Alabama DMV Bond

Alabama Dealer Bond

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An Alabama DMV bond, also known as a Motor Vehicle Dealer Bond, is a type of surety bond required by the Alabama Department of Revenue for individuals or businesses who want to become licensed motor vehicle dealers in the state. The bond provides a financial guarantee that the dealer will comply with state laws and regulations relating to the sale of motor vehicles, and will pay any necessary taxes and fees to the state. If the dealer fails to meet these obligations, the bond can be used to compensate any affected parties, such as customers or the state government. The required bond amount may vary depending on the specific license and dealership type, and must be obtained from a licensed surety bond provider

What is an Alabama Dealer Bond? 

Alabama Car Dealer Bonds are required by The Department of Revenue to obtain your Dealer license. The Alabama Dealer Bond amount is set at $50,000. The bond ensures that the principal shall comply with the conditions of any contract made by such licensee in connection with the sale or exchange of any motor vehicle (as that term is defined by Section 32-8-2, Code of Alabama 1975) and shall not violate any of the provisions of law relating to the conduct of the business for which it is licensed.

This Bond is further conditioned upon the faithful performance of Principal as Designated Agent, either personally, through any of their officer or employees, or through a title service provider, and any Title Service Provider to comply with all of the duties and requirements of any part of the Chapter starting at Section 32-8-1, Code of Alabama 1975, and the Chapter starting at section 32-20-1, Code of Alabama 1975.

Different parts of a Dealer bond:

 The bond is required when The Obligee (Department of Revenue) is the entity requiring you to get the bond.  There are 3 parts to a surety bond. The Principal "YOU", The Surety Company, and the Obligee. The Principal is the business or individual applying for the Surety Bond. The Obligee is the individual or entity requiring the Surety Bond and the Surety Company is the company who provides the Surety Bond coverage.


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Alabama Car Dealer Bond Information and Requirements:

All licensees are required to submit to the department a continuous bond in the amount of $50,000.
All dealers are required by law to become designated agents of the department. The dealer bond also satisfies the designated agent bonding requirement.

Dealer License and License Plate Requirements

This is a summary of information regarding the requirements to obtain Alabama dealer licenses and dealer license plates. Information presented contains all changes in Act 2019-244 effective October 1, 2020.

Step 1: Obtaining an Alabama Motor Vehicle Dealer License

Who is required to be licensed?
What are the dealer license fees?

  • Master Dealer License: $125.00

  • Each additional place of business: $ 5.00
  • Off-site sales license: $25.00
  • Master Off-site Sales License: $25.00

Applications for an Alabama dealer regulatory license must be submitted to the department electronically. To apply: Visit the Motor Vehicle License Portal . Upon submission of the license application, a transmittal sheet will be provided that lists which documents must be mailed to the department.

All new and used motor vehicle dealers, including motorcycle and trailer dealers (excluding trailers not subject to titling), wholesale dealers and rebuilders.

(Off-site sales licenses must be purchased at least 10 calendar days prior to sale. Visit the Motor Vehicle License Portal to apply for an off-site license.)A facilitator of an off-site sale is required to obtain a master off-site sales license. The facilitator will be required to verify the off-site license of participating dealers.  The facilitator must list each participating dealer’s off-site sale license number on the application.  If the dealer and facilitator are the same entity, only the master off-site sales event license is required.


What are the bonding requirements?

All licensees are required to submit to the department a continuous bond in the amount of $50,000.

All dealers are required by law to become designated agents of the department. The dealer bond also satisfies the designated agent bonding requirement.
What are the insurance requirements?

  • $25,000 bodily injury/person/accident
  • $50,000 combined bodily injury/accident
  • $25,000 property damage/accident or a combined single limit of $75,000/accident

Step 2: Obtaining Alabama Dealer and Manufacturer License Plates
Who qualifies for each type of license plate?
Are there any restrictions on the number of dealer, dealer transit and manufacturer plates that can be obtained?
  • New motor vehicle dealers may obtain a combined total of 35 dealer and motorcycle dealer license plates
  • Used motor vehicle dealers may obtain a combined total of 5 dealer and motorcycle dealer license plates
  • Licensed new or used dealers may purchase an additional combined total of 25 dealer and motorcycle dealer license plates if they complete applications for certificates of title for 300 or more title transfers in this state during the previous dealer regulatory license year.
What are the fees associated with the plates?
  • Dealer: $25.00
  • Dealer motorcycle: $17.00
  • Manufacturer: $25.00
  • Motorcycle manufacturer: $17.00
Who may legally operate vehicles displaying dealer (D) plates?
  • Prospective purchasers, limited to 72 hours of use
  • Owners of the dealership
  • Partners of the dealership
  • Corporate officers of the dealership
  • Employees of the dealership
  • May be used on vehicles on temporary loan from a dealer to a customer whose vehicle is being serviced or repaired by the dealer.
  • May be used on vehicles on temporary loan to a high school for the purpose of student driver education.
  • May only be displayed on vehicles in the dealer’s/manufacturer’s inventory.
  • May be used for one payload trip only on trucks or truck tractors in a dealer’s inventory with more than 2 axles on the power unit or a GVW exceeding 26,000 pounds. Limited to 72 hours of usage.
Motor Vehicle dealers may display standard plates on vehicles in a dealer’s inventory.  Ad valorem tax is not due when this occurs.
Prohibited uses of dealer (D) plates
  • Rental or lease vehicles
  • Tow trucks
  • Service trucks or vans
  • Other service vehicles
  • Penalties
  • $200 for first violation
  • $500 for each subsequent violation
  • Willful misstatements/documents filed with erroneous information in order to obtain license plates carry a criminal penalty of a Class A misdemeanor and a civil penalty of $1,000 to be assessed by the department.
  • Violating the dealer license law is a Class A misdemeanor.
  • $5,000 civil penalty for failure to maintain a blanket motor vehicle liability insurance policy.
Reporting Requirements

Each dealer must maintain blanket liability insurance coverage for all vehicles owned or associated with the business. Minimum insurance limits are:

After the dealer regulatory license has been obtained, the dealer must visit the county licensing office to purchase the appropriate privilege license(s) (Sections 40-12-51, 40-12-62, or 40-12-169).  Dealer plates will be issued by the Department of Revenue, contingent upon proof of the appropriate privilege licenses.  Dealer plates may be requested in the Motor Vehicle License portal.

Dealer (D) and motorcycle dealer plates may be obtained by licensed motor vehicle dealers.  Manufacturer plates may be obtained by manufacturers of private passenger automobiles, motorcycles, trucks, truck tractors, or trailers, if the manufacturing facility is located in Alabama.

Dealer (D) and motorcycle dealer plate restrictions:

There are no limitations on the number of manufacturer and motorcycle manufacturer plates that can be purchased by manufacturers.

These fees cannot be refunded or prorated.

Are there limitations on the types of vehicles the plates may be used upon?

If the dealer charges customers a fee for the uses above, dealer plates cannot be displayed on the vehicle.

If the dealer license is revoked or forfeited, all dealer plates shall be returned to the Department within 10 calendar days.

If a dealer or manufacturer license plate is lost or stolen, this fact must be reported to law enforcement and a report maintained for audit purposes.

If a plate becomes mutilated to the point that it is illegible, the plate must be returned to the Department, and a replacement plate will be issued upon payment of the appropriate fee (Section 40-12-265, Code of Alabama 1975).

When a motor vehicle is withdrawn from inventory, the licensed dealer shall purchase an Alabama license plate and register the vehicle.

Motor vehicle dealer,  motorcycle dealer, and manufacturer license plates may not be used in lieu of regular issued license plates as a means of avoiding registration and ad valorem tax requirements.

For more details, please see Sections 40-12-390 through 40-12-400 and 40-12-264, Code of Alabama 1975.

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