Motor vehicle dealer licenses require surety bonds that guarantee that dealerships meet industry regulations. This type of bond protects consumers from fraud and other wrongful actions committed by dealerships and their employees. Surety bonds are legally binding contracts.
Other names of this type of bond are: Automobile Bond, Car Dealer Bond, Dealer Bond, DMV Bond, Motor Vehicle Dealer Bond and Used Car Dealer Bond.
Premiums for Auto Dealer Bonds usually depend on a number of factors, such as bond amount, bond duration and financial and personal credentials.
Auto bond costs largely depend on an applicant’s credit history. Your credit score will affect your premium. Those with credit scores above 700 typically pay a rate that’s 1%-5% of the bond amount. Those with credit scores below 700 typically pay a rate that’s 10%-20%.
No. Dealers must file their bonds before they can be licensed. Surety bonds issued for auto dealers are a type of license and permit used to reinforce licensing laws and other industry regulations.
Without a surety bond – or other acceptable proof of financial accountability – dealers cannot be licensed.
Surety bond insurance doesn’t protect dealers. When purchasing surety bonds, many business owners incorrectly assume the financial guarantees provided by their bonds protect them from costs associated with legal claims. You must also have Commercial Liability insurance.
Although surety bonds are insurance products, they function more as lines of credit that can be used to pay for work-performance issues. Consumers can make claims on bonds to gain financial reparation when dealers use alleged unethical business practices.