Surety Bond Encyclopedia

FRANCHISE Motor Vehicle Dealer ($25,000) Bond - Statewide in Florida

Brief Summary

Franchise dealers run on a different calendar from everybody else in Florida. A franchise motor vehicle dealer license expires December 31, while independent and wholesale licenses run to April 30. The bond has to be written for the license period, and a new bond or a continuation certificate has to be with the department at the start of each period. Get the term dates right on form HSMV 86020 and the filing is routine. Get them wrong and the license sits.

Florida requires a $25,000 surety bond, or an irrevocable letter of credit in the same amount, from every applicant dealer of new or used motor vehicles before a license is issued, under section 320.27(10), Florida Statutes. The figure is flat. It does not change with sales volume, franchise brand, or number of locations. The bond runs to the Department of Highway Safety and Motor Vehicles and in favor of any person in a retail or wholesale transaction who suffers loss from a violation of chapter 319 or chapter 320. It is written on form HSMV 86020 and filed with the dealer license application, form HSMV 86056.

We can help with all Florida bonds!

How to Apply for a FRANCHISE Motor Vehicle Dealer ($25,000) Bond:

Confirm you are applying as a franchise motor vehicle dealer under s. 320.27(1)(c)1, meaning you deal pursuant to an agreement as defined in s. 320.60(1).
Dealer legal entity name exactly as it will appear on form HSMV 86056 and on the license.
Owner, partner or officer name, home address and Social Security number for the credit review.
Your license term dates. Franchise licenses expire December 31, and the bond has to be written for that license period.
Complete the bond application and review the quoted annual premium.
Pay the premium and receive the executed $25,000 bond on form HSMV 86020, signed by the surety's attorney in fact with the power of attorney attached.
File the bond with the dealer license application and the $300 application fee, along with the garage liability insurance certificate.
At each renewal, deliver a new bond or a continuation certificate to the department at the start of the new license period.

Detailed Information About the Florida FRANCHISE Motor Vehicle Dealer ($25,000) Bond:

The amount is $25,000, with no tiers

Section 320.27(10)(a) reads that annually, before any license shall be issued to a motor vehicle dealer, the applicant dealer of new or used motor vehicles shall deliver to the department a good and sufficient surety bond or irrevocable letter of credit, executed by the applicant dealer as principal, in the sum of $25,000. There is no schedule by unit count, revenue, or manufacturer. A single point store and a twelve franchise group post the same $25,000 per dealer license.

There is also no exemption in subsection (10) for franchise dealers, for long established dealers, or for anyone else. If a license is being issued, the bond is being filed.

What the bond covers, and the yearly cap

Section 320.27(10)(b) conditions the bond on the dealer complying with any written contract made in connection with the sale or exchange of a motor vehicle and not violating chapter 319 or chapter 320. It runs to the department and in favor of any person in a retail or wholesale transaction who suffers loss from a violation of those conditions.

One line matters more than most people realize. The aggregate liability of the surety in any one year shall in no event exceed the sum of the bond. Multiple claims in a single license year share the same $25,000. The bond is not a per claim limit.

The bond is tied to the license period, and yours ends December 31

Subsection (10) requires the bond or letter of credit to be for the license period, with a new bond, letter of credit, or a proper continuation certificate delivered to the department at the beginning of each license period. Form HSMV 86020 has you fill in an effective date and the term ending date of the license it supports.

That term date is where franchise dealers differ. A license issued to a franchise motor vehicle dealer expires December 31 of the year of its expiration. A license issued to an independent or wholesale dealer or auction expires April 30. If your bond was written on the April 30 cycle because someone assumed a generic Florida dealer bond, it does not match your license.

Training that independent dealers must complete, and franchise dealers do not

Section 320.27(4)(b) requires each initial license application for licensure under subparagraph (1)(c)2 to be accompanied by verification that within the preceding 6 months the applicant, meaning an owner, partner, officer, director, or a full time employee in a responsible management level position, successfully completed training at a licensed motor vehicle dealer training school. Subparagraph (1)(c)2 is the independent motor vehicle dealer, defined as any person other than a franchised or wholesale motor vehicle dealer who buys, sells, or deals in motor vehicles.

A franchised motor vehicle dealer is defined separately at (1)(c)1 as a person who repairs, services, buys, sells, or deals in motor vehicles pursuant to an agreement as defined in s. 320.60(1). Different subparagraph, so the dealer school requirement written for (1)(c)2 does not reach franchise applicants. Nothing about that changes the bond either way.

The second instrument franchise dealers actually do need

Insurance, not another bond. Under section 320.27(3), franchise dealers must submit a garage liability insurance policy. All other dealers may submit either a garage liability policy or a general liability policy coupled with a business automobile policy. The statutory minimum is $25,000 combined single limit liability coverage including bodily injury and property damage protection, plus $10,000 personal injury protection. Franchise dealers do not get the alternative structure. It is the garage policy.

Letter of credit instead of a bond

Subsection (10) treats an irrevocable letter of credit as an equal substitute for the surety bond, and FLHSMV publishes form HSMV 86057 for a motor vehicle dealer letter of credit. It ties up bank capacity rather than paying an annual premium, which is why most dealers file the bond instead.

Fees and renewal

The initial application fee is $300 in addition to any other fees required by law, and form HSMV 86056 confirms $300 for independent, wholesale, auction, salvage or franchise applicants. An initial applicant may instead pay $300 for the first year and $75 for the second. Renewal is $75 for a one year renewal or $150 for a two year renewal, on form HSMV 86720. Supplemental locations carry a $50 per location annual fee. Subsection (10) does not impose a separate bond for each supplemental location.

If the surety cancels, it must notify the department in writing and state the reason. Plan the replacement before that notice goes in, not after.

Eligibility and Requirements for a Florida FRANCHISE Motor Vehicle Dealer ($25,000) Bond:

A surety company authorized to transact surety business in Florida.
Bond amount of exactly $25,000, or an irrevocable letter of credit in the same sum on form HSMV 86057.
Written on form HSMV 86020, Surety Bond Motor Vehicle Dealer, in favor of the Director of the Division of Motorist Services of the State of Florida.
Effective date and license term ending date completed on the form to match the license period.
Dealer name on the bond matching the license application exactly.
Garage liability insurance with at least $25,000 combined single limit bodily injury and property damage and $10,000 personal injury protection. Franchise dealers must use a garage liability policy.
Owner credit review. At this bond size credit generally sets the rate rather than eligibility.

Florida FRANCHISE Motor Vehicle Dealer ($25,000) Bond FAQs:

Is the franchise dealer bond a different amount from the independent dealer bond?

No. Section 320.27(10)(a) sets $25,000 for the applicant dealer of new or used motor vehicles. Franchise, independent and wholesale dealers all post $25,000. What differs is the license year. Franchise licenses expire December 31, independent and wholesale licenses and auctions expire April 30, and the bond must be written for the license period.

Does the $25,000 reset for each claim?

No. Subsection (10) states that the aggregate liability of the surety in any one year shall in no event exceed the sum of the bond. All claims in a license year share the same $25,000, and the dealer reimburses the surety for anything paid.

We are an established franchise store. Are we grandfathered out of the bond?

No. Subsection (10) has no grandfather clause and no exemption for any dealer class. The bond is a condition of issuing the license, and a new bond or continuation certificate is required at the beginning of each license period.

Do I have to complete dealer school?

The prelicensing training in s. 320.27(4)(b) is written for initial applications under subparagraph (1)(c)2, which is the independent motor vehicle dealer. A franchised motor vehicle dealer is defined separately at (1)(c)1. Either way, completing training never substitutes for the bond.

Can I file something other than a surety bond?

Yes. Section 320.27(10) accepts an irrevocable letter of credit in the same $25,000 sum, and FLHSMV publishes form HSMV 86057 for it. A letter of credit consumes bank credit capacity, which is why most dealers file the bond and pay an annual premium instead.

Do I need a separate bond for each rooftop?

Section 320.27(10) attaches the bond to the dealer license rather than to each location, and it does not state a per location bond. Supplemental locations carry their own $50 annual license fee.

What does the bond cost?

Premium is a percentage of the $25,000 penalty, set by the surety after reviewing the owners' personal credit and, for larger dealer groups, financial statements and time in business. Clean credit and an established store price at the low end of a surety's filed rates. Weak credit, a startup point, or a prior bond claim price higher and can require collateral or an indemnitor. No firm rate exists before credit is pulled.

What happens if the surety cancels the bond?

Section 320.27(10) requires the surety to notify the department in writing and give the reason for cancellation. Since the bond is a condition of the license, the license is exposed until a replacement is on file. Arrange the replacement before a cancellation notice reaches the department.

What are the fees and when do I renew?

Initial application is $300 in addition to other fees required by law, and an initial applicant may pay $300 for the first year and $75 for the second. Renewal is $75 for one year or $150 for two years, on form HSMV 86720. A franchise license expires December 31 of the year of its expiration, so the renewal and the bond continuation both belong ahead of that date.