Auto Dealer Bond
An auto dealer surety bond is a type of insurance that all car dealers need to obtain before they can open their business. This car dealer bond protects customers from any fraudulent or unethical actions made by the dealer and shows that the dealer is financially secure enough to operate their business. If a customer is cheated by the dealer, the car dealer bond will ensure that the wronged customer will be reimbursed.
If you are interested in opening a used car dealership, the world of surety bonds can be a confusing process. Different states have different requirements when it comes to obtaining a bond for a car dealer, and it will be largely up to you to determine what you need to do for your own car dealer bond. There are some rules that apply to every state though, so let's start by looking at those.
Do I need an auto dealer bond?
If you are a private seller who is trying to get rid of one vehicle you no longer need, you won't need to get a bond. You can post advertisements in your local newspaper or online without any problems. On the other hand, you will need to get bonded if you plan to sell a certain number of vehicles that are registered to you. This number varies from state to state, but it's usually around three or four. You will also need a bond if you buy any vehicles for the purpose of selling them for a profit or if you sell a certain number of vehicles from the same location within 12 months. In most cases, you will also need a bond for a car dealership if you plan to sell any vehicles that are not registered to you. Once again, these requirements vary from state to state, so check www.dmv.org to find out what is required for your own business. If you need some guidance, call our team and let us shop for you.
How do I get a car dealer bond and license?
In order to become licensed and bonded as a car dealer, you need to meet certain requirements. First of all, your business needs to comply with all of the applicable building codes and zoning laws. More information about these codes can be obtained by contacting your city or your county directly. Your business also needs to be located on a commercial property that contains an enclosed building, a permanent sign that contains the name of your business, and a dedicated space for maintaining all of your financial records and any other information necessary for operating a car dealership. Finally, you have to make it clear that you will be open during normal business hours. More specific requirements may vary from one state to the next.
Once you meet the specific requirements to be bonded and licensed, your next step is to complete an application for a bond. There are several agencies across the country that specialize in bonds, so you should be able to find one that will serve you if you spend some time looking. Make sure that they can provide the bond that you will need for your business.
We can write them all - auto dealer, DMV, RV, motorcycle dealer, and used car dealer. Although there are some differences between these bonds, they all essentially serve the same purpose: to protect customers from fraud. If you as a dealer break your bond's terms, the wronged party can make a claim against the bond to obtain compensation.
How much does an auto dealer bond cost?
The exact price of the bond can vary for several reasons such as the required bond amount for your state, your own financial credentials, whether or not you choose to finance your premium, and your business credit score. Generally speaking, if your credit score and your financial credentials are good enough, your premium might be calculated at only one percent of the bond amount. For example, a standard bond that is worth $50,000 will only require you to pay $500. If your credit score isn't that great, you might still qualify for a bond, but you will most likely need to pay a higher premium. The best way to determine how much a bond will cost you is to ask for a free quote from NFP because that's what we do.
What can happen if you are not adequately bonded?
The biggest reason to obtain a bond to sell used cars is that it is required by law. Without a bond, it is illegal to sell more than one or two used vehicles to other parties. It also proves that you are financially stable and trustworthy enough to operate your used car business. A bond also acts as a form of protection against fraud not just for customers, but for you and your business. Without a car dealer surety bond, you will be forced to pay out of pocket if it is decided that you've cheated a customer.
The bonding professionals at NFP are here to help. We can help you get a proper auto dealer surety bond today. Call us at 855.999.7833 and we'll help you better understand what bonding is so we can help you make an informed decision on how to position your business for success. We look forward to the opportunity to earn your business.