Every motor vehicle dealer in Tennessee must post a $50,000 corporate surety bond to get and keep a dealer license. The amount is set by Tenn. Code Ann. 55-17-111(g)(1), the bond is filed with the Tennessee Motor Vehicle Commission (part of the Tennessee Department of Commerce and Insurance), and it is written on the state’s official form, the Motor Vehicle Dealer Bond (form IN-1316). The same $50,000 amount applies to every dealer class the Commission licenses under this section, and a separate $50,000 bond applies to automobile auctions under 55-17-111(d). The bond is a consumer-protection guarantee: it pays a buyer (or the state) if the dealer fails to pay a customer’s prepaid title, registration, or tax fees, or fails to deliver a clear vehicle title. It is not insurance for the dealer, and it is separate from the dealer license itself.
| Item | Detail |
|---|---|
| Who requires it | Tennessee Motor Vehicle Commission (Tennessee Department of Commerce and Insurance) |
| Governing law | Tenn. Code Ann. 55-17-111 (motor vehicle dealer and automobile auction surety bonds); dealer defined at 55-17-102(17) |
| Official form | Motor Vehicle Dealer Bond, form IN-1316 (Rev. 10/16), RDA No. 10222 |
| Bond amount | $50,000 for every motor vehicle dealer class; $50,000 for each automobile auction or branch |
| Premium basis | [CLIENT FLAG: insert All n One premium rate/basis] |
| Coverage term | Runs with the dealer license; the bond expires on the license expiration date and may be continued by rider or certificate for later periods [VERIFY against Tennessee Motor Vehicle Commission: the license renewal cycle (competitor sources describe a two-year license period; the statute and form tie the bond to the license term rather than stating a fixed number of years)] |
| Obligee | Any person who suffers a covered loss, including the Tennessee Motor Vehicle Commission and the State of Tennessee (per 55-17-111(g)(2)) |
How much is the bond, and which amount applies to me?
The amount is set by statute, and it is the same $50,000 across the dealer classes the Commission licenses. Find your row:
| License type | Bond amount | Authority |
|---|---|---|
| Motor vehicle dealer (new / franchise) | $50,000 | Tenn. Code Ann. 55-17-111(g)(1) |
| Motor vehicle dealer (used) | $50,000 | Tenn. Code Ann. 55-17-111(g)(1) |
| Motor vehicle dealer (wholesale) | $50,000 | Tenn. Code Ann. 55-17-111(g)(1) |
| Automobile auction (each auction or branch) | $50,000 per auction or branch | Tenn. Code Ann. 55-17-111(d) |
The statute sets a single $50,000 figure for a “motor vehicle dealer” and does not break it into higher or lower tiers by dealer sub-type, so new, used, and wholesale dealers all post the same $50,000 bond. Automobile auctions are bonded separately at $50,000, and the statute requires the bond for “each automobile auction or branch thereof,” so an auction operator posts a bond for each location.
You are treated as a motor vehicle dealer if you sell more than five (5) motor vehicles in a twelve-month period in Tennessee. A person may sell up to five vehicles titled in their own name within twelve months without a dealer license; selling more than that requires a license and the $50,000 bond.
[VERIFY against Tennessee Motor Vehicle Commission: whether an ordinary motor vehicle dealer that runs more than one sales location must file a separate $50,000 bond for each location. The statute expressly requires a per-branch bond for automobile auctions (55-17-111(d)); it is not equally explicit about additional locations for other dealer classes.]
[VERIFY against Tennessee Motor Vehicle Commission: whether recreational vehicle (RV) dealers, which the Commission also licenses, post the same $50,000 bond on form IN-1316 or a different bond. This page covers motor vehicle dealers and automobile auctions under 55-17-111.]
What does the bond cover?
The bond protects the car-buying public and the state, not the dealer. It guarantees that you will meet specific obligations to your customers, and it pays out if you do not. Under Tenn. Code Ann. 55-17-111(g)(2) and the state bond form (IN-1316), the bond covers a loss caused by either of two things:
- Nonpayment by the dealer of a retail customer’s prepaid title, registration, or other related fees or taxes. If a buyer pays you to handle their title, registration, or taxes and you do not pass that money through, the bond can make the buyer whole.
- The dealer’s failure to deliver, in connection with the sale of a vehicle, a valid vehicle title certificate free and clear of any prior owner’s interests and all liens, except a lien the buyer created or expressly assumed in writing.
Two limits are built into the statute and the form:
- Aggregate cap. The surety’s total liability to all claimants can never exceed the $50,000 bond amount, no matter how many claims are filed (55-17-111(g)(2)(B)).
- Time to sue. A claim to enforce liability on the bond must be brought within two (2) years after the event that gives rise to it (55-17-111(d)). This is a deadline for filing a claim, not the length of the bond.
A paid claim is money the surety fronts on your behalf. You are legally required to repay the surety in full, which is why the bond is a guarantee of your conduct rather than insurance that protects you.
How much does the bond cost?
You do not pay the full $50,000. You pay an annual premium, which is a small percentage of the bond amount and is based mainly on your personal credit and business history.
[CLIENT FLAG: insert All n One pricing. Provide premium rate ranges by credit tier and one worked example, for example: “A $50,000 Tennessee dealer bond typically costs X% to Y% of the bond amount per year. With good credit, a $50,000 bond runs about $___ per year.” Do not publish a premium figure until All n One supplies it.]
Because the bond amount is the same $50,000 for every dealer class, the main thing that moves your premium is your credit and business profile, not your dealer type. An automobile auction that must bond more than one location pays for each bond separately.
Is this the same as the dealer license, or a different bond?
Two points of confusion come up often:
- The bond is not the license. The surety bond is one requirement you must satisfy to get and keep a dealer license from the Tennessee Motor Vehicle Commission. You still complete the full license application, pay the license and location fees, and meet the Commission’s other requirements. [VERIFY against Tennessee Motor Vehicle Commission: the current license and application fee amounts and the established-place-of-business requirements.]
- This is the Motor Vehicle Commission dealer bond, not a title bond. A Tennessee certificate-of-title (bonded title) surety is a different bond that lets an owner title a vehicle when the paperwork is missing. The dealer bond on this page is a licensing bond for the business of selling vehicles. It is also separate from a freight broker bond or a sales tax bond, which serve different purposes.
How do I get bonded and file with the state?
- Confirm your license type. Decide whether you are applying as a motor vehicle dealer (new/franchise, used, or wholesale) or as an automobile auction. Every one of these posts a $50,000 bond; auctions bond each location.
- Apply for the bond. Request a quote for the $50,000 amount. Approval is typically based on your credit and business background.
- Pay the premium and receive the executed bond. The surety issues the bond on the state’s Motor Vehicle Dealer Bond form (IN-1316), signed, sealed, and with the power of attorney attached.
- File the bond with your license application. Submit the bond to the Tennessee Motor Vehicle Commission along with the rest of your application. The bond names the Commission and the State of Tennessee among the obligees, and copies of any claim, payment, or modification must be sent to the Commission’s Executive Director within seven calendar days.
- Keep the bond active. Keep the bond in full force and effect the entire time your license is active (55-17-111(h)(1)), and continue it by rider or certificate when your license renews. A lapse can suspend or void your dealer license.
Frequently asked questions
How much is a Tennessee motor vehicle dealer bond?
The bond amount is $50,000 for every motor vehicle dealer class the Tennessee Motor Vehicle Commission licenses, and $50,000 for each automobile auction or branch. You pay only a yearly premium, which is a small percentage of the $50,000, not the full amount.
Who requires the bond, and what form is used?
The Tennessee Motor Vehicle Commission, part of the Department of Commerce and Insurance, requires it under Tenn. Code Ann. 55-17-111. It is written on the state’s official Motor Vehicle Dealer Bond form, IN-1316 (Rev. 10/16).
Do I need a dealer license and bond if I only sell a few cars a year?
You can sell up to five vehicles titled in your own name within a twelve-month period without a dealer license. Selling more than five motor vehicles in a year means you must be licensed by the Motor Vehicle Commission and post the $50,000 bond. If you are near that threshold, confirm your status with the Commission before you sell.
What does the bond actually pay for?
It covers a loss to a buyer or the state when a dealer does not pay a retail customer’s prepaid title, registration, or tax fees, or fails to deliver a valid vehicle title free and clear of prior owners’ interests and liens (except a lien the buyer created or assumed in writing). The surety never pays more than $50,000 in total across all claims.
How long do I have to file a claim against the bond?
A suit to enforce liability on the bond must be brought within two years after the event that caused the loss (55-17-111(d)). That two-year window is a deadline for claims, not the length of the bond itself.
If the surety pays a claim, do I owe that money back?
Yes. A surety bond is not insurance for you. If the surety pays a valid claim, you must repay the surety in full, plus costs. The bond protects the public; you remain responsible for your own conduct.
How long does the bond last, and how do I keep it active?
The bond runs with your dealer license and expires on your license’s expiration date; it can be continued by rider or certificate for later periods. You must keep it in full force the whole time your license is active. [VERIFY against Tennessee Motor Vehicle Commission: the license renewal cycle, which competitor sources describe as two years.]
Can bad credit stop me from getting bonded?
Not usually. Premiums are priced partly on credit, so weaker credit means a higher rate, but bonds are widely available across credit levels. Ask for a quote to see your exact cost.
Does each of my sales locations need its own bond?
For automobile auctions, the statute requires a $50,000 bond for each auction or branch. For other dealer classes with more than one location, confirm the filing with the Commission. [VERIFY against Tennessee Motor Vehicle Commission: whether a multi-location motor vehicle dealer files one bond or a separate bond per location.]
