What is a Delaware Auto Dealer Bond?
Auto dealers in many states must obtain a valid license to operate a business, and Delaware is no exception. As part of the licensing process, auto dealers in Delaware need to secure a surety bond, known as a Delaware auto dealer bond. This type of bond provides a safeguard to the public when doing business with a licensed auto dealer.
Should something go wrong with the purchase or sale of a vehicle that is fraudulent or misleading to the consumer, a claim can be made against a Delaware auto dealer bond. Successful claims result in compensation being paid to the party that incurred financial loss in the transaction or business dealing with the auto dealer, and the dealership is required to repay the claim amount over time.
Who Needs a Delaware Auto Dealer Bond?
In Delaware, any individual or business that engages in the act of selling vehicles is likely to need an auto dealer bond. The requirement extends to those who sell more than five vehicles per year, as either a used or new vehicle dealership.
Delaware Auto Dealer Bond Obligee Details
A Delaware auto dealer bond brings together three different parties under a contract. The licensed auto dealer required to obtain a bond is known as the principal. The surety company is the party that provides the bond to the principal. Finally, the state licensing authority responsible for overseeing or enforcing laws pertaining to auto dealers is known as the obligee of the bond.
The obligee for Delaware auto dealer bond is as follows:
Delaware Division of Revenue
Division of Motor Vehicles
303 Transportation Circle
Dover, Delaware 19903
How Much Does a Delaware Auto Dealer Bond Cost?
As with other surety bonds, the price an auto dealer pays for a Delaware auto dealer bond varies. The surety company providing the bond first looks at the amount of the bond to determine the cost, along with the financial history of the auto dealer. In Delaware, all auto dealers must have an auto dealer bond of no less than $25,000. However, this does not represent the price you pay for putting the bond in place.
The surety company evaluates an auto dealer's financial track record and credit history to calculate the bond premium - the amount you pay out of the pocket. The bond premium is a percentage of the total bond, typically ranging from 1 to 10%. Auto dealers who do not have a strong financial history are likely to pay more for a Delaware auto dealer bond because the surety company is taking on greater risk in providing the bond.
How do You Get a Delaware Auto Dealer Bond?
Auto dealers in Delaware can start the process of obtaining an auto dealer bond by submitting a simple online application. The surety company reviews the bond type and amount and provides a quote. Once a review of the auto dealer's financial health is complete, a bond quote is provided. The auto dealer then pays the premium. Delaware auto dealer bonds expire December 31 of each year and must be renewed to stay compliant with state law.