Minnesota Auto Dealer Surety Bond
Everything you need to know about the $50,000 surety bond required for your MN dealer license: costs, requirements, and how to get bonded fast.
What Is a Dealer Surety Bond?
A dealer surety bond is a legally required financial guarantee that protects consumers who purchase vehicles from your dealership. If you violate state laws or fail to honor a vehicle sale agreement, consumers can file a claim against your bond to recover damages.
In Minnesota, every motor vehicle dealer must obtain a surety bond before receiving a dealer license. This requirement is mandated by MN Statutes 168.27, Subd. 24 and enforced by the Minnesota Department of Public Safety, Driver and Vehicle Services (DVS).
The bond is filed on form PS2446 and must remain active for the entire duration of your license. A surety bond involves three parties:
- Principal (you): The dealer who purchases the bond.
- Obligee (MN DVS): The state agency that requires the bond.
- Surety (bond company): The company that guarantees payment on valid claims.
Required Bond Amount
Per MN Statutes 168.27, Subd. 24, the bond amount depends on your dealer type:
| Dealer Type | Bond Amount |
|---|---|
| New Vehicle Dealer | $50,000 |
| Used Vehicle Dealer | $50,000 |
| Wholesale Dealer | $50,000 |
| Broker | $50,000 |
| Lessor | $50,000 |
| Auctioneer | $50,000 |
| Trailer Dealer (< 4,000 lbs) | $5,000 |
| Motorized Bicycle Dealer | $5,000 |
Note: The $50,000 bond amount is the same regardless of whether you're a small used car lot or a large new vehicle franchise. This is the coverage amount, not what you pay out of pocket.
How Much Does a Dealer Bond Cost?
You don't pay the full $50,000. Instead, you pay an annual premium that is a small percentage of the bond amount, based primarily on your personal credit score. With good credit, many dealers pay just $200-$300/year.
| Credit Score | Rate | Annual Premium |
|---|---|---|
| 700+ (Excellent) | ~0.5% | $200 - $300/yr |
| 650-699 (Good) | ~1% | $300 - $400/yr |
| 600-649 (Fair) | 1-2% | $400 - $700/yr |
| Below 600 (Poor) | 2-5% | $700 - $1,000/yr |
Disclaimer: These are estimated ranges based on real-world experience. Every situation is different — your actual premium depends on your surety company, credit history, and other factors. Always get quotes from multiple providers before committing.
Pro Tip: Shop around with multiple surety companies. Rates can vary significantly. With good credit (700+), many dealers pay just $200-$300/year for a $50,000 bond — it's one of the cheapest parts of getting licensed.
Who Needs a Dealer Bond?
Per MN Statutes 168.27, every motor vehicle dealer in Minnesota must have an active surety bond. There are no exceptions for dealer type, sales volume, or business size.
- Retail dealers (new and used) selling to consumers
- Wholesale dealers selling only to other dealers
- Brokers arranging vehicle purchases
- Lessors leasing vehicles to consumers
- Auctioneers conducting vehicle auctions
- Dealers accessing Copart, Manheim, or other dealer-only auctions
Copart & Manheim Access
If you're looking to buy vehicles at dealer-only auctions like Copart or Manheim, you'll need a valid dealer license which requires a surety bond. The bond is one of the first steps in gaining auction access. Factor the annual premium into your auction membership costs when planning your budget.
How to Get Your Dealer Bond (Step-by-Step)
- Apply with a surety company: Contact a licensed surety bond provider. You can apply online with most companies. You'll need your personal information, business details, and Social Security number.
- Credit check & underwriting: The surety company will run a soft credit inquiry to determine your premium rate. No collateral is required for applicants with good credit.
- Pay your premium: Once approved, pay your annual premium (as low as $200-$300 with good credit). Most companies offer payment plans.
- Receive your bond: The surety company issues your official bond document. Many providers offer electronic delivery for faster processing.
- File form PS2446 with DVS: Submit your completed bond (form PS2446) to the Minnesota DVS as part of your dealer license application. The bond must be on file before your license is issued.
Pro Tip: Get your bond early in the licensing process. While you're waiting for zoning approval and other paperwork, your bond can be ready to go. This prevents delays at the final application stage.
Frequently Asked Questions
How much is a dealer bond in Minnesota?
The required bond amount is $50,000 for all standard dealer types (new, used, wholesale, broker, lessor, auctioneer) per MN Statutes 168.27, Subd. 24. Your annual premium will be a small percentage of that amount depending on credit, often as low as $200-$300/year with good credit.
Do I need a bond for a wholesale dealer license?
Yes. All dealer license types in Minnesota require a $50,000 surety bond, including wholesale dealers. The only exception is trailer and motorized bicycle dealers, who need a $5,000 bond.
What happens if a claim is filed against my bond?
If a consumer files a valid claim against your bond, the surety company pays the claimant up to $50,000. However, you are responsible for repaying the surety company the full claim amount. Multiple claims can be filed up to the bond's total value.
How long does it take to get a dealer bond?
Most surety companies can issue a dealer bond within 1-3 business days after approval. With good credit, some online providers offer same-day approval and electronic bond delivery.
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