Vermont Auto Dealer Bond

A Vermont auto dealer bond, formally called a Motor Vehicle Dealer Bond or Motor Vehicle Dealer Continual Bond, is a surety bond required by the Vermont Department of Motor Vehicles before a new or used motor vehicle dealer registration can be issued.

The requirement comes from 23 V.S.A. § 453(g), which requires a surety bond, letter of credit, or certificate of deposit for new and used motor vehicle dealers.

It is a financial guarantee that your dealership will follow Vermont dealer laws and properly handle taxes and fees collected from customers. If you fail to do so, the state or a harmed purchaser may be able to make a claim against your bond.

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: State of Vermont / Vermont Commissioner of Motor Vehicles
  The state authority that requires the bond as a condition of dealer registration. 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, including your dealership name, dealer license number if available, and the number of vehicles sold during the prior registration period. 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 Vermont. You’ll receive an email copy of the bond, and you can request a paper copy if necessary.

4. File Your Bond With the Proper Vermont Authority 

Submit your bond, letter of credit, or certificate of deposit as part of your dealer registration application to the Vermont Department of Motor Vehicles.

Filing address:

Vermont Department of Motor Vehicles

120 State Street

Montpelier, VT 05603-0001

The Vermont DMV requires new and used motor vehicle dealers to provide a surety bond, letter of credit, or certificate of deposit before a dealer registration is issued. The required amount is based on the schedule in the Dealer Registration application.
 

• New applicants - A $35,000 bond is required before a new dealer registration is issued.
• Established dealers selling fewer than 25 vehicles - A $20,000 bond is required.
• Established dealers selling 25 to 100 vehicles - A $25,000 bond is required.
• Established dealers selling 101 to 250 vehicles - A $30,000 bond is required.
• Established dealers selling 251 or more vehicles - A $35,000 bond is required.
• New and used car dealers renewing for a two-year period - The bond amount may be based on the previous two years of sales.

The Vermont dealer rules also list license categories such as new and used car dealer, motorcycle/moped dealer, farm equipment dealer, trailer dealer, motorized highway building equipment dealer, finance dealer, and auction dealer. Confirm your exact license and bond requirement with the Vermont DMV Dealer Unit before filing.

The bond protects the state and purchasers from monetary loss tied to a dealer’s failure to remit required fees or taxes collected in connection with vehicle transactions. A claim may arise from violations such as:
 

• Failing to remit fees collected for registration, dealer, or title-related transactions
• Failing to remit motor vehicle purchase and use tax collected from a customer
• Creating a financial loss for the state or a vehicle purchaser through nonpayment of required amounts
• Breaching obligations covered by the Vermont Motor Vehicle Dealer Bond form

The maximum payout is limited by the bond's penal sum, which can range from $20,000 to $35,000. After any payout, you as the principal are liable to reimburse the surety.

How the Claims Process Works?

• Consumer, the state, or another 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 amount
• The dealer is then required to reimburse the surety for any amounts paid out
• Claims on your record will significantly increase your bond premium at renewal

Vermont initial dealer registrations are issued for one year and may be renewed for two years. Your bond, letter of credit, or certificate of deposit must remain in effect for the registration period and one year thereafter.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage. If your registration or bond term changes, you should confirm your required amount with the Vermont DMV before renewal.

New applicants use the $35,000 bond amount. After that, the required amount is based on your prior sales volume: $20,000, $25,000, $30,000, or $35,000.

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

Getting a Vermont dealer license requires more than a bond. The Vermont DMV’s New Dealer Checklist outlines the main items needed before your registration is issued.
 

• Completed Dealer Registration application
• A 1,200-square-foot building used primarily for the dealership, unless an exemption applies for ATV, snowmobile, or boat dealers
• Zoning compliance from the town
• A lease agreement for at least one year if the building is leased, or a copy of the deed if owned
• Proof of insurance on dealer plates
• Franchise agreement for new car dealers
• $35,000 bond, letter of credit, or certificate of deposit for new and used car dealers
• Authority to release information, background check, credit report, criminal record check, and judgment compliance form for each required person

For more information on how to get the license check our guide: Vermont auto dealer license.

How long does it take to get a Vermont 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 a paper original is needed for filing, we can mail it to you.

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

The bond amount is the maximum protection available under the bond. In Vermont, that amount ranges from $20,000 to $35,000. 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. For example, a $35,000 bond may cost $350–$1,050 per year for applicants with strong credit.

What happens if my bond lapses?

If your bond lapses, you may no longer meet Vermont dealer registration requirements. The Vermont DMV may not issue or renew a registration without the required bond, letter of credit, or certificate of deposit. If your bond is close to lapsing, renew it quickly and contact the DMV if your registration status is affected.

Can my bond be cancelled?

Yes, a surety bond can be cancelled — either by you or by the surety company. If the bond is cancelled and not replaced, your dealer registration may no longer satisfy Vermont’s bonding requirement. If you need to cancel your bond voluntarily — for example, because you are closing your dealership — contact us directly to handle it properly.

Do new Vermont dealer applicants need a $35,000 bond?

Yes. New applicants for a new or used motor vehicle dealer registration must provide a $35,000 bond, letter of credit, or certificate of deposit. Renewal amounts may be lower if your prior sales volume falls into a lower tier.

Is the Vermont dealer bond amount always the same?

No. New applicants need a $35,000 bond, but established dealers are assigned a bond amount based on vehicle sales. The required amount is $20,000 for fewer than 25 vehicles, $25,000 for 25 to 100 vehicles, $30,000 for 101 to 250 vehicles, and $35,000 for 251 or more vehicles.