What is a Maryland Auto Dealer Bond?
Most states require auto dealers to maintain a license as part of business operation rules and regulations. Auto dealers running a business in Maryland must meet this common requirement. Part of the licensing process is posting a surety bond, known as a Maryland auto dealer bond.
A Maryland auto dealer bond is designed to be a safeguard to the state and the customers with which the licensed auto dealer conducts business. If an auto dealer fails to comply with state laws in regards to how its business is run, a claim can be made against the bond. Claims cover financial damages that incur based on the harm experienced by the customer or the state.
Who Needs a Maryland Auto Dealer Bond?
All licensed auto dealers operating in the state of Maryland are required to secure a Maryland auto dealer bond. The state defines an auto dealer as anyone who engages in the sale or purchase of motor vehicles for profit, whether those vehicles are new or used. Both car dealers and motorcycle dealers need to post a Maryland auto dealer bond, although the amount of the bond varies depending on the number of vehicles sold or purchased.
Maryland Auto Dealer Bond Obligee Details
Similar to other surety bonds, a Maryland auto dealer bond connects three different parties through a legal agreement. These parties include the surety company providing the Maryland auto dealer bond to the auto dealer. The auto dealer in this case is known as the principal of the bond. The agreement also names the obligee of the bond, or the organization responsible for overseeing licensing and bonding requirements in the state.
For Maryland auto dealers, the obligee of a bond is as follows:
Maryland Motor Vehicle Administration (MVA)
6601 Ritchie Highway NE
Glen Burnie, Maryland 21062
How Much Does a Maryland Auto Dealer Bond Cost?
One factor impacting the cost of a Maryland auto dealer bond is the total bond amount required by the state. New vehicle dealers operating in Maryland must have a bond of $50,000 up to $300,000, depending on the number of vehicles sold throughout the year. Used auto dealer or wholesale auto dealers must have a bond in place of $15,000 up to $300,000, determined by the number of vehicles sold. However, the bond amount is not the price paid for the bond by the auto dealer.
Maryland auto dealer bonds are priced similarly to other surety bonds in that the principal of the bond only pays a fraction of the bond total. This is calculated by the surety company as a percentage of the bond, ranging from 1 to 5% for most auto dealers. Surety companies charge a lower bond premium for auto dealers who have a strong financial track record, while auto dealers with bad credit pay a higher percentage of the bond total.
How do You Get a Maryland Auto Dealer Bond?
An auto dealer can start the process of getting a Maryland auto dealer bond by submitting a request online. The surety company reviews details relating to the auto dealer's business, the type of bond requested, and the amount of the bond required. After review, the bond premium is quoted and the auto dealer can pay the bond premium online. Maryland auto dealers must renew their auto dealer bond every two years.