What is a Minnesota Auto Dealer Bond?
One of the requirements for obtaining a license to operate an auto dealership in Minnesota is securing a Minnesota auto dealer bond. Businesses that buy or sell more than five vehicles per year must meet this licensing requirement. A bond is put in place to help protect customers that do business with a dealership, safeguarding them from illegal business practices.
A Minnesota auto dealer bond represents a contract between three different parties. You are the principal as the licensed auto dealer, and the obligee, or the authority requiring the bond, is the Minnesota Department of Public Safety. The surety company provides the bond and guarantees that if a customer makes a valid claim, the financial losses they incurred will be covered by the bond.
What Does a Minnesota Auto Dealer Bond Cost?
Licensed auto dealers are required to have a Minnesota auto dealer bond of $50,000 in order to comply with the state’s regulations. You do not pay this entire amount, but instead, pay a premium calculated as a percentage of the bond. Minnesota auto dealer bonds cost between 1 and 10% of the full bond amount.
The surety company providing your bond determines the percentage you pay based on several factors, including your personal credit history and business financial standing. Bad credit which may include negative marks such as bankruptcies, court judgments or liens, and late payments is a sign that you may be a high-risk bondholder. If this is the case, you pay a higher percentage for your Minnesota auto dealer bond.
How Do You Get a Minnesota Auto Dealer Bond?
Getting a Minnesota auto dealer bond is not a complex process. You can submit a short online form to get a free quote for your bond, and then complete an application detailing your auto dealership business. The surety company will then provide you with your bond cost and instructions on how to finish the process.