What is a New Jersey Auto Dealer Bond?
A requirement for obtaining a license as an auto dealer in New Jersey is securing a New Jersey auto dealer bond. As a type of surety bond, a New Jersey auto dealer bond safeguards customers from fraudulent or illegal practices when doing business with a dealership. A claim can be made against a bond if a customer experiences financial damages, up to the amount of the bond in place.
A New Jersey auto dealer bond is a three-party contract connecting the principal required to post the bond, the surety company providing the bond, and the obligee, the New Jersey Motor Vehicle Commission, that requires the bond.
What Does a New Jersey Auto Dealer Bond Cost?
A surety bond functions like a line of credit to a licensed auto dealer. When a claim is found to be legitimate, the surety company pays the claim amount. However, the dealership is responsible for repaying the claim. This structure means that personal credit plays a major role in determining the price of a bond. Auto dealers with a low credit score or a negative credit history pay higher for a New Jersey auto dealer bond than dealers who have a healthy credit history.
In New Jersey, an auto dealer bond of at least $10,000 is required as part of obtaining a dealer bond. The surety company calculates the price you pay as a percentage of the total bond amount, ranging from 1 to 3% for dealers with strong credit. A New Jersey auto dealer bond for someone with a lower credit score can cost between 5 and 10% of the bond total.
How Do I Get a New Jersey Auto Dealer Bond?
You can submit a short online form to get a New Jersey auto dealer bond, providing details of your business and your personal credit history. The surety company reviews this information and gives you a quote for the bond along with how to complete the bonding process.