Georgia Proposing To Increase Dealer Surety Bond

The state shut down a bill in 2004 to increase the dealer surety bond amount from $20,000 to $50,000. The argument for the increase is to better protect consumers purchasing vehicles from fraud. The argument against the increase is from the dealers trying to do what they can to keep their costs down, citing some smaller shops may go belly up. Both sides of the argument bring up valid points, both sides also stretch the truth to make their points. The article that brought this to my attention, Why Georgia can be a bad place to buy a car told both sides of the story, but had some incorrect information as well.

The article told a story of a couple purchasing a vehilce, having it taken away and being stuck with the bill. This type of fraud is exactly what surety bonds are required for. However, if the bond liability is only $20,000 and the car you are purchasing is more then you are out of luck. If the car you purchased was only $10,000, but someone already was paid the full $20,000 in a previous claim, you are are also out of luck. I think the reasoning for a larger bond requirement is quite obvious. An increased bond would also make Georgia car buyers more comfortable buying their vehicle in the state. The current GA car dealer market is getting a bad reputation, just take a look at the title of the article I am writing about!

The article also stated that State Representative Alan Powell, opposed the increase to the current Georgia dealer bond requirement. Powell is owner of Highway 77 Auto Sales and feels the increase could put many mom and pop shops out of business. The article asserted that the increase would only cost dealers a couple hundred dollars extra every 2 years, or about .5% of the bond amount per year. This statement could not be farther from the truth. The current surety bond market is extremely conservative. Average rates for dealers with good credit are roughly 2-3% per year. Rates for dealers with credit problems are closer to 15% per year. In other words the cost to the dealers would be 4 to 30 times the amount the articles states.

The current bond market is particularly hard on auto dealers, as they have more credit issues than other business owners. This has nothing to do with dealers being irresponsible people, but rather the fact they must often use their personal lines of credit to purchase vehicles. If business is slow they have late payments and their credit scores plummit.

Whether you decide to increase the bond or leave as is, people will be effected. In the end, I too will have to agree that the increase is a must for the good of the citizens of Georgia, as well as the dealers. The cost of vehicles are up from when the bond requirement was originally made. The bond amount is no longer fullfilling the needs of why the state required it in the first place.

You can discuss this specific article more at: Surety Bond Forums: News

You can discuss dealer bonds in general at: Surety Bond Forums: MVD Bonds

You can apply for an Auto Dealer Bond online at Auto Dealer Bond Application