Auto Dealer Bond Guide
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Why do you need a dealer bond?
You need a bond for your dealership to protect your clients. Should you break the rules, your clients can make claims against your bond which you're responsible to pay. For example, if you sell a vehicle with invalid tags, a claim can be made. Learn more about how surety bonds work and how not having a full understanding can put your company at risk.
Costs are a percentage of the bond amount that's required of you, which is based on your personal credit. Use our bond pricing tool to get a quick ballpark estimate or an exact quote.
Yes. You can get you approved for a new or used car dealer bond regardless of your credit situation. However, the price will increase. You can apply to get an instant approval. As the largest writer of surety bonds in the U.S., we have access to high risk markets that many other agencies do not.
It only takes minutes, as we can approve you for auto dealer bonds instantly online. You can get a no obligation quote on our website at any time.
It is possible, but the rates vary based on your personal credit, meaning your price could be lower or higher depending on your credit strength compared to the other dealer. You can find out your exact auto dealer surety bond cost by applying and getting an instant quote.
Most likely. Many states require you to obtain dealer surety bonds to sell various types of mobile homes, including RV's, manufactured homes and modular homes. However, every state has their own motor vehicle dealer surety bond requirements. Take a look at your state's bond requirements.
Usually, no. One surety bond for a car dealer generally allows you to sell new and used vehicles. However, auto dealer surety bond requirements vary by state, so it's best to review your state's bond requirements.
No. A new or used car dealer surety bond does not protect you, it protects the public. However, you can protect yourself or your customers by getting fidelity bonds.
Lower Your Auto Dealer Bond Costs
There are several ways to cut down on your bond costs, with the most effective being taking care of personal credit issues (costs are mostly based on your personal credit). Other tips to reduce your bond costs include providing strong financials and getting your U.S. citizenship. Learn more about getting the best price for your auto dealer bond.
Bond Claims Can Put Your Dealership at Risk
As mentioned above, you're responsible to pay bond claims in full which can be as large as the full bond amount (including legal costs). The indemnity agreement you must sign to get your bond is a legal contract that pledges your corporate and personal assets in the event of bond claims. Watch our video for an easy to understand explanation of how bond claims work. Unfortunately, most bond agents won't take the time to explain how claims can put you at risk and how to avoid them; if this happens when working with a bond agency it should be a big red flag to reconsider doing business with them. Your bond agency should be your first line of defense against bond claims.
How to Avoid Bond Claims
Avoiding claims is as easy as operating your business professionally and ethically when selling vehicles, while following the rules of your bond. While this might seem like common sense to you, some auto dealers are tempted to mislead their customers to earn extra profit, such as knowingly selling products that lack in quality to save on expenses. If you mislead your customers even in the smallest way, it can come to back to harm your dealership in the form of bond claims. Remember, you are responsible to pay for any bond claims that you cause. If you need help understanding exactly what your bond guarantees you will and will not do, please contact a bond professional.
Auto Dealer Bond Process: Three Step Guide
#1: Determine Your Requirements
Most states require auto dealer bonds to operate a dealership, but not all. If you're just beginning your research, select your state from the map below to determine your requirements (you may see several requirements or none at all). If you have any doubts about which bond you need, it is best to contact a bond professional.
Select Your State
#2: Get Approved for Your Bond
Once you know which bond you need for your dealership, your next step is to apply online and get instantly approved.
#3: Sign and Submit Your Bond to the State
Once you have your auto dealer bond in your hands you will need to:
- Sign your bond
- Make a copy for your records
- Send the signed bond to the state (along with any other important paperwork provided by the state or bond agency)
The state should contact you after they receive your bond and ship your license to you; this process can take roughly one to three weeks depending on your state.
Have Bad Credit? Get Your Bond Anyway
It's possible to get an auto dealer bond with bad credit, but not all bond agencies will be able to approve you. Why? Because your personal credit is the main item that is considered when you apply for your bond; it's used to get an idea of your likelihood of triggering bond claims and your ability to pay them. Things like unpaid collections or tax liens on your credit report are a negative reflection of how you handle your finances, and since you are responsible to pay bond claims, can result in getting declined for a bond. Unfortunately, even if you get approved for a bond with credit issues, your costs will likely be higher. Use our free estimate tool to find out what your bond will cost.
Auto Dealer Bonds Benefit You and Your Clients
Your surety bond protects the public; in other words it protects your clients. If you commit fraud or break any other rules while selling vehicles, your clients can file claims on your bond. However, your surety bond benefits you as well. How? The easiest way to grasp how your bond benefits you is by understanding how surety bond alternatives affect your dealership.
What You Need Besides an Auto Dealer Bond
There are several things you can do to make your dealership a success besides getting a bond. One is to incorporate your business, which provides protection for your personal assets, a boost of credibility for your dealership and easier access to loans. Find out how to take your dealership to the next level with these valuable tactics.
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