If you’re an auto dealer in New York, there are a few things that you know you need. You need a car dealer license, motor vehicles to sell, a decent-sized lot, and a handful of salespeople if you’re just starting out.
These are obvious necessities for your business. However, there’s something else that’s just as important to have and that states even require: an auto dealer bond.
In states like New York, you must have an auto dealer bond if you want to operate as a car dealer. But, more often than not, most people know nothing about auto dealer bonds.
They don’t know what they are, what they cover, how much they cost, or even how to get one. And that’s why this article will clear the smoke, pull back the curtain, and demystify one of the most essential things that every auto dealer in New York needs.
What is an auto dealer bond?

Some people call an auto dealer bond a car bond—and honestly, both terms are correct. They each mean the same thing. Regardless of the phrase you use, this type of bond is a legally binding contract that protects customers, including everyday consumers and state or local agencies.
This protection allows customers to take recourse when they’re exposed to fraud or misrepresentation during a business transaction. For example, maybe you decide to sell a car that has invalid tags. Whether you knowingly or unknowingly do this, your customer has the right to file a claim on your bond.
When your customer takes this step, the business that’s backing your bond will pay the costs for your mistake. But the company will only pay up to the amount of the required bond. Then, you’ll have to reimburse the business. You don’t get to walk away scotch free.
This series of events will occur anytime you don’t follow the applicable regulations and laws that your state has for auto dealers. And the only time you can get away with avoiding a customer’s claim is if the claim on your bond is illegitimate, meaning it’s false.
Another thing you should keep in mind is that there are different types of auto dealer bonds. The one you choose will depend on your state’s requirements and the types of vehicles you’d like to sell. Some of the most popular bonds include:
- Used auto dealer bonds
- New auto dealer bonds
- Mobile home dealer bonds
- Motor vehicle bond
- Wholesale dealer bond
Each of these bonds is tailored to the type of dealership that you’ll run, so make sure you get the right one for your business.
What does an auto dealer bond cover?
While it’s important to know what an auto dealer bond is, you also need to know the ins-and-outs of what it covers. As previously mentioned, an auto dealer bond will protect customers who are exposed to fraud or misrepresentation during a business transaction. But what that fraud or misrepresentation looks like can vary.
Sometimes, it can look like a deliberate mistake you’ve made, or it can look like a simple error and misunderstanding. For better context, here’s a list of scenarios in which a customer can make a claim on your bond:
- Selling stolen motor vehicles
- Forgetting or avoiding to pay sales tax and fees to the state
- Not reporting a sale
- Committing financial fraud
- Fraudulently representing a motor vehicle during a transaction
- Withholding vehicle titles
- Failing to meet warranty obligations
- Refusing to pay for a trade-in vehicle
- Forgetting or avoiding to pay lenders
- Giving a check that’s returned for insufficient funds
Clearly, the list of protections that customers get from an auto dealer bond is vast. And while it might seem like you have to walk a tightrope when you have an auto dealer bond, you don’t have to do that. You just have to follow the law and handle your business responsibly.
How much does an auto dealer bond cost?

As with most things, the price of an auto dealer bond will vary. What you pay in New York will depend on the state’s requirements, especially since the state handles licensing. However, three other primary factors can also influence the cost of your auto dealer bond.
1. The amount of the bond
If the amount of your bond is significant, your costs will be higher than bonds that cover a lower amount.
For example, if you have a $200,000 auto dealer bond, then the costs you have to pay will be higher than if you had a $10,000 bond.
2. Your credit history
Like it or not, your credit score plays a critical role in determining how much you pay for your auto dealer bond.
If you have a credit score that’s 700 or higher, you’ll likely pay 1-4% of the total bond amount. If your credit score is 650 or lower, you’ll likely pay 5-20% of the total bond amount.
3. Your history of losses
Unfortunately, there are some bonds that have a significant number of losses. And the company backing your bond will take this factor into consideration when determining the cost of your auto dealer bond.
Bonds with minimal historic losses will come with lower costs than ones with higher historic losses, which will come with a premium price tag.
How do you get an auto dealer bond?
Regardless of the costs for your auto dealer bond, you need to get one. It protects your customers, provides necessary coverage, and it’s required. But how do you get an auto dealer bond in New York?
Luckily, the answer is simple. Use Barry Risk Management, Inc.
While typically known for their DMV expertise, Barry Risk Management, Inc. has a parent company named Barry Risk Management. This business specializes in helping people discover and buy the best coverage for their everyday needs, including auto dealer bonds.
With the guidance of Barry Risk Management, you can trust Barry Risk Management, Inc. to get the auto dealer bond that you need in New York. The only thing you have to do is reach out to a representative, and that agent will have the insight and knowledge to ensure they meet your business needs.
To get your auto dealer bond, contact an agent at Barry Risk Management, Inc. today!