California MVD Wholesale Dealer bond

Introduction

In the state of California, car dealers need a California Car Dealer bond. This is required by The State of California Motor Vehicle Department "MVD" and in order to get their hands on a dealer license, wholesale dealers need to secure a California Wholesale Dealer bond. A wholesale dealer is an automotive dealer who exclusively sells vehicles between licensed dealers. Even with California Court of Appeal decision, Karton v. Ari Design & Construction, Inc. 61 Cal.App.5th 734 (Ct. App. 2d District 2021), which held that a surety can be held liable for attorney's fees in excess of the penal sum, we still write these bonds and have the lowest rates.

Keep reading to learn more about how California Wholesale Dealer bonds work.

California Wholesale Dealer Bond Definition and Examples

The State of California Motor Vehicle Department "MVD" requires that wholesale automotive dealerships comply with select state government licensing requirements. There are multiple types of surety bonds, each of which come with their own unique set of requirements and uses.

A California Wholesale Dealer bond ensures your legal compliance with the California Vehicle Code and signals to customers that want to work with a wholesale dealership that your dealership is licensed and following the law. Not only is having a California Wholesale Dealer bond a legal requirement, but it serves the purpose of giving your business partners some much needed peace of mind. 

Obtaining a California Wholesale Dealer bond is part of a licensing process that wholesale auto dealers in California have to go through in order to confirm their suitability for conducting dealership activities in the great state of California. 

There are three parties involved in MVD bonds:

• Principal. The automotive dealer who needs the bond.

• Obligee. The party that legally requires that automotive dealers take out the bond, which is usually a government agency. 

• Surety. The company who issues the MVD bond — they’re also the ones that guarantee to the obligee that the automotive dealer will comply with all necessary requirements. 

How Does a California Wholesale Dealer Bond Work?

Legally, you must have a California Car Dealer bond in order to obtain your Dealer license. That bond amount must be $50,000 in order to sell both new and used cars. However, if you’re a wholesale dealer, that bond amount is $10,000. So, why does the state of California insist dealers have an MVD or a Wholesale Dealer bond? These bonds guarantee that the principal (remember, this is the dealer) comply with the conditions of any contract made by such licensee in connection with the sale or exchange of any motor vehicle and that the dealer won’t violate any of the provisions of law relating to the conduct of the business for which it is licensed.

If your wholesale dealership will be doing business with different states, you’ll need a different Wholesale MVD Dealer bond for each state you will be transacting business in.

Alongside having a Wholesale Dealer bond, California wholesale automotive dealers also need to maintain a business office, but they aren’t required to post their wall license, have a display area, or have a business sign.

What Happens if A Claim is Filed Against a California Wholesale Dealer Bond?

A California Wholesale Dealer bond protects the customers of a wholesale automotive dealership. If a wholesale dealership fails to follow the California Vehicle Code or any other applicable laws, this can lead to a claim being filed against their Wholesale Dealer bond and to a fair reimbursement for the affected parties. 

With a California Wholesale Dealer bond, the claimant can seek up to $10,000 worth of compensation, which the dealership will need to repay fully per the bond indemnity agreement. Ideally wholesale dealers will follow all appropriate rules and regulations so they can avoid costly bond claims.

What to Keep in Mind When Shopping for a California Wholesale Bond

If you need a California Wholesale Dealer bond, there’s a few important elements to keep in mind when shopping for one. You should always compare the bonding capacity, premium, and term of each bond you consider buying to make sure you’re getting the most bang for your buck. 

• Bonding capacity. This term can also be referred to as the bonding amount. Both a bonding capacity and bonding amount refer to the highest amount an individual can claim if the principal breaks a rule or regulation. Because a California Wholesale Dealer bond’s bonding capacity is $10,000, that means that $10,000 is the highest amount an individual can claim against a wholesale dealership. If the claim is against a new or used car dealership located in California, they can claim up to $50,000, as that is the bonding capacity for that type of dealership. 

• Bond premium. What it will cost you to purchase a Wholesale Dealer bond, is known as the bond premium. Generally, you only spend a small percentage of the bond premium amount in order to purchase a California Wholesale Dealer bond. We have a program that can write this bond with NO Credit check for $200.

• Bond term. Generally, bond terms only last a year and you must renew them annually, that being said it’s a good idea to confirm exactly how long the bond will be active. 

Apply for your California Wholesale Dealer bond today!

The below information is what the state will require in addition to the bond.

Use these resources to help you apply for your vehicle dealer license:

If you deal new vehicles, complete all forms in the New Dealer Applications Forms Packet (OL 248N).

If you deal used vehicles (dealer-wholesale only), complete all forms in the Used Dealer Applications Forms Packet (OL 248U).

Live scan fingerprint and Request for Live Scan Clearance (receipt) (DMV 8016) for each person listed under ownership on the Application for Original Occupational License (OL 12).

Fingerprint card (ADM 1316) (out-of-state applicants only). Fingerprint cards may be obtained by calling Occupational Licensing (OL) at (916) 229-3126 or from a DMV inspector office.

You may also need:

Certificate of Completion, Dealer Education Program (used vehicle dealers and wholesale-only dealers).

Proof of successfully passing the used dealer test administered by DMV (used vehicle dealers and wholesale-only dealers).

Each applicant may make 3 attempts to pass the test. If an applicant fails the test, they must pay a $16 fee and wait one week to re-test. After the third attempt, if the applicant does not pass, they must take the dealer education program again and the testing process starts over with another 3 attempts.

Letter of Authorization (New trailer dealers only. Required for each line).

Statement of Information (SI 550) or Statement of Information LLC (LLC 12) filed with the Secretary of State (corporation, limited liability company, or limited liability partnership owned businesses only).

Copy of California Department of Tax and Fee Administration (CDTFA) Resale Permit (enables you to collect sales tax).

Photographs of the business location (refer to OL photography requirements).

Collect your paperwork and fees.

Once you have completed these forms and collected all documents, make an appointment with an OL inspector. The OL inspector will:

Inspect the main business office where you conduct business.

The office of the principal place of business and each location of the dealership must be established to the extent that its construction is not temporary, transitory, or mobile in nature (a trailer coach office is acceptable if it is not part of the dealer’s vehicle inventory for sale while it is being used as an office and otherwise meets the requirements of the California Vehicle Code [CVC]). The place of business is a place actually occupied either continuously or at regular periods by the dealer.

Inspect all books and records pertinent to the business.

Inspect the display area (not required if wholesale only). Show Citation 11

The display area of the principal place of business must be of sufficient size to physically accommodate vehicles of a type for which the dealership is licensed to sell.

The display area must be clearly for the exclusive use of the dealer for display purposes only.

Additional display areas are permitted within a radius of 1,000 feet from the principal place of business and any licensed branch location without being subject to separate licensing. However, such display areas must also meet the signing requirement as identified in CVC §§11709 (a). Title 13, 270.08, 270.08 (a) and 270.08 (b).

Inspect signs (not required if wholesale only dealer).

Signs must be of a permanent nature, erected on the exterior of the office or on the display area, and be constructed or painted and maintained so as to withstand reasonable climatic effects and be readable as provided for in CVC §§ 11709. CCR, Title 13, 270.06.

A temporary sign or device may suffice when a permanent sign is on order. Evidence of such order must be submitted to DMV prior to issuance of a temporary permit or license. Show Citation 22

Fees for the State:

$175 non-refundable application fee

$1 family support program fee

$70 fee for each branch location (if applicable)

$88 fee for each dealer plate (plus county fees, if applicable)

$90 fee for each motorcycle plate (plus county fees, if applicable)

This figure will vary depending on the county where your business is located

Dealer plates are not required

$300 new motor vehicle board fee, per location (new automobile, commercial, motorcycle, ATV, motorhome, and recreational trailer dealers only)

$100 autobroker endorsement fee

$42 fee for each person submitting ADM 1316 Fingerprint Card (out-of-state applicants only)

$16 examination fee

Application Checklist

Take a look at the applicable checklist to make sure you completed all the application steps:

New Dealer Application Check List OL (248A).

Used Dealer or Dealer Wholesale Only Application Checklist (OL 248B).

How to Renew a Vehicle Dealer License. To renew your license, complete and submit the following:

Proof of continuing education (required every two years).

Renewal Application (OL 45).

$50,000 Bond Exemption Application (OL 56) (wholesale-only dealers, if applicable).

Report Or Replace Lost, Stolen, Or Surrendered Occupational License Special Plates (OL 247) (required if not renewing all plates).

Continuing Education Exemption Application (OL 257) (wholesale-only dealers, if applicable).

Mail your application and fees to the address on form OL 45.

Fees:

$125 renewal application fee

$1 family support program fee

$88 fee for each dealer plate (plus county fees, if applicable)

$90 fee for each motorcycle plate (plus county fees, if applicable)

$300 new motor vehicle board fee, per location (new automobile, commercial, motorcycle, ATV, motorhome, and recreational trailer dealers only)

$75 autobroker endorsement fee

How to Modify a Vehicle Dealer License:

To modify an existing license, complete and submit the relevant form(s):

Ownership changes

All other changes

Mail your completed form and fees to your local OL inspector.

Fees

$70 name change fee

$70 address change fee

$70 add a branch fee

$70 officer change fee