Tennessee Auto Dealer Bond: The $50,000 Surety Bond Behind Your Car Dealer License

The $50,000 bond and who it protects

The state's bond form, IN-1316, cites T.C.A. § 55-17-111(g) and calls for a corporate surety bond of at least $50,000. You submit that $50,000 corporate surety bond signed by the principal owner or owners. The bond pays covered losses from two specific failures, set out below.

The bond protects any person, including the Tennessee Motor Vehicle Commission and the State of Tennessee, who suffers a loss of the kinds the statute lists. The surety's total liability to everyone combined cannot exceed the amount of the bond. What you pay is a share of the bond amount, set by the surety from your credit and finances.

The 2008 act that amended the statute lets the Commission allow a certificate of deposit in place of a corporate surety. That same law states that a letter of credit is not satisfactory evidence of a surety bond in the required amount.

The documents you file for your license

You complete the Initial Motor Vehicle Dealer Application online at core.tn.gov. You file the $50,000 bond on form IN-1316, which must be notarized with the power of attorney attached. The bond must match your business name and address and include a power of attorney letter.

You also provide:

• A financial statement compiled by a CPA showing a minimum net worth of $10,000.
• A certificate of liability insurance with at least $300,000 per occurrence, indicating Garage Liability or Any Auto.
• A copy of your current Sales & Use Tax Certificate from the Department of Revenue.
• A county business tax license, which should be a Class 2.
• Felony disclosure: if any owner, officer, or director has been convicted of a felony, a copy of the final judgment or disposition order from the court in the jurisdiction of conviction.

A motor vehicle dealer must employ at least one licensed motor vehicle salesperson. Franchised dealers also submit a sworn statement of the labor rate charged to retail customers and to the manufacturer for warranty repairs. If your documents are not complete within 90 days, the process restarts with new fees. Licenses are issued within 14 business days once the Commission acts on a complete application.

Renewal and expiry

Your bond must be issued for two consecutive years and begin in the month of expected license issuance, expiring on the last day of that same month two years later. At renewal, the new bond runs from your license expiry date for two years; for example, if your license expires at the end of October 2026, your new bond should run from 10/31/2026 to 10/31/2028.

A common point of confusion: the June 30 odd-year renewal cycle applies to manufacturers, distributors, and their representatives, not to dealers.

Renewals processed after the expiration date incur a late fee totaling 50% of the initial license fee or $300. If you are more than 90 days late, you must reapply for licensure and meet all requirements as if it were an initial application, which means a new license number. Renewal also requires a two-year bond and garage liability insurance that is active and in good standing. Dealers cannot buy dealer plates without filing the Annual Sales Report; reports filed after February 15 incur a $100 late fee that must be paid before eligibility is restored. You cannot transfer your license when closing your dealership, so new owners must apply for their own.

Frequently asked questions

Dealing in a nearby state? See our Kentucky, Georgia, Alabama, Mississippi, and North Carolina auto dealer bond pages.