Class 2 Second Hand Motor Vehicle Dealer Bond - Massachusetts

A Massachusetts auto dealer bond is a $25,000 surety bond that a Class 2 used (second-hand) motor vehicle dealer must file to get or keep a dealer license. Massachusetts requires it under Massachusetts General Laws chapter 140, section 58. Only Class 2 used dealers need the bond — Class 1 new vehicle dealers and Class 3 junk (parts) dealers do not.

Massachusetts dealer licenses are issued locally. You apply to the licensing authority — usually the board of selectmen, city council, or a licensing board — in the city or town where your dealership sits. That local authority is the obligee, the party your bond protects on behalf of your customers.

The bond is a promise that you will follow the law when you sell a used vehicle. A buyer can file a claim against your bond, up to $25,000, if you fail to deliver a clean title, sell a stolen vehicle, roll back the odometer, bounce a bank draft, use unfair or deceptive practices, or ignore a warranty or arbitration order. The bond protects your customers, not you — if the surety pays a claim, you must pay the surety back.

You need a separate bond for each business name you use and for each city or town where you have a place of business. In place of the bond, a municipal licensing authority may let you deposit collateral — a certificate of deposit or an irrevocable letter of credit — with the same $25,000 face value.

You do not pay the full bond amount. Massachusetts sets the Class 2 dealer bond at $25,000 — that figure is the coverage, the most a claim can collect, not your cost.

You pay a premium, which is a small percentage of the $25,000 bond amount. Underwriting sets your rate, based mostly on your personal credit. The premium is separate from your local license fees and the RMV registration and plate fees.