Ohio Auto Dealer Bond: A Comprehensive Guide

October 26th, 2020

This guide provides information for insurance agents to help pre-owned car dealership owners on Ohio Auto Dealer bonds

At a Glance:

• Average Cost: $150 – $1,250 per year based on the business owner’s credit
• Bond Amount: $25,000
• Who Needs It: All individuals or business entities who sell or deal in 5 or more motor vehicles in a 12 month period either directly or indirectly
• 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 Ohio: The Ohio Bureau of Motor Vehicles (BMV)

Background

Ohio Administrative Code 4501:1-3 mandates auto dealers operating in the state to obtain a motor vehicle dealer license with the BMV. The Ohio 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, used car dealers must purchase and maintain a $25,000 motor vehicle title defect surety bond to be eligible for licensure.

What is the Purpose of the Ohio Auto Dealer Bond?

Ohio requires used 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 State of Ohio. 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 an Ohio Auto Dealer Bond?

BondExchange makes obtaining Ohio 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 ensure 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 Ohio Auto Dealer Bond Cost?

The $25,000 Ohio Motor Vehicle Dealer surety bond can cost anywhere between $150 to $1,250 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 $25,000 bond requirement.

$25,000 Ohio 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 Ohio Define “Motor Vehicle Dealer”?

To paraphrase Ohio Revised Code 4517.01, a motor vehicle dealer is any person or business entity who sells, manufactures or exchanges 5 or more motor vehicles in a 12 month period either directly or indirectly.

How Do Auto Dealers Apply for a License in Ohio?

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

License Period – The Ohio Dealer License expires on March 31 of every other year regardless of the date of issuance and must be renewed before the expiration date.

Step 1 – Determine the License Type

Ohio requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of Ohio Dealer Licenses.

• • Used Dealer – Sells only used motor vehicles
  • Distributor – Authorized by a motor vehicle manufacturer to distribute new motor vehicles to dealers
  • Leasing Dealer – Leases motor vehicles for 30 days or more
  • New Dealer – Sells new or used motor vehicles
  • Construction Equipment Auction Licence – Auctions construction equipment
  • Auction Owner – Sells motor vehicles at an auction

***The remaining steps will focus on how to obtain the Used Dealer License. Dealers can click on the name of each license type to learn the specific requirements for obtaining each license.***

Step 2 – Establish a Location

Before dealers can obtain their dealer license they must first buy or lease a permanent business location. The location must meet the following requirements:

• • Compliance with all applicable zoning regulations
  • Commercial use only and is separate from all other businesses
  • Minimum 3,500 square foot lot (not including the office or driveways)
  • A permanent office meets the following requirements:
    • At least 180 square feet
    • Located on the display lot
    • Has a desk, three chairs, and filing cabinets
    • Adequate lighting and utilities
  • Contains a permanently affixed sign that displays the business name in letters that are at least 6 inches high
  • Telephone number registered in the name of the business
  • Display the hours of operation near the entrance to the office
  • Staffed by either a licensed salesperson or owner during the hours of operation

Step 3 – Complete Dealer Training

Used vehicle dealers must complete a pre-licensing training course and submit proof of completion with their application. Dealers can register for a pre-license training course here.

Step 4 – Purchase a Surety Bond

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

Step 5 – Complete the Application

All used dealer regulatory license applications should be mailed to:

Ohio Bureau of Motor Vehicles
Attention: Dealer Licensing Section
P.O. Box 16521
Columbus, Ohio 43216-6521

Dealers must complete the Used Dealer Application, including the following steps.

• • 5.a Background Check – Each person listed on the application must complete a criminal history record with the Ohio Bureau of Criminal Identification and Investigation (BCI). Dealers can complete their background check here.
  • 5.b Photographs – Dealers must submit pictures of their business location with their application
  • 5.c Dealer Plates – Dealers can request the number of dealer plates they would like to receive on their application. The number of dealer plates allowed depends on the dealer’s annual sales volume as outlined in the below table originally found in the Used Dealer Application:

• • 5.d Business Registration – Dealers must register their business with the Ohio Secretary of State and submit a Certificate of Registration with their application. Dealers can register their business here.
  • 5.e FEIN – Dealers must submit their Federal Employer Identification Number to the Ohio BMV. Dealers can obtain a FEIN here.
  • 5.f Vendors number – Dealers must obtain a vendor’s number from their County Auditor’s Office. Dealers can obtain a vendor’s number here.

Step 6 – Pay Fees

Dealers must pay a $254.75 application fee when submitting their used dealer application. There is a $10.25 fee for each additional dealer plate requested.

Step 7 – Pass Inspection

After the dealer has submitted their license application. An inspector from the BMV will perform an inspection of the dealer’s business location to ensure that the location meets all of the requirements outlined in Step 2.

How Do Ohio Auto Dealers Renew Their License?

The Ohio Dealer License expires on March 31 of every other year regardless of the date of issuance and must be renewed before the expiration date. Dealers can renew their licenses through the BMV’s licensing portal located here. Dealers should include a copy of their surety bond continuation certificate provided by their insurance agent.

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

The State of Ohio does not require dealers to maintain any form of liability insurance. However, dealers must file a $25,000 motor vehicle title defect bond.

How Do Ohio Auto Dealers File Their Bond?

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

Ohio Attorney General
Consumer Protection Section
Attn: TDRF Unit Surety Bond
30 E. Broad Street, 14th Floor
Columbus, OH 43215

The $25,000 surety bond requires signatures from both the surety company that issues the bond and the auto dealer. The surety company should include the following information on the bond form:

• The legal name of entity/individual(s) buying the bond
• Surety company’s name
• The date on which the bond will be executed
• Date the bond is signed

How Can Ohio Auto Dealers Avoid Bond Claims?

To avoid claims on the Motor Vehicle Dealer Bond, dealers must follow all dealer regulations in the state, 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
• Do not tamper with a vehicle’s odometer
• Disclose all repairs made on a motor vehicle
• Do not engage in any illegal selling practices

What Other Insurance Products Can Agents Offer Dealers in Ohio?

Ohio does not require dealers to obtain any form of liability insurance, however, most reputable dealers will obtain insurance anyway. 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 Ohio Auto Dealer Customers?

Ohio conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed 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.