What is a Colorado Auto Dealer Bond?
Licensed auto dealers operating a business in Colorado are required to have a license to sell new or used vehicles. Wholesale and auction dealers must also meet this statewide requirement. Part of the licensing process involves obtaining a Colorado auto dealer bond which works to safeguard customers from fraudulent business practices. A Colorado auto dealer bond also ensures that any licensed dealer complies with state regulations and industry standards.
Three parties are involved in a Colorado auto dealer bond: the principal is the auto dealer, the surety company provides the bond, and the obligee, the Colorado Department of Revenue, requires a bond to be posted. Once a bond is in place, claims against the bond are paid by the surety company initially, but the principal is required to repay bond claims.
Who is Required to Get a Colorado Auto Dealer Bond?
Businesses and individuals engaged in the purchase or sale of motor vehicles in Colorado must be licensed as auto dealers in order to comply with state laws and regulations. Licensing requirements mandate a surety bond for each licensed auto dealer falling under the following categories:
- Franchised auto dealer
- Used auto dealer
- Wholesale auto dealer
- Auction wholesaler
- Franchised powersport auto dealer
- Used powersport auto dealer
- Wholesale powersport auto dealer
Colorado Auto Dealer Bond Obligee Details
Under Colorado Revised Statutes, the Department of Revenue has the authority to enforce licensing requirements to auto dealers operating in the state. This includes Colorado auto dealer bond minimums for each licensed auto dealer. The Department of Revenue as the obligee of Colorado auto dealer bonds has the following contact information:
Colorado Department of Revenue
Auto Industry Division
PO Box 17087
Denver, Colorado 80217
What Does a Colorado Auto Dealer Bond Cost?
A Colorado auto dealer bond allows customers who suffer financial losses to make a claim for compensation, up to the total bond amount. That bond amount for licensed dealers is $50,000, but you only pay a small percentage of the total. The percentage, known as the bond premium, ranges from 1 to 10% for most auto dealers in Colorado.
The bond premium is determined after the surety company evaluates your personal credit history and business financial standing. Auto dealers with a low credit score due to financial missteps in the past are seen as a higher risk than those who have a clean credit history. Because of the increased risk, the bond premium for bad credit auto dealers is higher.
How Do I Get a Colorado Auto Dealer Bond?
You can start the process of securing a Colorado auto dealer bond by submitting a brief online application. The surety company reviews your personal credit history and score, along with your business financials, and provides you with your bond premium.
Renewal and Expiration Date of Colorado Auto Dealer Bonds
Colorado auto dealer bonds have the same expiration date as auto dealer licenses. This expiration date falls on June 30 of each year, and renewal is required to continue to hold an active license and bond. The surety company providing your Colorado auto dealer bond sends renewal information prior to the June 30th date.