How to Get an Auto Dealer Surety Bond?


I’m almost done getting my car dealer license application ready. I went through
a criminal background check, paid my licensing fees and found a place of
business. I even got insurance. But does that mean I fulfilled the auto dealer
bond requirement? Aren’t they one in the same thing?
– Ha, no. In fact, they are quite
different. You need to get both of them in order to get your auto dealer license.
While liability insurance provides protection for your business and the
cars on your lot, an auto dealer bond provides protection for the state and
your customers. It’s the government’s way of making sure you’re complying with
state regulations. It also takes care of your customers in case you use any
fraudulent business methods.
– Oh, now it makes sense. So, do I apply for the bond
at the DMV?
– No. Auto dealer bonds like all surety bonds are underwritten by surety
bond companies and obtained through bond agencies such as Lance Surety Bonds.
Bonding companies typically don’t work directly with the public, so you need to
find a good bonding agency. That means an agency that partners with many different
bonding companies since this will maximize your chances of obtaining a
bond. The agency will also be able to find the bonding company that offers you
the lowest premium.
– I understand. When you say the lowest premium,
do you mean that the cost of the bond isn’t fixed?
– Exactly right. Once you apply with us, you will
receive a quote shown the actual premium you have to pay.
– So, how is my premium
calculated?
– The single most important factor is the business owner’s personal
credit score. The higher it is, the better. I see but I have bad credit. Does this
mean I won’t be able to get bonded and open my car dealership?
– Having bad credit as well as other credit issues, such as tax liens, civil judgments or
past bankruptcies, puts you in a high risk category. This may increase your
auto dealer bond premiums to a range of 5 to 15%. But if you
provide your agent with strong financials or business statements, cash
verification or strong liquid assets, you can lower your premium.
– Thank you very much for this detailed information! And once I get the bond, can I open
dealerships in other states, too?
– An auto dealer bond is only valid within the
state it was issued. So is your car dealer license. For every new state in
which you want to open a dealership you’ll have to apply for a new bond and
license.
– And once I obtain an auto dealer bond, when and how do I renew it?
– How often you renew your auto dealer bond will depend on your state’s requirements.
Most states want you to renew your license every year which automatically
means you’ll need to renew your auto dealer bond every year, too. If you work with Lance Surety Bonds, you’ll never have to worry about missing your renewal date
though. Three months before your due date our staff will make sure to notify you
and will even send you the invoice with your new premium.
– Thanks once again! You’ve been more than helpful.
– Anytime! Should you have any questions about auto
dealer bonds, call our agents and they will be happy to assist you.

About the Author: Michael Flood

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