What is a Kansas Auto Dealer Bond?
Car dealerships operating in the state of Kansas must have a valid license in order to run their business in line with state regulations. Obtaining a license requires the dealership to secure a Kansas auto dealer bond which works to protect customers of the dealership from fraud and illegal practices. A Kansas auto dealer bond is a guarantee that licensed auto dealers will comply with the rules set by the state.
Similar to other surety bonds, a Kansas auto dealer bond is a contract between you, known as the principal, a surety company providing the bond, and the obligee which requires the bond in the first place. The Kansas Division of Vehicles under the Department of Revenue handles both licensing and bonding requirements as the obligee of a bond agreement.
What Does a Kansas Auto Dealer Bond Cost?
State laws require newly licensed auto dealers in Kansas to have a bond of at least $30,000. This is not the price you pay for the bond, however. You pay a percentage of the total bond requirement, typically ranging from 1 to 10%.
A Kansas auto dealer bond is a form of credit that is extended to your dealership to cover bond claims. When a customer files a successful claim against the bond, the surety company pays for the claim amount and you as the dealership repay the claim. Because of this structure, your personal credit is a factor in determining the cost of your Kansas auto dealer bond. Poor credit due to late payments, judgments, or liens may mean you are a higher risk for a future bond claim. High-risk auto dealers pay more for a Kansas auto dealer bond than those who have excellent or good credit.
How Do You Get a Kansas Auto Dealer Bond?
When starting the licensing process as an auto dealer, you will also want to get a quote for your Kansas auto dealer bond. You can do so by submitting a short application online. The surety company will provide you with your bond pricing and guidance on how to complete the bonding process.