Surety Bond Encyclopedia

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

Brief Summary

In Virginia the $50,000 dealer bond is a new dealer requirement with an end date. You post it with your original license, keep it for three consecutive years alongside the $350 annual Motor Vehicle Transaction Recovery Fund fee, and once you finish that stretch with no claims you can drop it. Paying a yearly premium keeps $50,000 of cash in the business while you get established.

Virginia requires a $50,000 surety bond from every applicant for an original motor vehicle dealer license, filed with the Motor Vehicle Dealer Board before the license issues. Under Va. Code 46.2-1527.1 the bond stays in place for three consecutive years along with a $350 annual Fund fee. After three years with no claims against the bond or the Fund, the dealer pays the $100 annual Fund fee instead and no longer has to hold the bond. The surety must be licensed in Virginia and approved by the Attorney General.

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

Confirm you are applying for an original Virginia dealer license, which triggers the three-year bond and the $350 annual Fund fee.
Use the exact legal name and dealership address that appear on your MVDB license application.
Provide owner information for the surety's underwriting review and accept the quoted premium.
Have the surety complete and sign the MVDB 2 Motor Vehicle Dealer Bond Form.
Submit the bond to the Motor Vehicle Dealer Board with your license application, dated within 30 days of submission.
Keep the bond in force for three consecutive years, then confirm with the Board whether you can drop it and move to the $100 annual Fund fee.

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

The bond is for new dealers, and it runs three years

Most people assume every Virginia dealer carries a bond forever. That is not how it works. Virginia pairs the bond with the Motor Vehicle Transaction Recovery Fund. Under Va. Code 46.2-1527.1, an applicant for an original dealer license pays a $350 annual Fund fee and holds a $50,000 bond for three consecutive years. A dealer who gets through those three years with no claims against the bond or the Fund then pays the regular $100 annual Fund fee and is no longer required to hold the $50,000 bond.

The MVDB fee sheet applies this to new dealers opening on or after July 1, 2015, and also lists a $50,000 bond and the $350 fee for an added location that has never paid into the Fund.

Who is outside the Fund rules

Section 46.2-1527.1 does not apply to manufactured home dealers or to the nonprofit organizations it names. Recreational vehicle, trailer and motorcycle dealers licensed before July 1, 2015 are outside the Fund article entirely.

A renewing dealer with three claim free years can also elect continuous bonding instead of Fund participation. That is a separate $100,000 bond under Article 3.2 (Va. Code 46.2-1527.9), not the $50,000 new dealer bond on this page.

What the bond covers

Va. Code 46.2-1527.2 conditions the bond on the dealer not practicing fraud, making fraudulent representations or violating the dealer chapter. A person who suffers loss in connection with the purchase or lease of a motor vehicle, or from a breach of an extended service contract, can recover a final court judgment against the dealer up to $25,000. That per person figure is increased each January 1 by the Consumer Price Index for used motor vehicles. The surety's total liability to everyone, across all claims and all years, cannot exceed $50,000.

Filing details

The bond goes on the Board's Motor Vehicle Dealer Bond Form, MVDB 2, and the Board asks that it be dated within 30 days of submission. The surety must give the Board 30 days' notice before cancelling. If the bond becomes insufficient, the Board can suspend the license.

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

Bond amount of $50,000 per Va. Code 46.2-1527.1 and 46.2-1527.2.
Corporate surety licensed in Virginia and approved by the Attorney General.
Filed on MVDB 2 with the Virginia Motor Vehicle Dealer Board.
$350 annual Motor Vehicle Transaction Recovery Fund fee during the same three years.
30 days' notice to the Board before the surety can cancel.

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

How long do I have to keep the bond?

Three consecutive years from your original license. Va. Code 46.2-1527.1 says that after three years with no claims against the bond or the Motor Vehicle Transaction Recovery Fund, you pay the $100 annual Fund fee and are no longer required to hold the $50,000 bond or pay the $350 fee.

I am opening a second location. Do I need another bond?

The MVDB fee sheet lists a $50,000 bond and the $350 annual Fund fee for three years for a subsequent location that has never paid into the Fund. If you have already met the three-year requirement, the sheet lists a one-time $100 Fund fee for the new location instead. Confirm with the Board for your situation.

How much can one customer collect from the bond?

Up to $25,000 per person on a final court judgment, increased each January 1 by the Consumer Price Index for used motor vehicles. The surety's total liability across all claims and years is capped at $50,000.

Are any dealers excluded from these rules?

Yes. Section 46.2-1527.1 does not apply to manufactured home dealers or the nonprofit organizations it names, and the Fund article does not apply to recreational vehicle, trailer or motorcycle dealers licensed before July 1, 2015.

What does my premium depend on?

The surety prices the bond from an underwriting review of the owners, mainly personal credit and business history. The bond amount is fixed at $50,000, so the review affects the price you pay, not the coverage.