Connecticut Auto Dealer Bond: A Comprehensive Guide For Insurance Agents

This guide provides information for insurance agents to help their customers obtain a Connecticut Auto Dealer bond.

At a Glance:

• Average Cost: $100 per year or $10 per month
• Bond Amount:
  • $60,000 for dealers
  • $25,000 for general repairers
  • $15,000 for leasers
  • $10,000 for limited repairers
• Who Needs It: All dealers who seek to buy, sell, lease, rent, repair or exchange motor vehicles either directly or indirectly.
• Purpose: To ensure the public will receive compensation for any damages should the auto dealer fail to comply with dealer licensing law
• Who Regulates Dealers in Connecticut: The Connecticut Department of Motor Vehicles

Background

Connecticut Statute 14-52 requires all auto dealers, leasers, and repairers operating in the state to obtain a license with the Department of Motor Vehicles. The Connecticut legislature enacted the licensing laws and regulations to ensure that auto dealers and repairers engage in ethical business practices. To provide financial security for the enforcement of the licensing law, auto dealers and repairers must purchase and maintain a surety bond to be eligible for licensure.

The limits on all Connecticut Auto Dealer Bonds increased on July 1, 2022 due to the passing of Public Act 22-44. This page has been updated to reflect these changes.

What is the Purpose of the Connecticut Auto Dealer Bond?

Connecticut requires dealers to purchase the Motor Vehicle Dealer Bond as part of the application process for licensure. The bond protects all purchasers, sellers, financing agencies, and government agencies from monetary loss stemming from any fraud or fraudulent representation, failure to comply with licensing law, and failure to pay required taxes and fees. In short, the bond is a type of insurance that protects the public if the dealer breaks the laws pertaining to motor vehicle dealers.

How Can an Insurance Agent Obtain a Connecticut Auto Dealer Bond for their Customer?

BondExchange makes obtaining a Connecticut Auto Dealer Bond easy. Simply login to your account and use our keyword search to find the “auto dealer” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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How Much Does the Connecticut Auto Dealer Bond Cost?

The Connecticut Auto Dealer bond costs anywhere between 0.5% to 7% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate cost on the $60,000 bond requirement. Contact BondExchange for help determining the cost of your customer’s specific bond.

$60,000 Auto Dealer Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Connecticut Define “Motor Vehicle Dealer”?

To paraphrase Connecticut General Statutes 14-52, a dealer is an individual who buys, sells, repairs, leases, rents or exchanges motor vehicles in an established place of business.

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How Do Auto Dealers Apply for a License in Connecticut?

The process for applying for a motor vehicle dealer license in Connecticut is pretty complex, and each license type has its own specific set of requirements. Below are the general guidelines, but dealers should refer to the DMV’s Motor Vehicle Dealerships page for details on the process. Dealers can also call (860) 263-5056 and request a copy of the Connecticut Dealer Manual.

License Period – The dealer license period is valid for two years from the date of issuance, and must be renewed prior to the expiration date for dealers to continue operations.

Step 1 – Determine the License Type

Connecticut requires dealers to obtain specific licenses corresponding to the nature in which the dealer’s business operates. Keep in mind that dealers will need to acquire a license for each type of business they wish to operate. Below are the different types of the Connecticut Dealer License.

• • Dealer/Repairer – For dealers who sell and or repair new or used vehicles
  • Auto Club – Dealers who offer a membership-based service for the maintenance/assistance of vehicles. For example, AAA would be required to acquire this license
  • Junkyard License – Dealers who do business in auto parts and/or salvaged vehicles
  • Manufacturers License – Required for dealers who sell wholesale to other dealers
  • Renter/Leaser License – For dealers who rent/lease new vehicles

Step 2 – Establish a Location

Dealers are required to establish a permanent place of business that must contain the following:

• • New (Franchise) Dealers:
    • Display and storage area for new and used vehicles
    • Repair station large enough for at least one vehicle
    • Parts department
    • Office
    • A contract/franchise agreement with a manufacturer
    • At least one mechanic
  • Used Dealers
    • Display and storage area for at least two vehicles
    • Repair station large enough for at least one vehicle
    • Parts Department
    • Office
    • At least one mechanic

Step 3 – Complete the application

All new dealer regulatory license applications and dealer regulatory license renewal applications should be mailed to:

Business Licensing Unit
60 State St.
Wethersfield, CT 06161

For more information about what is required on the application, view this form.

• • 3.a Proof of Insurance: Dealers must submit a CT Financial Responsibility Insurance Certificate for the state-mandated insurance requirement as part of their application. The insurance form is issued by the dealer’s insurance company. Financial responsibility insurance ensures the dealer has enough assets to cover damages from any accidents they cause.
  • 3.b Sales Tax Permit Number: Applicants must submit a copy of their CT State Sales Tax Permit with their application. The permit can be acquired by contacting:

Department of Revenue Services
450 Columbus Blvd
Hartford, CT 06103

• • 3.c Type of Ownership: Dealers must provide information on what type the ownership the business operates under, i.e. corporation, LLC, etc.
  • 3.d Marker Plates: Dealers must submit an application for dealer plates with their license application. The application form can be found here.
  • 3.e Request Inspection: An application for inspection must be submitted as part of the dealer licensing application. The DMV will mail these documents to dealers who request them. Dealers can receive an application form here.

Step 4 – Pay Fees

There is a mandatory non-refundable application fee of $140. Additional fees are:

Required for all Dealers:

• • • $140 for all dealer plates
    • $74 for all motorcycle dealer plates

Required for Select Dealers

• • • $560 for a Used Dealer License
    • $700 for a New Dealer License
    • $340 for a General Repairer License
    • $340 for a Limited Repairer License
    • $2,300 for a Manufacturers License
    • $280 Recycler Application fee
    • $705 for a Recycler New License
    • $700 for a Recycler Renewal License
    • $140 for Recycler plates
    • $100 for Marine Dealer plates for trailers

Step 5 – Pass Inspection

Once the dealer’s application is approved, the DMV will send an inspector out to the dealer’s place of business to ensure the location meets the licensing guidelines outlined in Step 2.

Step 6 – Purchase and File a Surety Bond

Dealers must purchase and maintain a surety bond with the following limit:

• • $60,000 for dealers
  • $25,000 for general repairers
  • $15,000 for leasers
  • $10,000 for limited repairers

How Does a Connecticut Motor Vehicle Dealer Renew Their License?

The motor vehicle dealer license is valid for two years and must be renewed before the expiration date. To renew their license, dealers can submit their application electronically here. Dealers are given a 45 day grace period after the expiration date to renew their license or be subject to a $100 late fee.

What Are the Insurance Requirements for the Dealer License?

The State of Connecticut requires all licensed dealers to obtain a Financial Responsibility Insurance Certificate on all vehicles with dealer plates in the amounts of $25,000/$50,000 for bodily injury and $25,000 for property damage. Dealers must also purchase and maintain a surety bond.

How Do Connecticut Auto Dealers File Their Bonds?

Connecticut Auto Dealer bonds must be signed by both the surety company that issues the bond and the auto dealer. The bond form should include the following items:

• Legal name of entity/individual(s) buying the bond
• Physical address where the business will operate
• Surety company’s name, address and signature
• Date on which the bond will be executed
• Signature of two witnesses to the surety company’s signature
• Signature of two witnesses to the principal’s signature
• Date of the bond is sealed

Dealers should mail the completed bond form, including the power of attorney, to the following address:

Dealers and Repairers Section
60 State St.
Wethersfield, CT 06161

What Can Dealers Do to Avoid Claims Against the Connecticut Auto Dealer Bond?

To avoid claims on the Connecticut Auto Dealer Bond, dealers must follow all dealer regulations in the state, including some of the most important issues below that tend to cause claims:

• Renew bond before expiration
• Disclose all required information when transferring ownership of a vehicle
• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay sellers of vehicles promptly and in full
• Pay taxes on time and in full. Dealers should consider setting aside tax obligations as they accrue.
• Do not engage in any illegal selling practices
• Register for and renew the dealer license biennially
• Adhere to the dealer license plate regulations approved by the state
• Pay the license application fees

What Other Insurance Products Can Agents Offer Dealers in Connecticut?

Connecticut requires dealers to submit a Financial Responsibility Insurance Certificate on all vehicles with dealer plates. Financial Responsibility insurance is a certificate that the dealer has enough assets to cover any damages they may cause from an accident. Most reputable dealers that provide towing or service station services should also obtain garage keepers liability. Bonds are our only business at BondExchange, so we do not issue any form of liability insurance, but our agents often utilize brokers for this specific line of business.

How Can Insurance Agents Prospect for Connecticut Motor Vehicle Dealer Customers?

Connecticut conveniently provides a public database to search for active motor vehicle dealers in the state. The database can be accessed on the DMV site here. For a complete list of dealers in Connecticut, agents can download the DMV provided spreadsheet here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

What Other States Require Auto Dealer Bonds?

All 50 states and the District of Columbia require auto dealers to obtain an Auto Dealer Bond as a prerequisite for licensure. Insurance agents should utilize our Main MVD Page for a detailed analysis of the Auto Dealer Bond requirements nationwide.