local county treasurer.

Several items are required to apply for a dealer license, including:

• Completed dealer license application
• An approved business location meeting South Dakota's principal place of business requirements
• A zoning letter from the city or county confirming the proposed location is approved for your dealership type
• A copy of the lease agreement stating a dealership is permitted, if you are renting or leasing
• Public liability insurance, a minimum of $300,000 for vehicle dealer and motorcycle/off-road vehicle dealer licenses
• Your surety bond in the amount required for your license type
• A franchise or dealer agreement with the manufacturer or distributor, if selling new units
• The required license fee

Your proposed location must also be inspected and approved by a Motor Vehicle Dealer Agent before a license will be issued. Missing documents will delay processing.

You can find the official requirements on the South Dakota Department of Revenue dealer license page and the South Dakota Dealer Requirements PDF.

For more information on how to get the license, check our guide: South Dakota dealer license guide

How long does it take to get a South Dakota 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 copy if you want one on file. Your license timeline is longer than your bond timeline, since the Motor Vehicle Division also has to review your application and inspect your location.

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. For most South Dakota vehicle dealer and used vehicle dealer licenses, that amount 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.

What happens if my bond lapses?

If your bond lapses or is canceled, you are no longer meeting South Dakota dealer bond requirements. The surety may notify the Department of Revenue in writing, and your dealer license can be placed at risk until the bond is reinstated or replaced.

Can my bond be cancelled?

Yes, a surety bond can be canceled either by you or by the surety company. South Dakota law requires a surety company that cancels a dealer bond to notify the Department of Revenue in writing and give the reason for cancellation. Once your bond is canceled, your dealer license may no longer be in good standing.

Do I need a bond for every salesperson I employ?

No. South Dakota dealer bond requirements apply to the dealer license type, not to each individual salesperson. This is different from states that require separate salesperson bonds.

Do I need a separate bond for each dealership location?

Not usually. If you hold multiple dealer licenses, South Dakota allows one bond to cover all of them, provided the bond amount satisfies the requirement under each license. A few situations do change things:

• Supplemental lots in the same county carry no additional license fee, but require a zoning letter and Dealer Agent inspection and approval.
• Moving within the same county requires 30 days' written notice to your Dealer Agent, a zoning approval letter for the new location, and updated copies of your insurance and bond.
• Moving outside your licensed county requires a new license, and all initial license requirements must be met again.
• Mobile and manufactured home dealers must secure a separate license for each county in which they maintain a place of business.

Contact the Motor Vehicle Division or Lance Surety if you operate multiple locations or need to update your licensed location.