Tennessee Motor Vehicle Dealer Surety Bond

A Tennessee motor vehicle dealer surety bond is a required license bond for any person or business engaged in the sale of motor vehicles within the State of Tennessee. Whether you operate as a franchise dealer, an independent used car dealer, a wholesale dealer, an automobile auctioneer, or a recreational vehicle dealer, the Tennessee Motor Vehicle Commission (a division of the Tennessee Department of Commerce and Insurance) requires you to post a $50,000 surety bond as part of the dealer licensing process. Surety One, Inc. offers quick, no-hassle underwriting for Tennessee motor vehicle dealer bonds, including options for new applicants and those with challenged credit.

Bond Amount & Requirements

Tennessee Code Annotated §55-17-111(g) requires a $50,000 motor vehicle dealer surety bond for all dealer license applicants. The bond must be filed using the Commission’s official form IN-1316 (Motor Vehicle Dealer Bond) and must be issued by a corporate surety authorized to transact the business of indemnity and suretyship in Tennessee. A letter of credit is not an acceptable substitute for the surety bond.

The bond protects any person — including the Tennessee Motor Vehicle Commission and the State of Tennessee — who suffers a loss because of either: (1) nonpayment by the dealer of a retail customer’s prepaid title, registration, or other related fees or taxes; or (2) the dealer’s failure to deliver a valid vehicle title certificate free and clear of any prior owner’s interests and all liens (except a lien created by or expressly assumed in writing by the buyer).

Bond Amount	License Type	Description
$50,000	Franchise Dealer	Sells new and used motor vehicles under a manufacturer or distributor franchise agreement
$50,000	Used Motor Vehicle Dealer	Sells used motor vehicles to the public
$50,000	Wholesale Dealer	Sells motor vehicles exclusively to other licensed dealers
$50,000	Automobile Auction	Provides facilities and conducts motor vehicle auction sales
$50,000	Recreational Vehicle Dealer	Sells recreational vehicles (RVs) to the public
$50,000	Manufacturer / Distributor	Manufactures or distributes motor vehicles within Tennessee

Certificate of Deposit Alternative

In lieu of a corporate surety bond, Tennessee Code §55-17-111(g)(3) permits dealers to secure the bond requirement by depositing collateral in the form of a certificate of deposit (CD) with a face value equal to the $50,000 bond amount. The CD must be deposited with an authorized state depository designated by the Commission. Interest on the deposited CD is payable to the dealer.

Who Needs This Bond?

Tennessee Code §55-17-102(17) defines a motor vehicle dealer broadly. Any person who sells or offers for sale more than five (5) motor vehicles within a 12-month period is required to hold a Tennessee motor vehicle dealer license and must file the $50,000 surety bond. The applicant must certify that motor vehicle dealing constitutes or will constitute the principal business of the applicant.

The bond is required for:

• Franchise dealers (new and used vehicles)
• Independent used motor vehicle dealers
• Wholesale motor vehicle dealers
• Automobile auction operators (and each branch thereof)
• Recreational vehicle (RV) dealers
• Motor vehicle manufacturers and distributors

How Much Does the Bond Cost?

The cost of a Tennessee motor vehicle dealer surety bond (the “premium”) is a small percentage of the full $50,000 bond amount. Your exact premium is determined by a number of underwriting factors including your personal credit score, business financial strength, industry experience, and claims history. Because each applicant’s profile is unique, premiums vary and are quoted on an individual basis.

Surety One, Inc. offers competitive rates for all credit profiles, including programs for applicants with challenged credit. Surety bond application review and quoting are free of charge. There is no obligation to purchase. Contact us for your personalized quote.

Tennessee Dealer License Requirements

In addition to the $50,000 surety bond, the Tennessee Motor Vehicle Commission requires the following for a dealer license:

• Completed motor vehicle dealer license application with applicable fees
• Eligibility Verification for Entitlements Act Attestation
• Pre-licensing dealer education (required for new applicants)
• An established place of business with a minimum of 288 square feet of office space and ADA-compliant restroom facilities
• A display lot capable of holding at least 15 vehicles for sale, plus a minimum of 3 customer parking spots
• Permanent signage displaying the complete dealership name with letters a minimum of 8 inches in height
• Written zoning compliance approval from the applicable county or municipal entity
• Tennessee Department of Revenue Sales & Use Tax Certificate (via TNTAP)
• Business tax license (required in some cities and counties)
• Garage liability insurance meeting state minimum coverage standards
• Service agreement with a repair garage if no mechanic is on site
• Financial statements with a CPA compilation letter showing a minimum net worth of at least $10,000
• Financial disclosure for any owner, partner, or director with 5% or more interest
• Copy of corporate charter, articles of organization, or Certificate of Authority (if applicable)
• Franchise agreement / letter of acknowledgment from manufacturer (franchise dealers only)
• On-site business location inspection by the Commission after application submission

Filing, Renewal & Cancellation

The original executed surety bond (Form IN-1316) must be submitted with the dealer license application. The name on the bond must be exactly the same as the entity being licensed and must include the physical business address. Tennessee dealer licenses and bonds are issued on a two-year cycle, beginning in the month of expected license issuance and expiring on the last day of the same month two years later.

Any modification to the bond, any claim made against the bond, and notice of any claim payment must be sent via certified mail to the Executive Director of the Tennessee Motor Vehicle Commission within seven (7) calendar days after the event. The surety may terminate liability by providing sixty (60) days’ written notice via certified mail to both the dealer and the Executive Director. No suit may be maintained to enforce liability on the bond unless brought within two (2) years after the event giving rise to the cause of action.

A dealer must submit changes of address, ownership, employment, trade name, or franchise line-make to the Commission in writing within 30 days of the change.

Bond Claims

A claim against the Tennessee motor vehicle dealer surety bond may be filed by any person — including the State of Tennessee — who suffers a loss due to the dealer’s nonpayment of prepaid title, registration, or related fees/taxes, or the dealer’s failure to deliver a valid vehicle title certificate. The aggregate liability of the surety to all persons shall not exceed the $50,000 bond amount. Every bond provides for suit by any person who has a cause of action under Tennessee Code Title 55, Chapter 17.

Tennessee Motor Vehicle Commission
Department of Commerce and Insurance
500 James Robertson Parkway, 5th Floor
Nashville, TN 37243-0565
Phone: (615) 741-2711
Email: Motor.Vehicle@tn.gov
Web: tn.gov/commerce/regboards/mvc

Surety One, Inc. is the Tennessee surety bond expert provider, licensed in all fifty states, U.S. territories, and Canada. We offer competitive rates and excellent customer service for Tennessee motor vehicle dealer bonds and all other license bond classes. Need help meeting your Tennessee Motor Vehicle Commission licensing requirements? Call us at (800) 373-2804, email us at Underwriting@SuretyOne.com, or click here to chat with a live underwriter (no bots!) for immediate assistance. We’re here to support your business success.

Surety bond application review and quoting are free of charge. There is no obligation to purchase.

What We Need From You

Obligee's Bond Form