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.
Who Needs a Minnesota Auto Dealer Bond?
Under Minnesota law, any person or business engaging in the lease, sale, or arrangement of a sale of motor vehicles must be appropriately licensed to work legally in the state. Part of the licensing process is securing a Minnesota auto dealer bond that helps protect consumers and the obligee. Both new and used auto dealers must have a bond in place.
Minnesota Auto Dealer Bond Obligee Details
The Minnesota Department of Public Safety has the authority to dictate and manage the licensing and bonding requirements for Minnesota auto dealers. Licensed auto dealers are required to secure an auto dealer bond, and the Minnesota Department of Vehicle Services is the Division that acts as the obligee. This department’s information may be helpful for new and seasoned auto dealers in Minnesota:
Minnesota Department of Public Safety
Driver and Vehicle Services Division
445 Minnesota Street, Suite 186
St. Paul, Minnesota 55101
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.
Renewal Requirements for a Minnesota Auto Dealer Bond
Minnesota auto dealer bond have a renewal period of one year from when the bond was issued, or when the auto dealer’s license was granted. The surety company provides notice of an auto dealer bond renewal at least 30 days prior to the renewal date so Minnesota auto dealers have enough time to complete the process should additional information or forms be necessary.