What is a Nebraska Auto Dealer Bond?
When an individual or business wants to sell motor vehicles in the state of Nebraska, it is likely operating as an auto dealer. Under current regulations, an auto dealer in Nebraska is required to hold a valid license in order to operate legally. One aspect of the licensing process involves obtaining a surety bond, known as a Nebraska auto dealer bond.
An auto dealer bond is meant to protect both the state and the buying public from business activities of the auto dealer that do not comply with state laws. Should the licensed auto dealer fail to meet its obligations to the state or a customer, a claim can be made against a Nebraska auto dealer bond. These claims can be costly for an auto dealer, so having a bond in place is designed to deter fraudulent or misleading business practices.
Who Needs a Nebraska Auto Dealer Bond?
Anyone who engages in the sale of motor vehicles is considered an auto dealer in Nebraska, and therefore, must have a valid license and corresponding auto dealer bond. New and used auto dealers, as well as trailer dealers and motorcycle dealers, are required to maintain a bond for as long as they plan to be in the auto dealer industry.
Nebraska Auto Dealer Bond Obligee Details
A Nebraska auto dealer bond connects three different parties under a contract. The first is the licensed auto dealer required to hold the bond, known as the principal of the bond. The second is the surety company providing the bond to the auto dealer. Finally, the state licensing authority responsible for overseeing auto dealers operating in Nebraska is the obligee of the bond.
In Nebraska, the obligee of an auto dealer bond is as follows:
Nebraska Motor Vehicle Industry Licensing Board
Nebraska State Office Building
301 Centennial Mall South
Lincoln, Nebraska 68509
How Much Does a Nebraska Auto Dealer Bond Cost?
All auto dealers in Nebraska must have a bond of $50,000 in order to comply with current regulations. However, this is not the price paid for a Nebraska auto dealer bond. The surety company, instead, prices a bond as a percentage of the total bond amount required, based on the financial details and credit history of the dealer.
A Nebraska auto dealer bond, like other surety bonds, is a form of credit extended to the auto dealer. When claims are successful, the surety company pays the claim amount up to the limit of the bond, but the auto dealer is ultimately responsible for repaying these amounts. For this reason, credit history and financial stability of the dealer is crucial in pricing the bond. For most Nebraska auto dealers, the price of a bond ranges from 1 to 10% of the bond total. Auto dealers with strong credit and stable financials are likely to pay a lower percentage than those with bad credit.
How do You Get a Nebraska Auto Dealer Bond?
Auto dealers in Nebraska can start the process of obtaining a bond by filling out a short application online. The surety company reviews the application details, including the bond amount and financials of the individual or dealership, and provides a bond quote. Once the bond is paid for, information is sent to the obligee of the bond to finalize the process. Nebraska auto dealer bonds must be renewed by December 31 of each year to ensure ongoing compliance with state law.