What is an Iowa Auto Dealer Bond?
In order to become an auto dealer in the state of Iowa, individuals or businesses must have a license. Obtaining a surety bond is part of the licensing process, as this provides some protection to the buying public when engaging in business with a licensed auto dealer. The surety bond for licensed motor vehicle dealers is known as an Iowa auto dealer bond.
If an auto dealer in Iowa fails to comply with state law or regulations, a claim can be made against an auto dealer bond. An Iowa auto dealer bond claim is initially covered up the claim limit of the bond by the surety company, but auto dealers are ultimately responsible. Claims that are successful can disrupt the financial stability of a licensed auto dealer, as they must be repaid over time.
Who Needs an Iowa Auto Dealer Bond?
Any business engaged in the sale or exchange of used or new motor vehicles is required to have an Iowa auto dealer license before engaging in any business activities. One of the most prominent licensing requirements is securing an Iowa auto dealer bond, which extends to all licensed auto dealers in the state.
Iowa Auto Dealer Bond Obligee Details
Like other surety bonds, an Iowa auto dealer bond represents a three-party agreement. First, the surety company provides the bond to the licensed auto dealer required to obtain the bond. The auto dealer is known as the principal of the bond. The state licensing authority responsible for overseeing auto dealers is known as the obligee of the bond.
For Iowa auto dealers, the obligee is as follows:
Iowa Department of Transportation
Vehicle & Motor Carrier Services Bureau
10 Euclid, Box 9278
Des Moines, Iowa 50306
How Much Does an Iowa Auto Dealer Bond Cost?
Auto dealers operating in Iowa must have an auto dealer bond of no less than $75,000, regardless of the type of vehicles bought or sold. However, this is not the price you pay for an auto dealer bond. The cost depends on your credit history and financial stability, determined by the surety company providing the bond.
Because the surety company takes on some risk when issuing an Iowa auto dealer bond, a close look at financial details of the business is necessary. Iowa auto dealers pay between 1 and 10% of the total bond amount, and the stronger your credit and finances, the lower this amount will be.
How do You Get an Iowa Auto Dealer Bond?
Getting an Iowa auto dealer bond is a simple process. Auto dealers who are licensed can submit a brief application online for their auto dealer bond. The surety company will provide a bond quote based on the amount of the bond requested and the credit history of the auto dealer. Once the quote is generated, the auto dealer pays for the bond and then follows any instructions the surety company provides for finalizing the process. An Iowa auto dealer bond must be renewed every year, at the same time the auto dealer's license renews.