Surety Bond Encyclopedia

USED Motor Vehicle Dealer ($50,000) Bond - Statewide in Tennessee

Brief Summary

If you sell more than five used vehicles in a year in Tennessee, you need a dealer license, and the license needs this $50,000 bond. It runs two years on the Motor Vehicle Commission's own form, so one filing covers the full license period while you keep your cash in inventory.

In Tennessee the license question starts with volume. Once an individual sells or offers to sell more than five vehicles in 12 months, Commission rule 0960-01-.20 treats it as unlicensed dealing. A licensed used dealer must show a surety bond of at least $50,000 under Tenn. Code Ann. 55-17-111(g), on the Motor Vehicle Commission's form IN-1316, issued for two consecutive years. A letter of credit will not satisfy the requirement.

We can help with all Tennessee bonds!

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

Confirm you need a license: more than five vehicles sold or offered in 12 months requires one.
Secure a facility that meets rule 0960-01-.21 before applying.
Have the surety write the $50,000 bond on form IN-1316 for two consecutive years, starting in the month your license is expected to issue.
Sign the bond as principal owner, have it notarized, and attach the surety's power of attorney.
Submit the bond, insurance certificate and application through the Commission's online licensing system.
Renew the bond with each biennial license renewal so coverage never lapses.

Detailed Information About the Tennessee USED Motor Vehicle Dealer ($50,000) Bond:

When a used car seller needs this bond

The question most people get wrong is whether they need a license at all. Tennessee Motor Vehicle Commission rule 0960-01-.20 lets an individual sell up to five used vehicles titled in his or her own name within 12 months. Selling or offering more than five in that period is a violation without a license, and so is selling vehicles titled to someone else. Once you are licensed, Tenn. Code Ann. 55-17-111(g) requires proof of a surety bond of at least $50,000 with every license application and renewal.

A lot, an office and an insurance certificate

A used dealer does not need a franchise. What the Commission checks instead is the business itself. Rule 0960-01-.21 requires a facility separate from any other business, with no residence, tent or temporary stand, at least 288 square feet of office space, a restroom, a display lot for 15 vehicles and three customer parking spaces. The Commission's dealer page adds that the lot must be compacted gravel, not grass, and asks for a certificate of liability insurance of at least $300,000 per occurrence and at least one licensed salesperson. The page lists a $600 initial application fee.

What the bond pays for

The bond protects any person who loses money because the dealer did not pay a retail customer's prepaid title, registration or related fees or taxes, or did not deliver a valid title free of prior owners' interests and liens. Title problems on used inventory are exactly what this bond is built for. Rule 0960-01-.29 adds a related duty: a dealer who knows a vehicle has a salvage history must disclose it on the Commission's form and get the buyer's written acknowledgment before the sale closes, and the buyer cannot waive it.

Term, form and cancellation

The Commission asks for a $50,000 corporate surety bond signed by the principal owners, issued for two consecutive years, starting in the month the license is expected to issue. Rule 0960-01-.22 requires the bond to remain in force as long as you hold the license, and the surety must give 60 days' notice before cancelling. The statute lets the Commission accept a certificate of deposit as collateral instead of a surety bond.

Eligibility and Requirements for a Tennessee USED Motor Vehicle Dealer ($50,000) Bond:

Surety bond of at least $50,000 under Tenn. Code Ann. 55-17-111(g).
Tennessee Motor Vehicle Commission dealer bond form IN-1316 with power of attorney attached.
Facility with at least 288 square feet of office space, a restroom and a 15 vehicle display lot.
Certificate of liability insurance with at least $300,000 per occurrence.
At least one licensed motor vehicle salesperson.

Tennessee USED Motor Vehicle Dealer ($50,000) Bond FAQs:

How many cars can I sell before I need a dealer license and bond?

Rule 0960-01-.20 allows an individual to sell up to five used vehicles titled in his or her own name in a 12 month period. More than five in that period requires a dealer license, and the license requires the $50,000 bond.

Is the bond smaller for a used only dealer?

No. Tenn. Code Ann. 55-17-111(g) sets a minimum of $50,000 for every motor vehicle dealer, new or used.

What kinds of claims does the bond cover?

Losses caused by the dealer failing to pay a customer's prepaid title, registration or related fees or taxes, or failing to deliver a clear title with the vehicle. Total payouts are capped at the bond amount.

Can I post cash or a letter of credit instead?

A letter of credit is not accepted. The statute allows the Commission to accept a certificate of deposit with a face value equal to the bond amount as collateral, so ask the Commission before going that route.

What happens if my surety cancels?

The surety must give the Commission 60 days' notice. Under rule 0960-01-.22 you must either stop operating until you show new coverage or file replacement proof of coverage.