New Motor Vehicle Dealer ($50,000) Shepherd Bond - Statewide in Alabama

Brief Summary

Alabama will not issue a new motor vehicle dealer regulatory license without a $50,000 continuous surety bond payable to the Alabama Department of Revenue. The bond is a required attachment, not an underwriting hurdle. Most dealers are quoted the same day, the premium is a fraction of the bond amount rather than $50,000 of cash held by the state, and the executed bond uploads with the application in the Alabama Partner Registration Portal.

Every Alabama motor vehicle dealer regulatory licensee, new vehicle dealers included, must file a continuous $50,000 surety bond payable to the Alabama Department of Revenue under Code of Alabama 40-12-392 and Ala. Admin. Code 810-5-12-.02. One bond covers the dealer license and the dealer's designated agent status, coverage runs from the license issuance date, and a cancelled bond that is not replaced before the cancellation date revokes the license immediately.

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How to Apply for a New Motor Vehicle Dealer ($50,000) Shepherd Bond:

• Have the dealership's legal name and DBA exactly as they appear on the Alabama Partner Registration Portal application.
• Confirm which license types you are applying for. The same $50,000 bond covers new, used, wholesale and rebuilder licenses and the designated agent status.
• Provide owner name, home address and Social Security number for the credit review.
• Complete the bond application and review the quoted premium.
• Pay the premium and receive the executed continuous bond payable to the Alabama Department of Revenue.
• Upload the bond with the regulatory license application in the Alabama Partner Registration Portal along with the $125 master license fee and $5 for each additional location.
• After ALDOR approval, buy the county privilege license and keep blanket liability insurance in force.

Detailed Information About the Alabama New Motor Vehicle Dealer ($50,000) Shepherd Bond:

One bond, every license type

The most common mistake is assuming the bond amount changes with the kind of license. It does not. Ala. Admin. Code 810-5-12-.02 sets a single $50,000 continuous bond for motor vehicle dealers, automotive dismantlers and parts recyclers, licensed wholesale auctions, designated agents and title service providers. A new motor vehicle dealer, a used dealer, a motorcycle or trailer dealer, a wholesaler and a rebuilder all post the same $50,000 to the Alabama Department of Revenue. The Department's dealer license page says it plainly: all licensees are required to submit a continuous bond in the amount of $50,000 to ALDOR.

The second mistake is buying two bonds. Alabama law makes every licensed dealer a designated agent of the Department for title work, and designated agents carry their own $50,000 bond requirement. The Department's own guidance confirms the dealer regulatory license bond satisfies the designated agent bonding requirement, so a licensed dealer files one bond, not two.

Who must have the license and the bond

The regulatory license is required for all new and used motor vehicle dealers, including motorcycle and trailer dealers, wholesale dealers and rebuilders. The application is filed electronically through the Alabama Partner Registration Portal. The master dealer license fee is $125, with $5 for each additional location. After ALDOR approves the regulatory license, the dealer still has to visit the county licensing office to buy the privilege license for each county of operation, and must keep blanket liability insurance on every vehicle owned by or associated with the business. The bond covers none of that insurance exposure, it only answers for violations of the dealer and title laws.

How the bond works

The bond is payable to the Alabama Department of Revenue and coverage begins on the issuance date of the license. It is continuous, so it stays in force year to year as long as the premium is paid and the surety does not cancel. A claim does not go straight to the surety. Under Rule 810-5-12-.02 the claimant first obtains a final court judgment against the dealer, exhausts collection efforts, then submits the complaint, the judgment and a description of the collection attempts to the Department. The Department determines whether a violation occurred and files with the surety, which then has 30 days to respond. If the surety pays, the dealer owes the surety the amount paid plus costs.

Watch the cancellation rule. If the surety sends a notice of cancellation and the dealer has not filed a replacement bond before the cancellation date, the license and designated agent status are revoked immediately. Keep the premium current and let the surety know in advance of any ownership or name change so the bond rider and the license stay in step.

Eligibility and Requirements for a Alabama New Motor Vehicle Dealer ($50,000) Shepherd Bond:

• A surety company licensed to transact business in Alabama.
• Bond amount of exactly $50,000, continuous, with coverage beginning on the license issuance date.
• Alabama Department of Revenue named as obligee.
• Dealer name on the bond matching the regulatory license application exactly.
• Owner credit review. At $50,000 the rate depends mainly on personal credit, and dealers with weaker credit are usually still approved at a higher premium.

Alabama New Motor Vehicle Dealer ($50,000) Shepherd Bond FAQs:

Official and Additional Resources for the Alabama New Motor Vehicle Dealer ($50,000) Shepherd Bond: