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

Brief Summary

New or used makes no difference here. Alabama issues one master dealer license, and Code of Alabama 40-12-398 requires the same bond of not less than $50,000 from a new motor vehicle dealer, a used motor vehicle dealer, a motor vehicle rebuilder and a motor vehicle wholesaler. There is no tier by sales volume, franchise line or number of lots. Where applications actually stall is elsewhere: blanket motor vehicle liability insurance has to be filed with the application or the license is denied outright, and the license year starts October 1 with only thirty days of grace before penalties.

Before Alabama issues a master dealer license to a new motor vehicle dealer, used motor vehicle dealer, motor vehicle rebuilder or motor vehicle wholesaler, the applicant must deliver to the commissioner a surety bond in the sum of not less than $50,000, executed by a corporate surety qualified to do business in the state, on a form approved by the commissioner. The bond is payable to the Commissioner of Revenue and successors in office, and runs in favor of any person who recovers a judgment for a loss caused by a violation of its conditions.

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

• Execute the $50,000 Motor Vehicle Surety Bond on ALDOR form MVT 4-3, payable to the Commissioner of Revenue of the State of Alabama
• Use a corporate surety company qualified to do business in Alabama
• File evidence of blanket motor vehicle liability insurance covering business and inventory vehicles with the license application
• State the number of new and used vehicles sold during the previous calendar year on the application
• Provide the state sales tax number assigned to the applicant
• Describe a permanent location with space to display one or more vehicles, an appropriate sign, and books and records available for inspection
• Obtain the county privilege license in addition to the state master dealer license
• Pay the master dealer license fee of $125, plus $5 per additional place of business and $25 per dealer plate
• Renew on October 1 each year and file within the thirty day grace period to avoid delinquent license penalties

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

One license, one amount

Alabama does not split dealers into bonding tiers. Section 40-12-398 sets a sum of not less than fifty thousand dollars, or an amount as prescribed by the department, for all four covered classes. The Department of Revenue states the same $50,000 continuous bond on its dealer license page, and Administrative Code rule 810-5-12-.02 repeats it for motor vehicle dealers, automotive dismantlers and parts recyclers, licensed wholesale auctions, designated agents and title service providers. The rule also says the coverage period begins on the issuance date of the applicable license.

What the bond covers, and the filing it replaces

The bond is conditioned on the dealer complying with the conditions of any contract made in connection with the sale or exchange of a motor vehicle, and on not violating the laws governing the licensed business. On top of that, the statute states the bond serves in lieu of the bond provided for in subsection (b) of Section 32-8-34 and is additionally conditioned on performance of the dealer's duties as a designated agent under Chapter 8 of Title 32. A licensed dealer acting as a designated agent does not buy a second bond. ALDOR notes that a non dealer serving as a designated agent must post its own separate $50,000 bond.

One detail worth pricing in: penalties under the dealer licensing article, and the tax liability incurred under Chapter 23 on the sale of a motor vehicle, may be assessed against the bond. The state is a potential claimant, not just your customers.

The insurance filing that gets applications denied

Section 40-12-392(c) requires new and used motor vehicle dealers, rebuilders and wholesalers to maintain blanket motor vehicle liability insurance on vehicles operated on public streets and highways, including dealership inventory. Evidence of that coverage must be filed with the license application, and the application shall be denied if proof satisfactory to the commissioner is not provided. Letting the policy lapse during the licensing period can bring a civil penalty of up to $5,000, and that penalty may be assessed against the bond.

The calendar

A master dealer license is valid for one year from the first day of October and is renewed on October 1 each year, with thirty days of grace allowed without penalty before delinquent license penalties apply. ALDOR opens renewal in early September and has assessed a penalty of 15 percent of the license amount plus interest on renewals filed after October 31. Dealers also need a county privilege license.

Form and cancellation

The prescribed form is ALDOR Motor Vehicle Surety Bond MVT 4-3. The obligee is the Commissioner of Revenue of the State of Alabama, his successors and assigns. A surety wanting off files a written request to be released with the Department of Revenue, and the release takes effect sixty days from that filing. An electronic signature is acceptable if authorized by the department.

Fees and what the application asks

ALDOR lists a master dealer license fee of $125, $5 for each additional place of business, $25 for an off site sales license, $25 for dealer plates and manufacturer plates, and $17 for motorcycle dealer and motorcycle manufacturer plates. The application must state the number of new and used vehicles sold during the previous calendar year, give the state sales tax number, describe a permanent location with space to display one or more vehicles and an appropriate sign, and state whether the applicant is franchised by a manufacturer and for which line make, or is a used dealer, rebuilder or wholesaler.

A bond gets the license issued. It does not put buyers on the lot. Any licensed dealer can also claim a free listing at BestAutoDealerIn.com, a directory searchable by zip code and state, with a backlink that helps your own SEO, sends referrals, and gets a blog post written about your dealership.

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

• Bond in the sum of not less than $50,000, or an amount as prescribed by the department
• Corporate surety qualified to do business in the state, on a form approved by the commissioner
• Commissioner of Revenue and successors in office named as obligee
• Legal business name and addresses matching the license application, with authorized representative and surety signatures, effective date and issue date
• Coverage period beginning on the issuance date of the applicable license
• Sixty days from the surety's written release request to the Department of Revenue before the release takes effect

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

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