District of Columbia Auto Dealer Bond: A Comprehensive Guide

October 8th, 2020

This guide provides information for insurance agents to help new and pre-owned car dealership owners on District of Columbia (Washington D.C.) Auto Dealer bonds

At a Glance:

• Average Cost: $200 – $2,250 per year, based on the business owner’s credit
• Bond Amount: $25,000
• Who Needs It: All individuals and businesses who sell or deal in motor vehicles
• Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
• Who Regulates Dealers in the District of Columbia: The District of Columbia (DC) Department of Motor Vehicles

Background

Code of the District of Columbia 31-5692.01 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the DMV. The District of Columbia legislature enacted the license and regulations to ensure that dealers engage in ethical business practices and remit required taxes and fees. In order to provide financial security for the enforcement of the license law, dealers must purchase and maintain a $25,000 motor vehicle dealer surety bond to be eligible for licensure.

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What is the Purpose of the District of Columbia Auto Dealer Bond?

The District of Columbia requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for the Motor Vehicle Dealer License. The bond ensures that the public will receive compensation for financial harm if the auto dealer fails to comply with the licensing regulations and that the dealer will pay all required taxes and fees to the District of Columbia. In short, the bond is a type of insurance that protects the public if the dealer breaks licensing laws.

How Can an Insurance Agent Obtain a Washington DC Auto Dealer Bond?

BondExchange makes obtaining a DC Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How Much Does the District of Columbia Auto Dealer Bond Cost?

The $25,000 District of Columbia Motor Vehicle Dealer surety bond can cost anywhere between $200 to $2,250 per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. We also offer easy interest-free financing for premiums over $500. The chart below offers a quick reference for the approximate bond cost on the $50,000 bond requirement.

$25,000 DC Auto Dealer Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does the District of Columbia Define “Motor Vehicle Dealer”?

The District of Columbia considers any person or business who sells or deals in new or used motor vehicles to be a motor vehicle dealer subject to licensing regulations.

How Do Dealers Apply for a Motor Vehicle Dealer License in DC?

Dealers in the District of Columbia must navigate several steps to secure their motor vehicle dealer license. Below are the general guidelines, but dealers should refer to the DMV’s Dealer Page for details on the process.

License Period – The District of Columbia Dealer license expires on October 31 of every year and must be renewed before the expiration date.

Step 1 – Determine the License Type

The District of Columbia has two dealership types:

• • New Car Dealership – Dealers who sell new or used motor vehicles
  • Used Car Dealership – Dealers who sell used motor vehicles only

Step 2 – Establish a Location

Dealers in the District of Columbia must establish a business location before receiving their dealer license. Dealers must obtain a Certificate of Occupancy from the Department of Consumer and Regulatory Affairs certifying that their business location is compliant with all applicable zoning regulations. Dealers can call the District of Columbia Office of Zoning at (202) 442-4576 to learn more about the location requirements.

Step 3 – Complete the Application

All new dealer regulatory license applications and dealer regulatory license renewal applications can be completed online at the District of Columbia’s dealer licensing portal.

• • 3.a Clean Hands Certificate – All dealer applicants must submit a Clean Hands Certificate verifying they do not owe the District of Columbia more than $100 in fees or taxes.
  • 3.b Business License – Dealers must obtain a Basic Business License and submit the original license with their dealer application. Obtaining a Basic Business License has many of the same requirements as the dealer license, but has additional steps as well. Dealers can apply for a basic business license here.
  • 3.c FEIN Number – Dealers must have a Federal Employer Identification Number to be eligible for licensure. Dealers can obtain an FEIN here.
  • 3.d Drivers License – Dealers must submit a photocopy of their drivers license or another approved form of identification.
  • 3.e Salespersons License – Every person selling motor vehicles must be a licensed salesperson. Dealers should be a licensed salesperson if they intend on directly selling motor vehicles. Dealers can obtain a salesperson license here.
  • 3.f Insurance – Dealers must maintain dealership insurance on all vehicles with dealer plates and present proof of insurance when submitting their application. Dealers can learn more about the insurance and dealer plate requirements here. The District of Columbia does not have a minimum limit required.

Step 4 – Pay Fees

Dealer must pay the fees calculated by the dealer licensing portal. The following fees are most often required when obtaining the dealer license:

• • $556 to obtain a Basic Business License
  • $100 dealer registration fee
  • $154 salesperson application fee

Step 5 – Purchase a Surety Bond

Dealers must purchase and maintain a $25,000 motor vehicle dealer bond.

Step 6 – Notarize the Application

After the dealer has submitted their application they must print it out and have it notarized. Dealers should keep their notarized application for the next step.

Step 7 – Finalize the License

After the dealer has submitted their application, the District of Columbia DMV will contact them to set up an appointment to finalize the application. Dealers must bring their notarized application and all supporting documents to the meeting.

How Does a DC Motor Vehicle Dealer Renew Their License?

The District of Columbia Dealer license expires on October 31st of every year and must be renewed before the expiration date. Dealers can renew their license online at the District of Columbia’s dealer licensing portal. Dealers should maintain records of their initial application forms to assist with the renewal process.

What Are the Insurance Requirements for the DC Auto Dealer License?

The District of Columbia requires dealers to maintain dealership insurance on all vehicles with dealer plates. There is no insurance limit requirement, dealers just need to make sure all vehicles with dealer plates are properly insured. Dealers must also file a $25,000 motor vehicle dealer bond.

How Do District of Columbia Auto Dealers File Their Bond?

The $25,000 surety bond must be signed by both the surety company that issues the bond and the auto dealer. The bond form should include the following items:

• Legal name of both the business and individual(s) buying the bond
• Physical address where the business will operate
• Surety company’s name, address and signature
• Year the dealer license will expire
• Signature of witness to the principle

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Wells Fargo Bank
DC Government Wholesale Lockbox 91360
7175 Columbia Gateway Dr
Columbia, MD 21046

Dealers can also deliver the bond form in person to:

DCRA
Business Licensing Center
1100 4th St. S.W.
2nd Floor
Washington, DC 20024

How Can DC Auto Dealers Avoid Bond Claims?

To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the district, including some of the most important issues below that tend to cause claims:

• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay sellers of vehicles promptly and in full
• Transfer all vehicle titles when sold
• Pay taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
• Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in the District of Columbia?

The District of Columbia requires dealers to obtain dealership insurance on all vehicles with dealer plates. Most reputable dealers that provide towing or service station services should also obtain garage keepers liability. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for DC Auto Dealer Customers?

The District of Columbia conveniently provides a public database to search for active motor vehicle dealers in the district. The database can be accessed on the DMV site here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What Other States Require Auto Dealer Bonds?

All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.