Dealer bond
A dealer bond is a surety bond a vehicle dealer files with the state before it can be licensed. In Utah, Code 41-3-205 requires a $75,000 corporate surety bond for a new or used motor vehicle dealer and $10,000 for a motorcycle, off-highway vehicle or small trailer dealer, filed with the Motor Vehicle Enforcement Division (MVED) on Form TC-450. It pays customers and others who lose money because the dealer committed fraud, failed to deliver a title, or failed to pay off a trade-in's loan. It is not coverage for the dealer: the dealer and the surety are bound together.
Updated . Written by Andre Beukers, principal at Redoubt, a commercial insurance agency in Salt Lake City, not a government office.
What is a dealer bond?
It is a promise the dealer and a surety company make to the public together. Utah's form, the TC-450, makes the dealership the Principal and a surety company the Surety, "jointly and severally held and firmly bound to the people of the State of Utah to indemnify persons, firms, and corporations for loss suffered by reason of violation of the conditions hereinafter contained."
Utah Code 41-3-205 requires the form to be approved by the attorney general: it says the form "shall be approved by the attorney general" and "may be continuous in form," and MVED says the bond "must remain in effect as long as the dealer or crusher is in business."
Who requires a dealer bond, and for how much?
The state that licenses the dealer. Utah's 41-3-205 says that before a dealer's, special equipment dealer's, crusher's or body shop's license is issued, "the applicant shall file with the administrator a corporate surety bond"; the administrator is the motor vehicle enforcement administrator, and MVED tells dealers to file the bond with it. A dealer, under 41-3-102, is a business that "sells, displays for sale, or offers for sale or exchange three or more new or used motor vehicles or off-highway vehicles in any 12-month period." MVED adds that anyone who sells only vehicles owned for more than 12 months is not a dealer. Its dealer license page describes small trailers as "between 750-1,999 lbs. unladen weight."
Other states set their own terms. California Vehicle Code 11710 sets a dealer's bond at $50,000, or $10,000 for a dealer only in motorcycles or all-terrain vehicles, and says liability under it "is to remain at full value." Florida's 320.27(10) asks for $25,000 every year, as a surety bond or an irrevocable letter of credit.
| License | Bond amount | Where it says so |
|---|---|---|
| New or used motor vehicle dealer, including large trailers | $75,000 | 41-3-205(1)(a)(i); MVED dealer license page |
| Special equipment dealer | $75,000 | 41-3-205(1)(a)(ii) |
| Motorcycle, off-highway vehicle or small trailer dealer | $10,000 | 41-3-205(1)(a)(iii); MVED dealer license page |
| Crusher | $10,000 | 41-3-205(1)(a)(iii); MVED bonds page |
| Body shop | $20,000 | 41-3-205(1)(a)(iv); MVED bonds page |
What does a dealer bond cover?
Four kinds of loss, in Utah: fraud, fraudulent representation, a violation of 41-3-301(1), which requires a dealer to submit or deliver the title or manufacturer's certificate of origin, and a violation of 41-3-402(1), which requires payoff of liens on trade-ins. MVED's bond FAQ says the same: "Bonds cover loss suffered because of fraud or fraudulent representations or due to" those two violations. The TC-450 adds a promise to comply with the whole Motor Vehicle Business Regulation Act.
Both rules have clocks. With a temporary permit, 41-3-301(1)(a) gives the dealer 45 days to submit the endorsed title to the Motor Vehicle Division; without one, the title goes to a buyer other than a dealer or dismantler within 48 hours. 41-3-402(1)(a) requires a trade-in's lien to be paid off within 21 calendar days of the sale or 15 days after the dealer is paid in full, whichever is earlier.
The bond has a ceiling: total liability to all claimants, "regardless of the number of claimants or the number of years a bond remains in force, may not exceed the amount of the bond." Neither the statute nor the TC-450 mentions a test-drive injury, hail on the lot or damage to a customer's car; those risks belong on the dealer's own insurance.
Is a dealer bond insurance?
Utah's insurance code defines "insurance" to include "a contract of guaranty or suretyship entered into by the guarantor or surety as a business," and 41-3-205 requires the surety to be "licensed to do business within the state" and rated B+ or better by A.M. Best.
But the dealer is the Principal, not the insured. Surety insurance, in the same code, includes "a guarantee against loss or damage resulting from the failure of a principal to pay or perform the principal's obligations to a creditor or other obligee." On the TC-450 the dealer and the surety bind themselves "jointly and severally," and 41-3-205 speaks throughout of payment by the "surety or principal." The bond makes sure the customer is paid; it does not protect the dealership. When a dealer orders plates, MVED asks for something separate: "a copy of your plate insurance declaration page(s)."
How does a dealer bond claim work?
The claimant has two deadlines in Utah: "a claim is filed in writing with the administrator within one year after the cause of action arose," and the lawsuit starts within two years after that claim. MVED's advice is plain: "A complainant should contact an attorney, who will know what legal procedures to follow." MVED takes transaction complaints on Form TC-451, and a dealer's license file, public on request with certain restrictions, lists the bond company and number.
Then the bond waits. No claimant is paid "until six months have expired" from the first written claim. The surety or principal then assesses every claim and proposes a split: valid claims are paid in full if they total less than the bond, pro rata if more. If the claimants do not all agree, the surety or principal files an interpleader in the district court where the dealer was licensed, and it must tell MVED when a claim succeeds or settles. A claimant who wins or settles gets attorney fees if the bond is not depleted; a surety's or principal's fee award for an interpleader is capped at $2,500.
How do you get a dealer bond and file it with MVED?
Utah Code 41-3-205 requires a surety licensed in Utah and rated B+ or better by A.M. Best. MVED requires the bond on its Form TC-450 and is exact about it: "The Company name on the bond must read EXACTLY as it does on application form TC-301, including your entity name and your DBA name. The bond must have a revision date of 10/13."
The surety fills out the bond and returns it. An owner, partner, corporate officer or member signs the front as Principal before a notary, who signs and seals the back, and the surety's attorney-in-fact signs the Affidavit of Qualification or a power of attorney is attached. The bond goes to MVED with the application, the photo of the sign and place of business, and the fees.
MVED says to allow five to ten working days for the site inspection, with the license three to five working days after it passes; incomplete packets are returned. Every MVED license expires June 30, while MVED says the bond must stay in effect as long as the dealership is in business, and the TC-450 runs for the license "and all lawful renewals thereof."
What happens if the surety cancels the dealer bond?
The surety can withdraw on written notice to the dealer and to the MVED administrator, but "no withdrawal shall be effective for any purpose until sixty days shall have elapsed from and after the receipt of such notice by the said Administrator," and it stays liable for what the dealer did before then.
A dealer that loses its bond has its license suspended "automatically" under 41-3-205(5); it returns its licenses, pocket cards, temporary permits and special plates and may not use them until a bond is on file and the license is reinstated. A cash bond does not fill the gap. MVED's FAQ: "It is illegal to operate as a dealer without a current corporate surety dealer bond on file with MVED." Put together, the risk is a gap: the withdrawal takes effect 60 days after MVED receives the notice, and the license is suspended once the dealer no longer has the bond, so a replacement bond needs to be on file with MVED when the withdrawal takes effect.
What to have ready before the surety writes your TC-450
MVED returns incomplete packets, and the bond has to match the application word for word.
- 1.The legal entity name and any DBA, exactly as on the TC-301
- 2.The license type, which sets the bond amount
- 3.The dealership's street address, city and county
- 4.Your organizational structure (the TC-450 makes you check one)
- 5.The owner or officer signing as Principal, and a notary
- 6.The surety's attorney-in-fact signature or a power of attorney
- 7.If you are ordering dealer plates, the plate insurance declarations page
Is $75,000 what a Utah dealer bond costs?
No. $75,000 is the bond amount, the maximum that can be paid to all claimants combined under 41-3-205(1)(d). What the surety charges for the bond is a separate figure, and neither the statute nor MVED's pages publish one.
Does a Utah dealer bond have to be renewed every year?
The license does: MVED licenses expire June 30 each year. The bond may be continuous in form under 41-3-205, and the TC-450 runs for the license "and all lawful renewals thereof." The TC-450 has no cancellation clause other than the surety's withdrawal on 60 days' notice to MVED.
Do I need a dealer bond to sell a few of my own cars?
Not if you stay outside Utah's definition. 41-3-102 makes a dealer of a business that sells or offers three or more vehicles in any 12-month period, and MVED says a person who sells only vehicles owned for more than 12 months is not a dealer.
Where these answers come from
Each entry carries the exact words of the source so you can check it yourself. Forms, rules and carrier pages change; read the current version before acting.
- 1. Utah Form TC-450, Bond of Motor Vehicle Dealer, Special Equipment Dealer, Crusher or Body Shop (rev. 10/13), obligation
“jointly and severally held and firmly bound to the people of the State of Utah to indemnify persons, firms, and corporations for loss suffered by reason of violation of the conditions hereinafter contained”
files.tax.utah.gov, accessed October 3, 2026. MVED links tax.utah.gov/forms/current/tc-450.pdf, which returns 403 to curl and redirects in a browser to this files.tax.utah.gov address; curl fetches that one. The form is printed "Approved as to form, Office of the Utah Attorney General". - 2. Utah Form TC-450 (rev. 10/13), principal and surety bound together
“we, the said Principal and said Surety, bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, and firmly by these presents”
files.tax.utah.gov, accessed October 3, 2026. Same PDF as above, read by curl from files.tax.utah.gov. - 3. Utah Form TC-450 (rev. 10/13), condition 1
“Well and truly observe and comply with all requirements and provisions of THE MOTOR VEHICLE BUSINESS REGULATION ACT, as provided by Chapter 3, Title 41, Utah Code Ann.”
files.tax.utah.gov, accessed October 3, 2026. Condition 2 repeats the four statutory conditions. The form also says any conflict between the bond and the Act is resolved in favor of the Act. - 4. Utah Form TC-450 (rev. 10/13), term of the obligation
“during the time of said license and all lawful renewals thereof, then the above obligation shall be null and void; otherwise to remain in full force and effect.”
files.tax.utah.gov, accessed October 3, 2026 - 5. Utah Form TC-450 (rev. 10/13), surety's withdrawal
“no withdrawal shall be effective for any purpose until sixty days shall have elapsed from and after the receipt of such notice by the said Administrator”
files.tax.utah.gov, accessed October 3, 2026. The same paragraph keeps the surety liable for the principal's acts before the sixty days expire. - 6. Utah Code 41-3-205(1)(a), bond required before a license issues
“Before a dealer's, special equipment dealer's, crusher's, or body shop's license is issued, the applicant shall file with the administrator a corporate surety bond in the amount of”
le.utah.gov, accessed October 3, 2026. Amended by Chapter 342, 2010 General Session. le.utah.gov names this file in the versionDefault field of the section page (41-3-S205.html), re-read by curl -k on 2026-10-03; a verifier could not read that field, so currency rests on that read. - 7. Utah Code 41-3-205(1)(a)(i) to (iv), bond amounts
“$75,000 on or after July 1, 2006, for a motor vehicle dealer's license; (ii) $20,000 until June 30, 2006, and $75,000 on or after July 1, 2006, for a special equipment dealer's license; (iii) $10,000 for a motorcycle, off-highway vehicle, or small trailer dealer's or crusher's license; or (iv) $20,000 for a body shop's license.”
le.utah.gov, accessed October 3, 2026 - 8. Utah Code 41-3-205(1)(b), who may be the surety
“The corporate surety shall be licensed to do business within the state and have a rating of at least B+ by the A.M. Best Company.”
le.utah.gov, accessed October 3, 2026 - 9. Utah Code 41-3-205(1)(c), form and conditions of the bond
“The form of the bond: (i) shall be approved by the attorney general; (ii) shall be conditioned upon the applicant's conducting business as a dealer without: (A) fraud; (B) fraudulent representation; (C) violating Subsection 41-3-301(1) which requires a dealer to submit or deliver a certificate of title or manufacturer's certificate of origin; or (D) violating Subsection 41-3-402(1) which requires payoff of liens on motor vehicles traded in; and (iii) may be continuous in form.”
le.utah.gov, accessed October 3, 2026 - 10. Utah Code 41-3-205(1)(d), aggregate limit
“The total aggregate liability on the bond to all persons making claims, regardless of the number of claimants or the number of years a bond remains in force, may not exceed the amount of the bond.”
le.utah.gov, accessed October 3, 2026 - 11. Utah Code 41-3-205(2)(a), claim and suit deadlines
“a claim is filed in writing with the administrator within one year after the cause of action arose; and (ii) the action is commenced within two years after the claim was filed with the administrator.”
le.utah.gov, accessed October 3, 2026 - 12. Utah Code 41-3-205(2)(b), notice to the administrator
“The surety or principal shall notify the administrator if a claim on the bond is successfully prosecuted or settled against the surety or principal.”
le.utah.gov, accessed October 3, 2026 - 13. Utah Code 41-3-205(3)(a), six-month wait before payment
“A surety or principal may not make a payment on a surety bond to any claimant until six months have expired from the date when the first claim on the bond was filed with the surety or principal in writing.”
le.utah.gov, accessed October 3, 2026 - 14. Utah Code 41-3-205(3)(c), full or pro rata payment
“If the total verifiable claims on the bond are less than the bond amount, then each bond claimant shall be entitled to the full amount of a valid claim. (ii) If the total verifiable claims exceed the bond amount, then the proceeds shall be distributed pro rata to the bond claimants of valid claims.”
le.utah.gov, accessed October 3, 2026. Paragraph (3)(b) requires the surety or principal to assess all claims and submit a distribution assessment after the six months. - 15. Utah Code 41-3-205(3)(d), interpleader
“If the distribution assessment under Subsection (3)(b) is not unanimously approved by the claimants of all valid claims on the bond, the principal or surety shall file an interpleader action in the state district court where the defaulting dealer was licensed.”
le.utah.gov, accessed October 3, 2026 - 16. Utah Code 41-3-205(4), attorney fees
“A person making a claim on the bond shall be awarded attorney fees in cases successfully prosecuted or settled against the surety or principal if the bond has not been depleted. (b) A surety or principal may not be awarded attorney fees that exceed $2,500 for an interpleader action filed under Subsection (3)(d)”
le.utah.gov, accessed October 3, 2026 - 17. Utah Code 41-3-205(5)(a), loss of the bond
“If a dealer, body shop, or crusher loses possession of the bond required by this chapter, the dealer, body shop, or crusher license is automatically suspended. (ii) All licenses, pocket cards, temporary permits, and special plates issued to the licensee shall be immediately returned to the administrator.”
le.utah.gov, accessed October 3, 2026 - 18. Utah Code 41-3-205(5)(b), no use until reinstated
“A dealer, body shop, or crusher may not continue to use or permit to be used licenses, pocket cards, temporary permits, or special plates until the required bond is on file with the administrator and the license has been reinstated.”
le.utah.gov, accessed October 3, 2026 - 19. Utah Code 41-3-102(9)(a), definition of dealer
“"Dealer" means a person: (i) for which the business in whole or in part involves selling new, used, or new and used motor vehicles or off-highway vehicles; and (ii) that sells, displays for sale, or offers for sale or exchange three or more new or used motor vehicles or off-highway vehicles in any 12-month period.”
le.utah.gov, accessed October 3, 2026. Version effective May 6, 2026. Subsection (1) of the same section: "Administrator" means the motor vehicle enforcement administrator. - 20. Utah Code 41-3-301(1)(a), title submitted within 45 days
“shall within 45 days submit a certificate of title or manufacturer's certificate of origin for that motor vehicle, endorsed according to law, to the Motor Vehicle Division”
le.utah.gov, accessed October 3, 2026. Applies when a temporary permit is issued under 41-3-302. Version effective May 6, 2026. - 21. Utah Code 41-3-301(1)(b), title delivered within 48 hours
“If a temporary permit is not issued, the certificate of title or manufacturer's certificate of origin shall be delivered to the vendee, endorsed according to law, within 48 hours”
le.utah.gov, accessed October 3, 2026. The sentence continues: 21 days when the buyer is a dealer or dismantler. - 22. Utah Code 41-3-402(1)(a), payoff of liens on trade-ins
“within 21 calendar days of the date of sale or lease, or within 15 calendar days of receiving payment in full for the motor vehicle it sold, whichever date is earlier, shall remit payment to the lienholder sufficient to pay off the lien on the traded in motor vehicle”
le.utah.gov, accessed October 3, 2026. Amended by Chapter 342, 2010 General Session. le.utah.gov names this file in the versionDefault field of the section page (41-3-S402.html), re-read by curl -k on 2026-10-03; a verifier could not read that field, so currency rests on that read. - 23. Utah Code 31A-1-301(96)(b)(ii), definition of insurance
“a contract of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction”
le.utah.gov, accessed October 3, 2026. Listed under what "insurance" includes. Amended by Chapter 120, 2024 General Session. le.utah.gov names this file in the versionDefault field of the section page (31A-1-S301.html), re-read by curl -k on 2026-10-03; a verifier could not read that field, so currency rests on that read. - 24. Utah Code 31A-1-301(185), definition of surety insurance
“"surety insurance" includes: (a) a guarantee against loss or damage resulting from the failure of a principal to pay or perform the principal's obligations to a creditor or other obligee”
le.utah.gov, accessed October 3, 2026 - 25. Utah MVED, Dealer License page, Bond
“Dealers must file a corporate surety dealer bond with MVED. New or used motor vehicle or large trailer dealers — $75,000 Motorcycle or small trailer dealers — $10,000 Small trailers are trailers between 750-1,999 lbs. unladen weight.”
dmv.utah.gov, accessed October 3, 2026. Utah Code 41-3-102 and MVED's business FAQ define a small trailer by an upper limit of less than 2,000 pounds; this page's 750-pound floor is MVED's wording. - 26. Utah MVED, Dealer License page, How to Become a Dealer, step 9
“In order to obtain dealer plates, complete the plate section of TC-301 and provide a copy of your plate insurance declaration page(s).”
dmv.utah.gov, accessed October 3, 2026 - 27. Utah MVED, Dealer License page, How to Become a Dealer, step 4
“The Company name on the bond must read EXACTLY as it does on application form TC-301, including your entity name and your DBA name. The bond must have a revision date of 10/13.”
dmv.utah.gov, accessed October 3, 2026 - 28. Utah MVED, Dealer License page, step 4, principal's signature
“An owner, partner, corporate officer or member must sign the front as “Principal” (line located just above the insurance agent’s signature on the face of the bond) in front of a notary.”
dmv.utah.gov, accessed October 3, 2026. The next line: "Be certain that the notary signs and seals the back of the bond." - 29. Utah MVED, Dealer License page, step 4, attorney-in-fact
“The bond company must either have the designated attorney-in-fact sign the back of the bond in the last section, Affidavit of Qualification, or attach a power of attorney to the bond.”
dmv.utah.gov, accessed October 3, 2026 - 30. Utah MVED, Dealer License page, Application Form
“Applications, bond, picture of the sign and principle place of business, and fees must be submitted for approval to the Motor Vehicle Enforcement Division”
dmv.utah.gov, accessed October 3, 2026. "Principle" is MVED's spelling. - 31. Utah MVED, Dealer License page, Considerations
“After submitting the application packet please allow five to ten working days for a site inspection. After the site passes inspection, you will receive your dealer license within three to five working days.”
dmv.utah.gov, accessed October 3, 2026 - 32. Utah MVED, Dealer License page, Considerations, incomplete packets
“Application packets received that are incomplete will be returned.”
dmv.utah.gov, accessed October 3, 2026 - 33. Utah MVED, Bonds page, General Information
“Dealers, Body Shops, and Crushers must file a corporate surety bond with the Utah MVED that must remain in effect as long as the dealer or crusher is in business.”
dmv.utah.gov, accessed October 3, 2026. The page lists $75,000 for new or used motor vehicle dealers, $10,000 for motorcycle or small trailer dealers, $20,000 for body shops and $10,000 for crushers. - 34. Utah MVED, Bonds FAQ, what does a dealer bond cover
“Bonds cover loss suffered because of fraud or fraudulent representations or due to:”
dmv.utah.gov, accessed October 3, 2026. Followed by the two violations, 41-3-301(1) and 41-3-402(1). - 35. Utah MVED, Bonds FAQ, how to make a claim on a bond
“A complainant should contact an attorney, who will know what legal procedures to follow.”
dmv.utah.gov, accessed October 3, 2026 - 36. Utah MVED, Bonds FAQ, cash bond or operating without a bond
“No. It is illegal to operate as a dealer without a current corporate surety dealer bond on file with MVED”
dmv.utah.gov, accessed October 3, 2026. Answer to: "I failed to obtain a new bond before my old one expired. Can I post a cash bond or keep operating until the new bond is on file?" - 37. Utah MVED, Business License FAQ, license term
“All MVED licenses expire June 30th of each year. No matter when you obtain the license, it will expire at midnight, on June 30th.”
dmv.utah.gov, accessed October 3, 2026 - 38. Utah MVED, Business License FAQ, who is not a dealer
“Anyone who sells or exchanges only those vehicles he has owned for more than 12 months will not be considered a motor vehicle dealer”
dmv.utah.gov, accessed October 3, 2026. MVED cites Utah Code 41-3-103. - 39. Utah MVED, Business License FAQ, license file is public
“With certain restrictions, each license issued by MVED is public information and will be given out upon request.”
dmv.utah.gov, accessed October 3, 2026. The list of what the file contains includes "Bond company and number" and "Dates bond was issued and/or cancelled". - 40. Utah MVED, Filing a Complaint
“If you need to file a complaint about a motor vehicle transaction, please complete Form TC-451, Original Complaint Report”
dmv.utah.gov, accessed October 3, 2026. The same page offers filing online through MVED's MVP portal. - 41. California Vehicle Code 11710(b), dealer's bond amount
“A dealer’s bond shall be in the amount of fifty thousand dollars ($50,000), except the bond of a dealer who deals exclusively in motorcycles or all-terrain vehicles shall be in the amount of ten thousand dollars ($10,000).”
leginfo.legislature.ca.gov, accessed October 3, 2026 - 42. California Vehicle Code 11710(c), full value
“Liability under the bond is to remain at full value. If the amount of liability under the bond is decreased or there is outstanding a final court judgment”
leginfo.legislature.ca.gov, accessed October 3, 2026. The sentence ends: the license "shall be automatically suspended". - 43. Florida Statutes 320.27(10)(a) (2026), dealer surety bond or letter of credit
“Annually, before any license shall be issued to a motor vehicle dealer, the applicant-dealer of new or used motor vehicles shall deliver to the department a good and sufficient surety bond or irrevocable letter of credit, executed by the applicant-dealer as principal, in the sum of $25,000.”
leg.state.fl.us, accessed October 3, 2026
The state will not issue the dealer license or plates without the bond and the policy
Utah MVED and other dealer licensing offices: the dealer bond, dealer plate insurance and garagekeepers coverage.
Elsewhere on the site
Applying for a Utah dealer license?
Send Redoubt the business name on your TC-301, the license type and whether you are ordering dealer plates. We will talk through what the TC-450 and the plate policy have to show, and what to line up before the packet goes to MVED.
This is general insurance information, not legal advice or a coverage determination. The policy forms, the endorsements the carrier issues, and the requirement in writing from whoever is asking control.