Washington Auto Dealer Bond

A Washington auto dealer bond, commonly filed on the Vehicle, Vessel Dealer Business Bond form, is a surety bond required by the Washington State Department of Licensing before your vehicle dealer license can be issued.

It is a financial guarantee that your dealership will operate in compliance with Washington law and deal honestly with customers. If you fail to do so, a harmed customer can make a claim against your bond to recover 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: Washington State Department of Licensing
  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 Washington. 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 Washington Authority 

Submit your bond as part of your dealer license application. Washington says the Department of Licensing issues the license, but the application is processed by the Department of Revenue Business Licensing Service.

Filing address:

State of Washington

Business Licensing Service

PO Box 9034

Olympia, WA 98507-9034

The Washington State Department of Licensing requires the following vehicle businesses to post a surety bond before receiving the applicable license or endorsement.
 

• Motor vehicle dealers - Businesses and auctioneers that buy or sell new or used cars, trucks, or motor homes at wholesale or retail need a $30,000 motor vehicle dealer bond.
• Manufactured home, park trailer, and travel trailer dealers - These dealers also need a $30,000 dealer bond under Washington law.
• Miscellaneous vehicle dealers - Dealers that sell motorcycles, neighborhood electric vehicles, off-road vehicles, utility trailers, boat trailers, tent trailers, horse trailers, or other vehicles outside the main motor vehicle category need a $5,000 bond.
• Mobile home manufacturers - A mobile home manufacturer bond is $40,000.
• Travel trailer manufacturers - A travel trailer manufacturer bond is $20,000
• Vehicle wreckers, vessel dealers, and registered tow truck operators - These related vehicle businesses use the same state bond form, but their bond amounts differ by license type.

Washington also requires a bond for each business location in the state and bond coverage for temporary subagencies.

The bond protects consumers and other eligible claimants from financial loss caused by dealer violations. Under RCW 46.70.070, a retail purchaser, qualifying consignor, or a dealer that transacted with a wholesale dealer may bring an action against the dealer and the surety bond if they suffer loss from a violation of Washington dealer law.

For example, RCW 46.70.180 treats false, deceptive, or misleading vehicle sale, lease, or financing statements as unlawful. A claim can be filed for any of the following violations:
 

• Making false, deceptive, or misleading statements about the sale, lease, or financing of a vehicle
• Misrepresenting fees, licensing costs, title transfer charges, or required documents
• Failing to transfer title or handle ownership documents properly
• Failing to honor written warranty or guarantee obligations
• Mishandling consignor funds, deposits, or sale proceeds
• Any other breach of Washington vehicle dealer law

The maximum payout per bond is the bond's penal sum: $30,000 for most motor vehicle 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
• 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

Washington dealer bonds are issued as continuing obligations. The state bond form says the bond remains in effect for later licensing periods unless the surety cancels it with 30 days written notice to the Washington Department of Licensing.

Your bond must remain active for your dealer license to stay valid. If the bond is cancelled, withdrawn, revoked, or exhausted, the Department of Licensing can terminate the license until a new bond is provided with no lapse in coverage.

Lance Surety will contact you well in advance of your renewal date to help prevent any lapse in coverage. At renewal, the surety company will review your credit. Maintaining a strong credit profile can help keep your premium costs low.

Getting a Washington auto dealer license requires more than purchasing a bond. The Washington State Department of Licensing says it issues the license, while the Department of Revenue Business Licensing Service processes the application and prints the endorsement on the business license.

Before you apply, gather the required documents and information, including:
 

• $30,000 vehicle dealer bond
• Financial/Source of Funds Statement
• Personal Criminal History Statement for each owner, officer, or member of the business
• Property tax statement or rental/lease agreement for the business site
• Certificate of Dealer Education if selling only used vehicles
• Applicable dealer license, renewal, sub-agency, and plate fees

Retail vehicle dealers in Washington are also required to use the E-Permits system. You may not begin business activity until you receive the required license, and you must post the license at each location where you operate.

You can find the full checklist on the Washington State Department of Licensing website.

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

How long does it take to get a Washington 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 to consumers. For most Washington motor vehicle dealer licenses, that amount is $30,000. 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. A $30,000 bond may cost $300 to $900 per year for applicants with strong credit.

What happens if my bond lapses?

If your bond lapses, you are no longer in compliance with Washington dealer licensing requirements. The Washington bond form says the Department of Licensing can terminate the license if the bond is cancelled, withdrawn, revoked, or exhausted until a new bond is provided with no lapse in coverage.

Can my bond be cancelled?

Yes. A Washington vehicle dealer bond can be cancelled by the surety. The state bond form says the bond is a continuing obligation until cancelled by the surety with 30 days written notice received by the Washington Department of Licensing.

Do I need a bond for every salesperson I employ?

No. Washington does not require a separate salesperson bond like some states do. However, Washington law makes the dealer accountable for employees, sales personnel, and managerial personnel while they are performing their official duties.

Do I need a separate bond for each dealership location?

Yes. Washington law says vehicle dealers must maintain a bond for each business location in the state, plus bond coverage for temporary subagencies. If you operate more than one licensed location, confirm the bonding requirement for each location before filing your application.